Fundamental Payroll Certification Fundamental Payroll Certification MCQ 3 — Questions and Answers
Question 1: Which federal agency administers the Family and Medical Leave Act (FMLA)?
- The IRS
- The Department of Labor Wage and Hour Division (Correct answer)
- The Social Security Administration
- The EEOC
Correct answer: The Department of Labor Wage and Hour Division
The Department of Labor's Wage and Hour Division enforces FMLA, which entitles eligible employees to up to 12 weeks of unpaid, job-protected leave.
Question 2: A tipped employee's hourly tip credit under the FLSA allows the employer to pay a cash wage as low as:
- $2.13/hr (Correct answer)
- $3.00/hr
- $5.12/hr
- $7.25/hr
Correct answer: $2.13/hr
Federal law allows employers to pay tipped employees a direct cash wage of $2.13/hr, provided tips bring total compensation to at least the $7.25 federal minimum wage.
Question 3: Which payroll record retention period does the IRS generally require for employment tax records?
- 1 year
- 2 years
- 4 years (Correct answer)
- 7 years
Correct answer: 4 years
The IRS requires employers to retain employment tax records for at least 4 years after the date the tax is due or paid, whichever is later.
Question 4: An employee who works in two states during the same pay period is subject to income tax withholding based on:
- Only the state where the employer is headquartered
- Only the state where the employee lives
- Reciprocity agreements and nexus rules of each state (Correct answer)
- A flat federal rate that replaces state withholding
Correct answer: Reciprocity agreements and nexus rules of each state
Multi-state withholding is governed by each state's nexus rules and any reciprocity agreements between states, which may allow withholding only in the residence state.
Question 5: Under the IRS Accountable Plan rules, which reimbursement must be included in an employee's taxable wages?
- A $50 per diem that does not exceed the federal GSA rate
- A mileage reimbursement at the IRS standard rate with receipts
- A $200 expense reimbursement with no business-purpose documentation (Correct answer)
- A hotel receipt reimbursed at the actual amount spent
Correct answer: A $200 expense reimbursement with no business-purpose documentation
Accountable plan reimbursements must have a business connection, adequate substantiation, and return of excess amounts; without documentation, the reimbursement becomes taxable wages.
Question 6: What does the term 'constructive receipt' mean in payroll?
- An employee physically receives a paper check
- Income is taxable when it is made available to the employee without restriction (Correct answer)
- An employer constructs a new payroll system
- Wages are paid only after a receipt is submitted
Correct answer: Income is taxable when it is made available to the employee without restriction
Constructive receipt means income is taxable in the year it is credited or made available to the employee, even if not physically received.
Question 7: Which form must employers file quarterly to report federal income, Social Security, and Medicare taxes?
- Form 940
- Form 944
- Form 941 (Correct answer)
- Form W-3
Correct answer: Form 941
Form 941 (Employer's Quarterly Federal Tax Return) is used to report withheld income tax, employee and employer Social Security, and Medicare taxes each quarter.
Fundamental Payroll Certification Fundamental Payroll Certification MCQ 3
Which federal agency administers the Family and Medical Leave Act (FMLA)?