CPP Practice Exam 10
This is a practice quiz to help you prepare for the Certified Payroll Professional certification. The quiz is based on a bank of 25 multiple choice questions that reveal the correct answer before you move on to the next question. The questions and their associated answers are randomized every time you take the quiz to avoid pattern development. Questions requiring calculations that change from year to year have been omitted. Good luck as you pursue this goal. I hope this helps you prepare. Inspired by my lovely wife as she pursued this goal as Read morewell.
- 1.
On what form must mistakenly paid wages, for which no repayment is made, be reported?
- A.
W-2
- B.
W-4
- C.
1099-R
- D.
1099-MISC
Correct Answer
A. W-2Explanation
Mistakenly paid wages, for which no repayment is made, must be reported on Form W-2. This form is used by employers to report wages, tips, and other compensation paid to employees, as well as the taxes withheld from their paychecks. By reporting mistakenly paid wages on Form W-2, the employer ensures that the employee's income and tax liability are accurately reflected on their tax return.Rate this question:
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- 2.
A report has been requested that is NOT a standard report from the system. This type of report is called a(n):
- A.
Ad-hoc report
- B.
Integrated report
- C.
Batch system report
- D.
Edit report
Correct Answer
A. Ad-hoc reportExplanation
An ad-hoc report refers to a report that is not a standard report generated by the system. It is a custom report that is created on-demand to meet specific requirements or address specific questions or concerns. Unlike standard reports, ad-hoc reports are not pre-defined and can be tailored to include specific data, filters, and formatting options based on the user's needs. These reports are typically used for one-time or infrequent analysis and are not part of the regular reporting structure of the system.Rate this question:
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- 3.
A procedure to have a time record signed by an employee indicates:
- A.
Authorization for payment
- B.
Confirmation of total hours
- C.
Hours cannot be challenged
- D.
Time spent at the establishment
Correct Answer
B. Confirmation of total hoursExplanation
The procedure to have a time record signed by an employee indicates confirmation of total hours. This means that the employee is acknowledging and verifying the number of hours they have worked, ensuring that the recorded hours are accurate. It does not necessarily imply authorization for payment or that the hours cannot be challenged. The purpose of this procedure is simply to confirm the total hours worked by the employee.Rate this question:
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- 4.
For an employee earning $10.20 per hour and participating in a 401(k) plan with a deferral per pay period of $50, compute the federal taxable wages based on the following: Biweekly pay period Regular 80 hours 4 hours overtime 3 hours double-time
- A.
$731.40
- B.
$888.40
- C.
$898.60
- D.
$938.40
Correct Answer
B. $888.40Explanation
The federal taxable wages can be calculated by multiplying the regular hours worked (80) by the hourly rate ($10.20), adding the overtime hours (4) multiplied by 1.5 times the hourly rate, and adding the double-time hours (3) multiplied by 2 times the hourly rate. Therefore, the federal taxable wages would be $888.40.Rate this question:
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- 5.
Which of the following statements is CORRECT regarding a federal tax levy?
- A.
It does not have to be honored if any other garnishments have been served.
- B.
It requires a new order for each pay period.
- C.
It is limited only by the amount of the employee's net pay
- D.
It is continued each pay period until a release of levy is received.
Correct Answer
D. It is continued each pay period until a release of levy is received.Explanation
A federal tax levy is a legal action taken by the government to collect unpaid taxes from an individual. This statement is correct because once a federal tax levy is imposed, it continues to be in effect each pay period until a release of levy is received. This means that the employer is required to withhold a portion of the employee's wages and send it directly to the government to satisfy the tax debt. The levy remains in effect until the tax debt is fully paid or until the government releases the levy.Rate this question:
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- 6.
Penalties for failure to make timely deposits are determined by:
- A.
A flat rate of 10% for late deposits.
- B.
5% of the undeposited amount with a maximum of $100,000
- C.
15% of the undeposited amount with a maximum of $100,000
- D.
A four-tiered penalty structure based on the number of days the deposit is late
Correct Answer
D. A four-tiered penalty structure based on the number of days the deposit is lateExplanation
The correct answer is a four-tiered penalty structure based on the number of days the deposit is late. This means that the penalty for failure to make timely deposits will vary depending on how many days the deposit is late. This suggests that the penalty will be higher for deposits that are late for a longer period of time.Rate this question:
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- 7.
