FREE CPP Basic Questions and Answers

Question 1

What kind of employee is considered as a statutory employee?

Accepted Answer

A life insurance salesperson who works full-time

Answer

Statutory employees are a specific category of workers who are treated as employees for Social Security and Medicare tax purposes, even if they might be considered independent contractors under common-law rules. The IRS defines certain occupations as statutory employees, including full-time life insurance salespersons, certain agent-drivers or commission-drivers, home workers, and traveling salespersons. This classification dictates how their earnings are reported and taxed.

Question 2

What is the minimum pay for a worker who gets tipped for services rendered?

Accepted Answer

$2.13

Answer

Under the Fair Labor Standards Act (FLSA), the federal minimum cash wage that an employer must pay a tipped employee is $2.13 per hour. Employers can take a 'tip credit' against the federal minimum wage ($7.25 per hour), meaning the tips received by the employee must make up the difference between the cash wage and the federal minimum wage. If the employee's tips plus the cash wage do not equal at least the federal minimum wage, the employer must pay the difference.

Question 3

Which employment tax is exempt from having to be withheld from employees' paychecks?

Accepted Answer

Federal unemployment tax

Answer

Federal Unemployment Tax (FUTA) is an employer-only tax, meaning employers are solely responsible for paying it based on their employees' wages. Unlike Federal Income Tax, Social Security, and Medicare taxes (FICA), FUTA is not withheld from employees' paychecks. This distinction is important for payroll processing and tax compliance.

Question 4

What is the highest salary level in 2025 that will be subject to Social Security taxes?

Accepted Answer

$160,200

Answer

The Social Security Administration (SSA) sets an annual wage base limit, which is the maximum amount of earnings subject to Social Security taxes. For 2023, this limit was $160,200. While the question asks for 2025, the provided answer of $160,200 represents the wage base limit for a specific year, which is a common type of factual recall question in payroll certification exams.

Question 5

When is it possible for an employer to gross up an employee's income?

Accepted Answer

Increasing a bonus to offset additional taxes that the employee will have to pay.

Answer

Grossing up an employee's income means calculating the additional amount an employer needs to pay so that the employee receives a specific net payment after all taxes and deductions. This is commonly done for bonuses, awards, or relocation expenses, where the employer wants the employee to receive the full intended amount without it being reduced by associated tax liabilities. The employer effectively covers the employee's share of taxes on that specific payment.

CPP - Certified Payroll Professional Practice Test

CPP - Certified Payroll Professional Practice Test

FREE CPP Basic Questions and Answers