Fundamental Payroll Certification Fundamental Payroll Systems and Administration 4 — Questions and Answers
Question 1: A payroll administrator discovers that an employee was overpaid by $500 in the prior pay period. What is the best first step?
- Immediately deduct the full amount from the next paycheck without notice
- Notify the employee and establish a repayment plan in compliance with state law (Correct answer)
- Write off the overpayment as a payroll expense
- Report the overpayment to the IRS
Correct answer: Notify the employee and establish a repayment plan in compliance with state law
State wage deduction laws often restrict how and when overpayments can be recovered, requiring employee notification and, in some states, written consent.
Question 2: Which payroll record retention period is required by the FLSA for basic payroll records such as time cards and wage rate tables?
- 1 year
- 2 years (Correct answer)
- 3 years
- 7 years
Correct answer: 2 years
The FLSA requires that records used to compute wages, such as time cards and piece-rate tables, be kept for at least 2 years.
Question 3: An employee contributes to a Section 125 Cafeteria Plan. How does this affect their taxable wages?
- Increases federal taxable wages
- Reduces federal, Social Security, and Medicare taxable wages (Correct answer)
- Only reduces state taxable wages
- Has no effect on taxable wages
Correct answer: Reduces federal, Social Security, and Medicare taxable wages
Section 125 pre-tax contributions reduce the employee's wages subject to federal income tax, Social Security, and Medicare taxes.
Question 4: Which of the following is an example of a voluntary payroll deduction?
- Federal income tax withholding
- Social Security tax
- Employee 401(k) contribution (Correct answer)
- State disability insurance
Correct answer: Employee 401(k) contribution
A 401(k) contribution is initiated at the employee's discretion, making it a voluntary deduction, unlike mandatory taxes.
Question 5: A payroll system integration with an HR system of record is most valuable for:
- Generating W-2 forms at year-end
- Automatically syncing employee demographic and status changes to payroll (Correct answer)
- Calculating federal income tax withholding
- Processing direct deposit transactions
Correct answer: Automatically syncing employee demographic and status changes to payroll
HR-to-payroll integration ensures that hires, terminations, pay changes, and demographic updates flow automatically, reducing manual data entry errors.
Question 6: What does the term 'payroll cutoff date' refer to?
- The last day employees can request time off
- The deadline by which all payroll data must be submitted for processing before the pay date (Correct answer)
- The date payroll taxes are due to the IRS
- The final day of the fiscal year for payroll purposes
Correct answer: The deadline by which all payroll data must be submitted for processing before the pay date
The payroll cutoff date is the deadline for submitting time, expense, and change data so the payroll can be processed and funds disbursed on payday.
Question 7: Under IRS rules, when must a new employee complete Form W-4?
- Within 30 days of their start date
- Before or on their first day of work (Correct answer)
- Within the first full pay period
- At the end of the calendar year
Correct answer: Before or on their first day of work
The IRS requires employees to furnish a completed W-4 before or on their first day so that proper withholding can begin immediately.
Fundamental Payroll Certification Fundamental Payroll Systems and Administration 4
A payroll administrator discovers that an employee was overpaid by $500 in the prior pay period.
What is the best first step?