An employer may exclude a business reimbursement from income when the employee's expenses meet which of the following requirements?
- A.
Reimbursements are made with regular payroll
- B.
Expenses are substantiated and excess advances are returned
- C.
Expenses are business-related, substantiated, and excess advances are retained for future travel.
- D.
Expenses are business-related, substantiated, and excess advances are returned timely.
Correct Answer
D. Expenses are business-related, substantiated, and excess advances are returned timely.Explanation
An employer may exclude a business reimbursement from income when the employee's expenses are business-related, substantiated, and excess advances are returned timely. This means that the expenses must be directly related to the business, the employee must provide evidence or documentation to support the expenses, and any excess money received as an advance must be returned within a reasonable timeframe. By meeting these requirements, the reimbursement can be excluded from the employee's income.Rate this question:
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- 8.
Under FLSA, a work week is defined as:
- A.
Any 7 consecutive 24-hour periods
- B.
Sunday through Saturday
- C.
A minimum of a 40-hour/5-day time frame
- D.
Stated in a collective bargaining agreement
Correct Answer
A. Any 7 consecutive 24-hour periodsExplanation
Under the Fair Labor Standards Act (FLSA), a work week is defined as any 7 consecutive 24-hour periods. This means that an employer can establish any 7-day period as their work week, as long as it remains consistent. This definition allows for flexibility in determining when overtime pay is required, as overtime is typically calculated based on hours worked in excess of 40 hours within the defined work week.Rate this question:
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- 9.
At least how often must employers report fringe benefits as income for federal tax withholding purposes?
- A.
Each pay period
- B.
Monthly
- C.
Quarterly
- D.
Annually
Correct Answer
D. AnnuallyExplanation
Employers must report fringe benefits as income for federal tax withholding purposes annually. This means that they need to report the value of these benefits once a year, typically at the end of the tax year. Reporting fringe benefits annually allows employers to accurately calculate the amount of taxes that need to be withheld from employees' paychecks. It also ensures compliance with federal tax regulations and helps to prevent any potential tax issues or penalties.Rate this question:
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- 10.
Certain company records must be retained for four years to comply with regulations of which of the follwoing agencies?
- A.
U.S. Citizenship and Immigration Service
- B.
Internal Revenue Service
- C.
Social Security Administration
- D.
Wage and Hour Division, Department of Labor
Correct Answer
B. Internal Revenue ServiceExplanation
The correct answer is the Internal Revenue Service. The IRS requires certain company records to be retained for four years to comply with their regulations. These records include tax returns, employment tax records, and financial records. By retaining these records, companies can ensure that they are in compliance with IRS regulations and can provide necessary documentation if audited by the IRS.Rate this question:
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- 11.
To build morale and motivate staff, a manager must:
- A.
Give good reviews and raises
- B.
Reward "stars" and promote competition within the team
- C.
Delegate accountability to staff members
- D.
Be sincere and specific with praise
Correct Answer
D. Be sincere and specific with praiseExplanation
To build morale and motivate staff, a manager must be sincere and specific with praise. This means that the manager should genuinely acknowledge and appreciate the efforts and achievements of their team members. By providing specific feedback and recognition, the manager can make employees feel valued and motivated to continue performing well. This approach helps in creating a positive work environment and fosters a sense of appreciation and recognition among the staff members.Rate this question:
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- 12.
From which of the following taxes are statutory workers' compensation payments exempt?
- A.
Federal income tax only
- B.
Social security and Medicare taxes only
- C.
Federal unemployment tax only
- D.
Federal income, social security, medicare, and federal unemployment taxes
Correct Answer
D. Federal income, social security, medicare, and federal unemployment taxesExplanation
Statutory workers' compensation payments are exempt from federal income tax, social security tax, Medicare tax, and federal unemployment tax. This means that workers' compensation payments are not subject to any of these taxes, providing relief to the recipient.Rate this question:
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- 13.
Which of the following items represents an input interface to the payroll system?
- A.
General ledger
- B.
Time and attendance
- C.
Benefit payments
- D.
Material usage records
Correct Answer
B. Time and attendanceExplanation
The item "time and attendance" represents an input interface to the payroll system because it is a record of the hours worked by employees. This information is necessary for calculating employee wages and salaries, which are key components of the payroll system.Rate this question:
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- 14.
