FPC-Remote APA Fundamental Payroll Certification Free Practice Exam Questions (2025 Updated)

Comprehensive and Detailed Explanation:FormI-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 anITIN (Individual Taxpayer Identification Number)is requested usingForm W-7, not I-9.

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

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

Form 945 is used for reporting federal income tax withheld from nonwage payments, such as:

Pension distributions

Gambling winnings

Certain annuities

Form 941 (B) is for employment taxes on wages.

Form 940 (A) is for FUTA taxes.

References:

IRS Form 945 Instructions

IRS Withholding Rules

A journal is known as the "original entry" because transactions are first recorded here before posting to the ledger.

The general ledger is the final entry (B), not the journal.

References:

Payroll Accounting Standards (Payroll.org)

System needs (A), processes affected (B), and cost of implementation (D) are critical factors in designing a shared services model.

Employee acceptance (C) is valuable but not a primary technical or financial consideration.

References:

Payroll Process Improvement Guidelines (Payroll.org)

Cash equivalents, such as gift cards (A), are always taxable income.

Nominal gifts (B, C, D) are generally tax-exempt under de minimis rules.

References:

IRS Publication 15-B (Taxable Fringe Benefits)

Form 941 is used to report quarterly employment taxes(including federal income tax, Social Security, and Medicare).

Form 940 reports FUTA taxes (A), not quarterly employment taxes.

Form 944 is for small employerswho file annually instead of quarterly.

Form 945 is for non-wage income withholding (D).

References:

IRS Form 941 Instructions

Independent contractors DO NOT complete Form I-9, as they are not employees underIRCA (Immigration Reform and Control Act).

Employees receiveForm W-2and completeForm W-4.

Independent contractors completeForm W-9for tax reporting.

References:

IRS Independent Contractor Guidelines (Publication 1779)

Shrugging shoulders (B) is a sign of uncertainty or disinterest, making itnegative body language.

Making eye contact (C), nodding (D), and avoiding slouching (A) are positive active listening cues.

References:

Effective Communication in Payroll Training Guide (Payroll.org)

Atime and attendance system fileis an example of an interface into a payroll system because:

Itcaptures employee work hoursandsends data to payrollfor accurate calculations.

Payroll interfaces ensureautomated and accurate payment processing.

Other options explained:

Check print file(A) is an output, not an interface.

ACH payment file(B) is used to process payments, not interface data.

General ledger transactions(D) are accounting-related, not payroll input.

References:

Payroll System Integration Guide (Payroll.org)

Thefederal minimum wageis$7.25 per hour.

A state's minimum wage is$0.60 higher, so$7.25 + $0.60 = $7.85.

FLSA requires thehigherof state or federal minimum wage.

References:

FLSA Minimum Wage Provisions (Department of Labor)

Withholding status (D) affects federal income tax deductionsand is essential for calculating net pay.

Rate of pay (A), hours worked (B), and shift differentials (C) impact gross pay but NOT net pay calculation.

References:

IRS Form W-4 Withholding Guidelines

Payroll Calculation Standards (Payroll.org)

Form 1094-C is used by employers under the Affordable Care Act (ACA) to report employer health coverage information.

Itincludes basic employer details, employee counts, and ACA compliance data.

Employee FITW (B), FUTA wages (C), and deceased employee payments (D) are NOT reported on Form 1094-C.

References:

IRS Form 1094-C Instructions

ACA Compliance Guidelines (Payroll.org)

Workers’ compensation benefits are tax-exempt if they are paid for work-related injuries or illnesses.

If payments are received for non-work-related illnesses (B), they become taxable.

Amounts that do not exceed federal or state limits (C & D) remain tax-exempt.

References:

IRS Publication 525 (Taxable and Nontaxable Income)

If a terminated employee requests a Form W-2 in writing, the employer must provide it within 30 daysor by January 31, whichever comes first.

Since the request was made on August 1, the deadline is August 31.

References:

IRS Form W-2 Guidelines

Prenotification ensures that the receiving bank (C) accepts and properly routes the direct deposit transaction before funds are sent.

References:

NACHA Direct Deposit Standards

Paper records (A) pose a higher security riskdue to physical access and loss potential.

Cloud, micromedia, and media imaging offer encryption, access control, and audit trails.

References:

Payroll Record Security Best Practices (Payroll.org)

TheInternal Revenue Service (IRS)is responsible for issuing updates related toForms W-2 and W-3under federal tax laws.

SSA (Social Security Administration)processes W-2s but does not initiate changes.

OCSS (Office of Child Support Services)andUSCIS (U.S. Citizenship and Immigration Services)are not involved in payroll tax forms.

References:

IRS Publication 15 (Employer’s Tax Guide)

IRS Form W-2 & W-3 Guidelines

Workers’ compensation includes commissions (B) as part of employee earnings.

Gratuities (A) and uniform stipends (D) are usually excluded.

References:

State Workers' Compensation Audit Guidelines

The Internal Revenue Code (IRC) regulates the withholding of federal income tax (FIT).

FICA (C) governs Social Security & Medicare taxes.

FUTA (D) applies to unemployment tax but does not regulate withholding.

References:

Internal Revenue Code (IRC) Section 3402

IRS Publication 15 (Employer’s Tax Guide)