FPC Exam Flashcards

Q: What should FPC flashcards focus on first?

Start with payroll rules that change calculations: employee versus contractor status, FLSA nonexempt overtime, taxable fringe benefits, pre-tax deductions, federal deposit schedules, and gross-to-net sequencing.

Q: Do these FPC cards include exact tax thresholds?

They emphasize durable rules and workflows. Exact tax thresholds are used only where local FPC source data supports them; candidates should still check current IRS and PayrollOrg materials for exam-window law dates.

Q: Why are controls and accounting included on an entry-level payroll exam?

Payroll work is not only calculation. The FPC blueprint includes payroll systems, administration, audits, and accounting, so candidates need to know how records, approvals, reconciliations, and journal entries support compliant payroll.

Q: How should I review paycheck calculation cards?

Treat each card as a step in a workflow: identify gross pay, determine taxable wages, apply required taxes, subtract lawful deductions, handle garnishment limits, and reconcile the final net pay to reports and funding.

Q: Is prior payroll experience required for the FPC?

No. PayrollOrg states that the FPC has no payroll experience prerequisite, which is why it is commonly used for entry-level payroll roles or professionals moving into payroll operations.

Question 1

Employee vs. contractor: strongest payroll clue

Accepted Answer

Look at the actual working relationship, not the label in the contract. Control over schedule, tools, methods, supervision, and ongoing work usually points toward employee status.

Question 2

Form W-4 vs. Form W-9

Accepted Answer

Employees give Form W-4 so payroll can calculate federal income tax withholding. Independent contractors generally give Form W-9 so the payer has a certified TIN for information reporting.

Question 3

Payroll risk of worker misclassification

Accepted Answer

Treating an employee as a contractor can create unpaid withholding, employer payroll taxes, wage-hour exposure, penalties, interest, and corrected reporting work.

Question 4

Missing TIN from a contractor

Accepted Answer

If a reportable payee does not provide a valid TIN when required, backup withholding may apply. Payroll should not treat the missing TIN as just a paperwork issue.

Question 5

Three worker-classification fact groups

Accepted Answer

Common-law analysis looks at behavioral control, financial control, and relationship facts. A defensible classification memo weighs all three instead of relying on one convenient fact.

Question 6

FLSA overtime trigger

Accepted Answer

For nonexempt employees, federal overtime generally starts after 40 hours in a single workweek. Employers cannot average two workweeks together to erase overtime.

Question 7

Nondiscretionary bonus and overtime

Accepted Answer

A nondiscretionary bonus usually belongs in the regular rate. If it covers a prior period, payroll may need to recalculate overtime for that period and pay the extra premium.

Question 8

Unauthorized overtime worked

Accepted Answer

If the employer knows or should know a nonexempt employee worked overtime, the time must be paid. Discipline for violating policy is separate from the duty to pay wages.

Question 9

Two hourly rates in one workweek

Accepted Answer

When a nonexempt employee works at multiple rates, overtime commonly uses a weighted-average regular rate unless a permitted alternative agreement applies.

Question 10

Private-sector comp time

Accepted Answer

Private-sector employers generally cannot give nonexempt employees compensatory time off instead of overtime pay. Public-sector rules are different, so do not generalize.

Question 11

Default rule for taxable compensation

Accepted Answer

Cash pay and cash-equivalent benefits are taxable wages unless a specific exclusion applies. Payroll should start with inclusion, then document any exclusion.

Question 12

De minimis benefit treatment

Accepted Answer

Small, infrequent benefits can be excluded when tracking them would be unreasonable. Cash and gift cards are not de minimis just because the dollar amount is low.

Question 13

Group-term life imputed income

Accepted Answer

Employer-provided group-term life coverage above the IRS exclusion limit can create imputed taxable income. Payroll must include the taxable value even though no cash was paid.

Question 14

Personal use of a company vehicle

Accepted Answer

Business use may be excluded, but personal-use value is generally a taxable fringe benefit. Payroll needs a valuation method and timely inclusion in wages.

Question 15

Section 125 vs. traditional 401(k) tax effect

Accepted Answer

Qualified Section 125 health deductions usually reduce federal income tax wages and often FICA wages. Traditional 401(k) deferrals reduce federal income tax wages but generally remain subject to FICA.

Question 16

Purpose of Form W-4

Accepted Answer

Form W-4 tells payroll how to calculate federal income tax withholding. Without a valid W-4, payroll must use IRS default withholding treatment rather than guessing.

Question 17

Exempt Form W-4 renewal

Accepted Answer

An employee claiming exemption from federal income tax withholding generally must renew the claim by February 15. If not renewed, payroll should stop treating the employee as exempt.

Question 18

IRS lock-in letter

Accepted Answer

A lock-in letter tells the employer the withholding settings to use. Payroll must follow the IRS instruction until the IRS releases or changes it, even if the employee submits a conflicting W-4.

Question 19

Correcting a filed Form W-2

Accepted Answer

Use Form W-2c to correct an employee wage statement after filing. Form W-3c transmits corrected wage totals to the Social Security Administration.

Question 20

W-2 wages vs. 1099-NEC payments

Accepted Answer

Employees receive Form W-2 for wages subject to payroll rules. Independent contractor nonemployee compensation is generally reported on Form 1099-NEC, not through payroll withholding as wages.

Question 21

FICA matching rule

Accepted Answer

Social Security and regular Medicare taxes are shared between employee and employer. Social Security has a wage base; regular Medicare generally applies to all covered wages.

Question 22

Additional Medicare tax

Accepted Answer

Additional Medicare tax is withheld from employee wages above the statutory threshold and is not matched by the employer. It is an employee withholding obligation, not a shared tax.

