Fundamental Payroll Certification Fundamental Payroll Systems and Administration 5 — Questions and Answers
Question 1: Which of the following describes a 'parallel run' during a payroll system implementation?
- Running two payroll systems simultaneously to compare results before fully switching (Correct answer)
- Processing payroll on two different pay schedules at the same time
- Using two separate EINs for the same company
- Submitting tax deposits to both federal and state agencies on the same day
Correct answer: Running two payroll systems simultaneously to compare results before fully switching
A parallel run involves processing payroll in both the old and new systems simultaneously to verify that the new system produces accurate results before cutover.
Question 2: An employer wants to offer employees the option to receive their pay via a payroll card. Which of the following is a key compliance consideration?
- Employees must be paid exclusively by payroll card
- Employees must have a free option to access their full net pay (Correct answer)
- Payroll cards are prohibited in all states
- The IRS requires payroll cards to be reported on Form W-2
Correct answer: Employees must have a free option to access their full net pay
State and federal consumer protection rules generally require that employees be able to access their full wages without fees, ensuring payroll cards are not a hidden wage reduction.
Question 3: What is the purpose of reconciling payroll to the general ledger?
- To calculate employee benefits
- To ensure payroll expense and liability accounts match the amounts processed through payroll (Correct answer)
- To prepare Form 941
- To verify employee attendance records
Correct answer: To ensure payroll expense and liability accounts match the amounts processed through payroll
Payroll-to-general-ledger reconciliation confirms that the financial records accurately reflect all payroll transactions, supporting audit readiness and financial accuracy.
Question 4: Which report would a payroll manager use to verify that all employees in a specific department received the correct pay rate?
- Payroll tax summary report
- Department earnings report (Correct answer)
- Certified payroll report
- Workers' compensation audit report
Correct answer: Department earnings report
A department earnings report breaks down wages paid by department, allowing managers to verify pay rates and totals for each employee in that unit.
Question 5: A payroll system is described as 'cloud-based SaaS.' What does this primarily mean for the employer?
- The employer must maintain servers on-site
- The software is hosted and maintained by the vendor and accessed via the internet (Correct answer)
- Payroll data is stored exclusively on employee devices
- The employer owns a permanent license to the software
Correct answer: The software is hosted and maintained by the vendor and accessed via the internet
Cloud-based SaaS (Software as a Service) payroll systems are hosted by the vendor, reducing the employer's IT infrastructure burden and keeping the software automatically updated.
Question 6: During year-end processing, what is the significance of the 'W-2 cutoff date'?
- The date after which no more W-2s can be filed with the SSA
- The deadline for finalizing all payroll adjustments that must appear on employee W-2 forms (Correct answer)
- The date employees must return their W-2 forms to HR
- The IRS deadline for paying fourth-quarter payroll taxes
Correct answer: The deadline for finalizing all payroll adjustments that must appear on employee W-2 forms
The W-2 cutoff date is the last day to make corrections (such as fringe benefit additions or prior-period adjustments) that need to be captured on the current year's W-2s.
Question 7: What is the main advantage of using electronic pay stubs over paper pay stubs?
- Electronic pay stubs are required by federal law
- They reduce printing costs and allow employees to access pay history at any time (Correct answer)
- They eliminate the need for payroll tax withholding
- They are accepted in place of Form W-2 at tax time
Correct answer: They reduce printing costs and allow employees to access pay history at any time
Electronic pay stubs lower administrative costs and give employees on-demand access to current and historical earnings and deduction information.
Fundamental Payroll Certification Fundamental Payroll Systems and Administration 5
Which of the following describes a 'parallel run' during a payroll system implementation?