A company has a gross payroll of $120,589.36. Federal taxes withheld are $24,117.87; combined social security and Medicare taxes withheld are $6,502.50. What is the company's total tax liability for this pay period?
- A.
$30.620.37
- B.
$37,122.87
- C.
$42,568.04
- D.
$61,240.74
Correct Answer
A. $30.620.37Explanation
To calculate the company's total tax liability for this pay period, you need to add up the federal taxes withheld and the combined social security and Medicare taxes withheld.
Total Tax Liability = Federal Taxes Withheld + Social Security and Medicare Taxes Withheld
Total Tax Liability = $24,117.87 + $6,502.50
Total Tax Liability = $30,620.37
The company's total tax liability for this pay period is $30,620.37.Rate this question:
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- 15.
One reason many companies use a Zero Balance checking account is that:
- A.
Cash is available for investment until items are presented for payment at the company's bank
- B.
Funds do not have to be deposited until the employee cashes the check
- C.
The company receives interest on the account
- D.
Bank reconciliations are not required
Correct Answer
A. Cash is available for investment until items are presented for payment at the company's bankExplanation
A Zero Balance checking account allows companies to keep their cash available for investment until items are presented for payment at the company's bank. This means that the company can use the funds for other purposes, such as investing in profitable ventures, until the checks are actually cashed by the employees. This provides the company with more flexibility and the opportunity to earn interest on the cash before it is used for payments.Rate this question:
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- 16.
In a customer service situation, Payroll should:
- A.
Assure the caller everything is okay, even when it's not
- B.
Get in the last word
- C.
Avoid addressing stressful issues
- D.
Remain assertive and stay focused
Correct Answer
D. Remain assertive and stay focusedExplanation
In a customer service situation, it is important for Payroll to remain assertive and stay focused. This means that they should confidently address the caller's concerns and maintain their attention on finding a resolution. By remaining assertive, Payroll can effectively handle the situation and provide the necessary assistance to the caller. Additionally, staying focused ensures that they prioritize the customer's needs and work towards a satisfactory outcome.Rate this question:
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- 17.
All of the following items qualify as a de minimis fringe benefit EXCEPT:
- A.
Occasional parties and picnics for employees
- B.
Occasional supper money for working overtime
- C.
Traditional holiday gifts, such as food items
- D.
Group legal services worth less than $70 annually
Correct Answer
D. Group legal services worth less than $70 annuallyExplanation
The correct answer is group legal services worth less than $70 annually. This is because de minimis fringe benefits are those that are of minimal value and are impractical to account for. Occasional parties and picnics for employees, occasional supper money for working overtime, and traditional holiday gifts are all examples of de minimis fringe benefits as they are of minimal value and are impractical to account for. However, group legal services worth less than $70 annually do not qualify as de minimis fringe benefits because they have a specific monetary value attached to them.Rate this question:
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- 18.
All of the following steps are required when initiating direct deposit for an employee EXCEPT:
- A.
Pre-notification
- B.
Receiving financial institution routing number
- C.
Getting authorization from the employee
- D.
Receiving employee's bank account number
Correct Answer
A. Pre-notificationExplanation
Pre-notification is not required when initiating direct deposit for an employee. Pre-notification refers to the process of sending a test transaction to the employee's bank account before initiating the actual direct deposit. It is done to verify that the account information provided by the employee is correct. However, it is not a mandatory step in the direct deposit initiation process. The other steps mentioned, such as receiving the financial institution routing number, getting authorization from the employee, and receiving the employee's bank account number, are all necessary for initiating direct deposit.Rate this question:
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- 19.
When paying supplemental wages along with regular wages WITHOUT specifying the amount of each, how would a company determine the amount of income tax to withhold from the supplemental wages if the employee has been paid no supplemental wages so far during the year and the supplemental wage payment is no more than $1,000,
- A.
Withhold a flat 25% from the supplemental wages and withhold from regular wages using the appropriate table.
- B.
Withhold a flat 25% from the supplemental wages.
- C.
Withhold income tax as if the total were a single payment for a regular payroll period.
- D.
Compute income tax withholding on the regular wages separate from the supplemental wages.
Correct Answer
C. Withhold income tax as if the total were a single payment for a regular payroll period.Explanation
When paying supplemental wages along with regular wages without specifying the amount of each, the company would determine the amount of income tax to withhold from the supplemental wages by treating the total payment as a single payment for a regular payroll period. This means that the company would calculate the income tax withholding based on the total amount of both regular wages and supplemental wages, as if it were a regular payment for a standard pay period.Rate this question:
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- 20.
An employer that deposits payroll taxes semiweekly incurs a tax liability of $55,000 on Tuesday and a liability of $110,000 on Wednesday. When should the taxes be deposited?
- A.
$55,000 on Thursday and $110,000 on Friday
- B.
$55,000 on Friday and $110,000 on the next Wednesday
- C.
$110,000 on Thursday and $55,000 on Friday
- D.
$165,000 on Thursday
Correct Answer
C. $110,000 on Thursday and $55,000 on FridayExplanation
The employer should deposit $110,000 on Thursday and $55,000 on Friday because they are required to deposit payroll taxes semiweekly. This means that they must deposit the taxes within three business days after the end of each payroll period. Since the tax liability of $55,000 was incurred on Tuesday, the deposit should be made on Thursday. Similarly, the tax liability of $110,000 incurred on Wednesday should be deposited on Friday.Rate this question:
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- 21.
Documenting payroll policies and procedures will provide all of the following results EXCEPT:
- A.
A vehicle for improving processes
- B.
A tool for assessing internal business controls
- C.
A mechanism for educating payroll partners, suppliers, and customers
- D.
Assurances of payroll personnel competency and performance
Correct Answer
D. Assurances of payroll personnel competency and performanceExplanation
Documenting payroll policies and procedures can provide several benefits, including serving as a vehicle for improving processes, a tool for assessing internal business controls, and a mechanism for educating payroll partners, suppliers, and customers. However, it does not directly provide assurances of payroll personnel competency and performance. These assurances would typically come from other sources such as performance evaluations, training programs, or certifications.Rate this question:
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- 22.
Which of the following records MUST be kept for four years?
- A.
Hours worked
- B.
Time cards
- C.
OSHA records
- D.
Voided payroll checks
Correct Answer
D. Voided payroll checksExplanation
Voided payroll checks must be kept for four years because they are important financial records that provide evidence of cancelled or voided payments. These records are necessary for auditing purposes and to ensure accuracy in payroll accounting. Keeping voided payroll checks for a specific period allows for future reference and verification if needed.Rate this question:
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- 23.
Techniques for conducting periodic physical payouts:
- A.
Are the same for all employees
- B.
Vary by whether the employee is paid by check or direct deposit
- C.
Vary for some employees such as telecommuters
- D.
Vary by wage class and compensation level
Correct Answer
A. Are the same for all employeesExplanation
The explanation for the given correct answer is that the techniques for conducting periodic physical payouts are the same for all employees. This means that regardless of whether an employee is paid by check or direct deposit, or if they are a telecommuter or fall into a specific wage class or compensation level, the techniques used to conduct the payouts remain consistent. This ensures fairness and consistency in the payment process for all employees.Rate this question:
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- 24.
Which of the following plans describes a cafeteria plan under section 125 of the Internal Revenue code?
- A.
A quantified and accountable expense reimbursement plan
- B.
A tax-qualified retirement plan for public education institutions
- C.
A plan which permits employees to select two or more qualified taxable and nontaxable benefits
- D.
A plan whereby state government employees may request that pretax dollars be set aside in a retirement account until age 39
Correct Answer
C. A plan which permits employees to select two or more qualified taxable and nontaxable benefitsExplanation
A cafeteria plan under section 125 of the Internal Revenue code is a plan that allows employees to choose from a variety of benefits, both taxable and nontaxable, based on their individual needs and preferences. This plan provides flexibility for employees to customize their benefits package according to their specific requirements.Rate this question:
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- 25.
Using federal child support guidelines, calculate the maximum amount of support that can be withheld from an employee's semimonthly disposable earnings of $1,500.00. The employee is four months in arrears in making child support payments and has no other dependents.
- A.
$750.00
- B.
$825.00
- C.
$900.00
- D.
$975.00
Correct Answer
D. $975.00Explanation
The federal child support guidelines determine the maximum amount of support that can be withheld from an employee's disposable earnings. In this case, the employee's semimonthly disposable earnings are $1,500.00. Since the employee is four months in arrears in making child support payments and has no other dependents, the maximum amount of support that can be withheld is $975.00.Rate this question:
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