APA FPC-Remote Fundamental Payroll Certification Exam Practice Test

Answer : C

Comprehensive and Detailed Explanation:

Grossing up means increasing the payment amount so that the employee receives a specific net amount after taxes are withheld. Employers pay the taxes on behalf of the employee in such cases.

This is commonly used for:

Relocation reimbursements

Bonus payments

Tax equalization for expatriates

Option A is incorrect because grossing up is done to cover taxes, not to determine withholdings.

Option B is incorrect because grossed-up amounts are taxable, not tax-exempt.

Option D is incorrect because grossed-up payments are always taxable.

Formula:

IRS Publication 15 -- Employer's Tax Guide

Payroll.org -- Gross-Up Calculation Methods

Answer : B

Comprehensive and Detailed Explanation:

Using the IRS Percentage Method for Married Filing Jointly (2019 W-4):

Calculate taxable wages:

Gross pay: $2,500.00

Less pre-tax deductions: -$425.00

Taxable wages: $2,075.00

Federal Income Tax (from IRS tax tables):

Using 2019 IRS Percentage Method for Married, Semimonthly Pay:

First $1,640.00 taxed at 10% = $164.00

Remaining $435.00 taxed at 12% = $52.20

Total FIT = $216.20

Social Security Tax (6.2%):

$2,500.00 6.2% = $155.00

Medicare Tax (1.45%):

$2,500.00 1.45% = $36.25

Other deductions:

Child Support: $100.00

Total Taxes and Deductions:

216.20+155.00+36.25+100.00=507.45216.20 + 155.00 + 36.25 + 100.00 = 507.45216.20+155.00+36.25+100.00=507.45

Net Pay Calculation:

2,500.00507.45=1,730.362,500.00 - 507.45 = 1,730.362,500.00507.45=1,730.36

Thus, the correct answer is B. $1,730.36.

IRS Publication 15-T -- Federal Income Tax Withholding Methods

Payroll.org -- Net Pay Calculation Guide

Answer : D

E-mail is NOT a secure method for protecting sensitive payroll and HR data.

Best practices include data encryption, access control, and employee training.

Data Security Standards (Payroll.org)

IRS Data Protection Guidelines

Answer : A

Comprehensive and Detailed Explanation:

The tax deposit liability includes federal income tax withholding (FITW), Social Security tax, and Medicare tax.

Social Security Tax:

Employer & Employee each pay 6.2% on $40,000

$40,000 6.2% 2 = $4,960.00

Medicare Tax:

Employer & Employee each pay 1.45% on $35,000

$35,000 1.45% 2 = $1,015.00

Total Tax Deposit Liability:

$2,000 (FITW) + $4,960 (Social Security) + $1,015 (Medicare) = $7,975.00

Thus, the correct answer is A. $7,975.00.

IRS Publication 15 -- Employer's Tax Guide

Payroll.org -- Payroll Tax Calculation Best Practices

Answer : A

Comprehensive and Detailed Explanation:

Annual payroll reconciliation ensures that payroll records match tax filings. The best practice is to start reconciliation after completing the W-2 audit, as this verifies:

Employee earnings and tax withholdings

Federal and state tax deposits

Year-end adjustments

Option B is incorrect because quarterly reconciliation is separate from annual reconciliation.

Option C is incorrect because reconciliation should start after verifying W-2s, not just at the year-end.

Option D is incorrect because reconciliation should be based on the prior year, not the first payroll of the new year.

IRS -- Year-End Payroll Reporting Guide

Payroll.org -- Annual Reconciliation Best Practices

Answer : D

Comprehensive and Detailed Explanation:

Form I-9, Employment Eligibility Verification, is used by employers to:

Verify the identity of newly hired employees

Ensure employees are legally authorized to work in the U.S.

Prevent illegal employment practices

Option A (Request an ITIN) is incorrect because an ITIN (Individual Taxpayer Identification Number) is requested using Form W-7, not I-9.

Option B (Determine FIT withholding) is incorrect because Form W-4 is used for federal income tax withholding, not Form I-9.

Option C (Summarize taxable wages) is incorrect because Form W-2 summarizes taxable wages.

Answer : D

Comprehensive and Detailed Explanation:

State Unemployment Tax Act (SUTA) liability is determined based on where an employee works and receives direction from, not necessarily where a company is incorporated.

The key factors for determining SUTA state include:

Base of Operations (Option A) -- Where the employee works.

Employee's Residency (Option B) -- If an employee works in multiple states, residency may be considered.

Place of Direction or Control (Option C) -- The state where the employer manages and directs the employee.

Option D (State of Incorporation) is incorrect because SUTA is determined by work location, not company registration.