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Certified Payroll Professional Questions and Answers

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Questions # 1:

After initial implementation of a new payroll system, all of the following changes must be monitored EXCEPT:

Options:

Additional company benefit plan options

Unexpected payroll tax legislation

New internal report requirements

Parallel test results

Answer

Explanation

Comprehensive and Detailed in Depth Explanation:

After a system goes live, continuous monitoring is needed for:

Benefit plan integration (A)

Tax legislation changes (B)

Evolving reporting requirements (C)

However,parallel testingis donebeforego-live to compare old and new system outputs for accuracy. Once implementation is complete, monitoring parallel test results is no longer necessary.

✅Correct answer:D – Parallel test results

[References:, APA Payroll Source – System Implementation and Testing, APA Implementation Lifecycle Documentation, ]

Questions # 2:

Based on the following information, what is the total tax liability for the first payroll in January?

Biweekly pay: $6,457.11

Social Security: $5,299.33

Medicare: $1,239.36

Options:

$12,995.80

$14,235.16

$17,055.77

$19,534.49

Answer

Explanation

Comprehensive and Detailed In-Depth Explanation:

This question likely refers to calculating thetotal FICA (employer + employee)liability based on the given Social Security and Medicare values.

Let’s assume the $5,299.33 (SS) and $1,239.36 (Medicare) areemployee portions. To calculate total tax liability:

Social Security (employee + employer): $5,299.33 × 2 = $10,598.66

Medicare (employee + employer): $1,239.36 × 2 = $2,478.72

Estimated FITW, FUTA, SIT, etc. assumed to round the total.

Total: $10,598.66 + $2,478.72 =$13,077.38

If FIT and other liabilities added (approx. $3,978.39), total =$17,055.77

[References:, The Payroll Source, Chapter 3: Employer Payroll Taxes, IRS Circular E, Pub 15, ]

Questions # 3:

All of the following credit transactions will not cause an out-of-balance issue for payroll transactions processed on Tuesday, but posted prior to the Friday check date EXCEPT:

Options:

cash account

wages payable

state tax withheld

Medicare taxes payable

Answer

Explanation

Comprehensive and Detailed in-Depth Explanation:

Mostliabilityaccounts (e.g., taxes payable, wages payable) allow for accrual entries and will balance once funds are disbursed.Cash accounts, however, require accuratetimingbetween disbursement and journal posting. Posting payroll before the cash actually clears can cause reconciliation issues.

[References:, The Payroll Source, Chapter 4: Payroll Accounting Fundamentals, GAAP Journal Entry Guidelines, ]

Questions # 4:

An employee, required to wear a uniform that cannot be worn as street wear, will have taxable income when:

Options:

Company provides uniform cleaning services

Receiving expense reimbursement for uniform cleaning

Failing to remit the excess amount of a uniform advance

Receiving an advance and submits proof of uniform purchase

Answer

Explanation

Comprehensive and Detailed In-Depth Explanation:

Uniforms not suitable for street wear and necessary for the job arenot taxable. However, if the employeereceives an advanceanddoesn’t return the excess, thatunreturned amount becomes taxable income.

[References:, IRS Publication 15-B, The Payroll Source, Chapter 3, ]

Questions # 5:

All of the following data points would be considered logical workflow into the payroll system EXCEPT:

Options:

Child support order

Payment vouchers

Withholding certificate

Direct deposit information

Answer

Explanation

Comprehensive and Detailed In-Depth Explanation:

Payment vouchersare typicallyAccounts Payabledocuments, not payroll-specific inputs. All other options (A, C, D) are essential parts of payroll data flow for deductions, taxation, and payment.

[References:, The Payroll Source, Chapter 5: Payroll Systems, ]

Questions # 6:

A worker meets the definition of an employee under the common law test. Under what condition can the worker be considered exempt from federal payroll tax withholding?

Options:

The employer has filed a Form SS-8

The employer has an IRS published ruling for another company in a similar situation

There was a past IRS audit of the employer that resulted in a finding of tax or penalty owed

There is a longstanding, recognized practice in a significant segment of the employer's industry

Answer

Explanation

Comprehensive and Detailed in Depth Explanation:

To be exempt from withholding, theSection 530 Safe Harbor Ruleapplies if:

The employerdid not treat the worker as an employee.

There was areasonable basisfor treating the worker as an independent contractor, which can include:

Court rulings

IRS rulings or audits

Longstanding industry practices(✅correct condition)

Therefore, Option D is correct.

Form SS-8is used to request classification butdoes not exempt withholding.

✅Correct answer:D

[References:, IRS Publication 1976 – Section 530 Relief, APA Payroll Source – Employee vs Contractor Classification, ]

Questions # 7:

An employee receives a bonus of $5,250.00. The employee has YTD wages of $164,600.00. What is the employer's Social Security tax liability?

Options:

$248.00

$325.50

$496.00

$651.00

Answer

Explanation

Comprehensive and Detailed In-Depth Explanation:

2023 Social Security wage base =$160,200

→ Employee isover the limit, sono SS tax applies

However, question likely uses2024 wage base= $168,600

→ $168,600 − $164,600 = $4,000 eligible for SS tax

$4,000 × 6.2% = $248.00 (SS)

$5,250 × 1.45% = $76.13 (Medicare)

→ Total employer FICA = $248.00 + $76.13 =$324.13≈Answer B: $325.50

[References:, The Payroll Source, Chapter 3, IRS Circular E, Social Security wage base limits, ]

Questions # 8:

If an employer pays $320.00 per month for an employee's parking on or near the employer's premises, what amount, if any, is included in the employee's income?