Question 23

FUTA and SUTA relationship

Accepted Answer

FUTA is the federal unemployment tax; SUTA is state unemployment tax. State rates and wage bases vary, and SUTA credit rules can affect net FUTA liability.

Question 24

Monthly vs. semiweekly depositor

Accepted Answer

Federal employment tax deposit schedule is based on tax liability during the IRS lookback period. It is not chosen by payroll preference or pay frequency alone.

Question 25

$100,000 next-day deposit rule

Accepted Answer

If accumulated federal employment tax reaches $100,000 on any day in a deposit period, the employer generally must deposit by the next business day and may be accelerated to semiweekly status.

Question 26

Gross-to-net paycheck workflow

Accepted Answer

Start with gross earnings, determine taxable wages, calculate required taxes, subtract authorized deductions and garnishments, then reconcile the resulting net pay to funding and reports.

Question 27

Salary covering 40 nonexempt hours

Accepted Answer

When a fixed weekly salary covers 40 hours for a nonexempt employee, the regular-rate starting point is usually salary divided by 40 before computing overtime premium.

Question 28

Retroactive rate increase

Accepted Answer

If a pay increase applies to a prior period that included overtime, payroll should recalculate the regular rate for that period and pay the additional overtime due.

Question 29

Net-to-gross calculation

Accepted Answer

Gross-up solves for the gross amount needed to deliver a promised net payment after taxes. It is used when policy guarantees the employee a specific take-home amount.

Question 30

Time rounding control

Accepted Answer

Rounding time punches can be permissible only when the practice is neutral over time and does not systematically underpay employees.

Question 31

Disposable earnings for garnishments

Accepted Answer

For most federal garnishment limits, disposable earnings are gross earnings minus legally required deductions. Voluntary deductions are not automatically subtracted.

Question 32

Ordinary creditor garnishment cap

Accepted Answer

Ordinary debt garnishments are limited by federal CCPA rules, and state law can be more protective. Payroll must apply the legal maximum rather than simply honoring the full order amount.

Question 33

Child support vs. creditor garnishment

Accepted Answer

Child support orders usually have priority over ordinary creditor garnishments and may use higher withholding limits. Priority rules prevent over-withholding when orders compete.

Question 34

Bankruptcy stay and payroll deductions

Accepted Answer

A bankruptcy order can stop or change certain garnishments. Payroll should review the order promptly and update withholding only through documented legal instructions.

Question 35

Garnishment discharge protection

Accepted Answer

Federal law generally protects an employee from being fired because of one indebtedness garnishment. Payroll should separate order processing from employment discipline decisions.

Question 36

Core payroll record retention periods

Accepted Answer

FLSA basic payroll records are generally kept at least 3 years, wage-computation support at least 2 years, and IRS employment tax records at least 4 years.

Question 37

Form 941, Form 940, and Form W-2

Accepted Answer

Form 941 is the quarterly federal employment tax return. Form 940 is the annual FUTA return. Forms W-2 report employee annual wages and taxes.

Question 38

Correcting Form 941 errors

Accepted Answer

A prior Form 941 error is generally corrected on Form 941-X. The correction should also be checked against deposits, wage statements, state filings, and GL balances.

Question 39

Year-end payroll reconciliation target

Accepted Answer

Reconcile quarterly Form 941 totals, annual W-2/W-3 totals, payroll registers, deposits, and payroll-related general ledger accounts before filing or correcting year-end reports.

Question 40

Electronic payroll record standard

Accepted Answer

Electronic records are acceptable when they remain complete, readable, retrievable, secure, and backed up. End-of-retention disposal should protect confidential payroll data.

Question 41

Least-privilege payroll access

Accepted Answer

Users should have only the payroll system access needed for their job. Unique user IDs, MFA for privileged roles, and audit logs make actions traceable.

Question 42

Segregation of duties in payroll

Accepted Answer

No one person should control master-data setup, time approval, payroll calculation, payment release, and bank reconciliation. Where staffing is limited, compensating review controls are needed.

Question 43

Batch control totals

Accepted Answer

Batch totals compare expected records or amounts to processed records or amounts. They help catch missing, duplicated, or altered data before payroll is finalized.

Question 44

Exception report effectiveness

Accepted Answer

An exception report is useful only when someone independent reviews it timely, investigates unusual items, and documents the resolution.

Question 45

Payroll disaster recovery control

Accepted Answer

A recovery plan should define payroll-critical systems, backups, manual workarounds, recovery objectives, contacts, and testing. Untested plans are weak audit evidence.

Question 46

Basic payroll journal entry

Accepted Answer

Payroll entries typically debit wage or salary expense and credit cash or a clearing account plus liability accounts for taxes, deductions, and other amounts owed.

Question 47

Employee deductions in the GL

Accepted Answer

Amounts withheld from employees are liabilities until remitted to tax agencies, benefit carriers, courts, or other payees. They are not employer expense when withheld.

Question 48

Payroll accrual and reversal

Accepted Answer

An accrual records compensation earned but not yet paid in the proper accounting period. Reversing it in the next period helps avoid double counting when actual payroll posts.

Question 49

Payroll clearing account red flag

Accepted Answer

A clearing account should return to near zero after payroll funding and postings. Remaining balances suggest timing differences, posting errors, or incomplete transactions needing investigation.

Question 50

Audit finding remediation

Accepted Answer

A strong remediation plan fixes root cause, assigns an owner, sets a due date, and adds monitoring evidence. Repeating the same finding usually signals weak follow-through.

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