Fundamental Payroll Certification Fundamental Payroll Certification 5 — Questions and Answers
Question 1: A tipped employee in a restaurant earns $2.13/hour in direct wages. Their tips bring total compensation to $9.00/hour. Under FLSA, this arrangement is:
- Illegal — all employees must receive at least the full federal minimum wage directly
- Legal — provided tips bring total earnings to at least the federal minimum wage (Correct answer)
- Legal only if the employer takes a tip credit exceeding $5.00
- Illegal — the tip credit cannot apply in food service
Correct answer: Legal — provided tips bring total earnings to at least the federal minimum wage
The FLSA tip credit permits employers to pay tipped employees as little as $2.13/hour if tips bridge the gap to the $7.25 federal minimum wage.
Question 2: Which of the following correctly describes the FLSA child labor restrictions for minors aged 14–15?
- No work restrictions — minors over 14 may work any hours
- Limited to 3 hours on school days and 18 hours in school weeks (Correct answer)
- Permitted to work in any hazardous occupation with parental consent
- May work unlimited hours on weekends only
Correct answer: Limited to 3 hours on school days and 18 hours in school weeks
FLSA limits 14- and 15-year-olds to 3 hours on school days, 18 hours during school weeks, 8 hours on non-school days, and 40 hours on non-school weeks.
Question 3: Under IRS rules, supplemental wages paid separately from regular wages (e.g., a standalone bonus check) are subject to a flat federal withholding rate of:
- 10%
- 22% (Correct answer)
- 28%
- 37%
Correct answer: 22%
The IRS optional flat rate for supplemental wages paid separately is 22% (for amounts under $1 million) for federal income tax withholding.
Question 4: The FLSA definition of 'hours worked' generally includes:
- Meal breaks of 30 minutes or more where employees are fully relieved of duties
- Short rest breaks of 5 to 20 minutes (Correct answer)
- Commute time from home to the primary workplace
- Vacation and sick leave hours
Correct answer: Short rest breaks of 5 to 20 minutes
Under FLSA, short rest breaks (roughly 5–20 minutes) benefit the employer and must be counted as hours worked and compensated.
Question 5: Which of the following best defines 'constructive receipt' in payroll?
- Wages are taxable only when the employee cashes their check
- Income is taxable when it is made available to the employee, even if not yet received (Correct answer)
- Wages become taxable only at the time the employer records the expense
- Income is never taxable until physically deposited in the employee's bank account
Correct answer: Income is taxable when it is made available to the employee, even if not yet received
Constructive receipt means income is taxable in the year it is credited to the employee's account or made available without restriction.
Question 6: An employer provides an employee a company car for both business and personal use. The personal use portion is treated as:
- A non-taxable working condition fringe benefit
- Taxable imputed income subject to FICA and federal income tax (Correct answer)
- A tax-free de minimis fringe benefit
- Excluded from all payroll reporting
Correct answer: Taxable imputed income subject to FICA and federal income tax
Personal use of a company vehicle is a taxable fringe benefit and must be included in the employee's gross income and reported on Form W-2.
Question 7: What is the purpose of Form 944 (Employer's Annual Federal Tax Return)?
- To report FUTA taxes for all employers annually
- To allow very small employers (annual liability ≤ $1,000) to file employment taxes once per year instead of quarterly (Correct answer)
- To replace Form W-2 for seasonal employers
- To report backup withholding on non-employee compensation
Correct answer: To allow very small employers (annual liability ≤ $1,000) to file employment taxes once per year instead of quarterly
Form 944 is designed for employers whose annual employment tax liability is $1,000 or less, allowing a single annual filing instead of four quarterly Form 941 filings.
Fundamental Payroll Certification Fundamental Payroll Certification 5
A tipped employee in a restaurant earns $2.13/hour in direct wages.
Their tips bring total compensation to $9.00/hour.
Under FLSA, this arrangement is: