Fundamental Payroll Certification Fundamental Payroll Paycheck Calculation Methods 4 — Questions and Answers
Question 1: A tipped employee earns $2.13/hr (federal minimum cash wage) and $180 in tips during a 40-hour week. What is their gross pay for payroll purposes?
- $85.20
- $180.00
- $265.20 (Correct answer)
- $290.00
Correct answer: $265.20
Gross pay includes both the cash wage ($2.13 × 40 = $85.20) and all reported tips ($180), totaling $265.20.
Question 2: An employee is paid on a piece-rate basis, earning $0.50 per unit and producing 900 units in a 45-hour week. What is their regular rate of pay for FLSA overtime purposes?
- $9.00 (Correct answer)
- $10.00
- $0.50
- $7.50
Correct answer: $9.00
Total earnings $450 ÷ 45 hours worked = $10.00 regular rate of pay.
Question 3: Using the 'half-time' method for piece-rate overtime, how much additional overtime pay is owed for the 5 overtime hours in the previous question (regular rate = $10.00)?
- $75.00
- $50.00
- $25.00 (Correct answer)
- $150.00
Correct answer: $25.00
Under the half-time method, overtime premium = 0.5 × regular rate × OT hours = 0.5 × $10.00 × 5 = $25.00 (piece-rate earnings already include straight-time pay).
Question 4: An employee earns a $600 nondiscretionary bonus based on production. How must this bonus be treated for FLSA overtime calculations?
- Excluded — bonuses are never included in the regular rate
- Included in the regular rate calculation for the workweeks covered (Correct answer)
- Included only if paid in the same pay period as overtime
- Taxed at the supplemental rate and excluded from overtime
Correct answer: Included in the regular rate calculation for the workweeks covered
Nondiscretionary bonuses must be included in the regular rate of pay and retroactively allocated to the workweeks they cover to recalculate overtime.
Question 5: An employee's W-2 Box 1 (Federal wages) is lower than Box 3 (Social Security wages). Which of the following most likely explains the difference?
- The employee received nontaxable fringe benefits
- The employee made traditional 401(k) elective deferrals (Correct answer)
- The employee had excess FICA withheld
- The employee received a discretionary bonus
Correct answer: The employee made traditional 401(k) elective deferrals
Traditional 401(k) deferrals reduce federal income taxable wages (Box 1) but not Social Security/Medicare wages (Boxes 3 and 5), creating a lower Box 1 than Box 3.
Question 6: An employee receives a company car with an annual lease value of $3,000 for personal use. How should this be treated for payroll?
- Excluded as a de minimis fringe benefit
- Included as imputed income subject to FICA and FIT withholding (Correct answer)
- Included in FICA wages only
- Reported on a separate 1099-NEC
Correct answer: Included as imputed income subject to FICA and FIT withholding
The fair market value of personal use of an employer-provided vehicle is imputed income, subject to both FICA taxes and federal income tax withholding.
Question 7: An employee receives retroactive pay of $800 covering prior pay periods. For withholding purposes, the employer should:
- Spread the $800 across the prior periods and amend each payroll
- Withhold based on the pay period in which the retroactive pay is actually paid (Correct answer)
- Apply the 22% supplemental flat rate since it is back pay
- Exclude it from withholding as it is a correction, not new income
Correct answer: Withhold based on the pay period in which the retroactive pay is actually paid
Retroactive pay is treated as supplemental wages and withheld in the pay period it is actually paid, using either the flat 22% rate or the aggregate method.
Fundamental Payroll Certification Fundamental Payroll Paycheck Calculation Methods 4
A tipped employee earns $2.13/hr (federal minimum cash wage) and $180 in tips during a 40-hour week.
What is their gross pay for payroll purposes?