PAYROLL FUNDAMENTALS LATEST 2026 TEST PAPER 1
QUESTIONS AND SOLUTIONS RATED A+
✔✔What information must an employer report for new hires? - ✔✔Name, Date of Hire,
Address, SS, Employer's Name, Address, and EIN
✔✔Fair Labor Standards Act of 1938 (FLSA) - ✔✔Guarantees employees a minimum
wage, requires employers to pay an overtime premium, limits when minors can work,
and provides equal pay protection.
✔✔Who is protected by FLSA? - ✔✔Nonexempt employees
✔✔Minimum weekly salary required for exempt employees - ✔✔$455
✔✔4 categories of exempt employees - ✔✔Executives, Administrative Employee,
Professional, Outside Sales People
✔✔Special FLSA provisions exist for... - ✔✔Various transportation workers, agricultural
workers, hospital employees, and public sector employees.
✔✔Automated clearing house (ACH)- - ✔✔An entity which serves as the central agency
for processing and transferring funds from one financial institution to another via
electronic data transmission. ACHs operate under rules and standards established by
the National Automated Clearing House Association (NACHA)
✔✔Circular E - ✔✔Employer's Tax Guide (IRS Publication 15). The basic IRS
reference. Provides explanation and illustration of an employer's federal tax withholding,
depositing, and reporting obligations. Circular E provides information relevant to all
employers, while Publication 15-A, Employer's Supplemental Tax Guide , is intended to
provide additional information required by larger employers.
✔✔Disposable earnings - ✔✔That portion of earnings remaining after deductions
required by law have been made; used to calculate the maximum amount of an
employee's wages subject to garnishment
✔✔Electronic funds transfer (EFT) - ✔✔The electronic movement of funds from one
bank account to another. Direct deposit of employees' paychecks is an example of EFT.
✔✔Exempt employees - ✔✔Generally, employees who are exempt from the minimum
wage and overtime provisions of the Fair Labor Standards Act
✔✔FICA - ✔✔The Federal Insurance Contributions Act which imposes employer and
employee taxes to fund the federal government's old-age, survivors, and disability
insurance (OASDI/Social Security) and health insurance (HI/Medicare) trust funds.
, ✔✔Gross-up - ✔✔The formula for determining the total taxable gross when the
employer pays the employee's share of tax
✔✔Noncash fringe benefits - ✔✔Benefits paid to employees in a form other than cash
(e.g., health insurance, company-provided vehicles, group-term life insurance)
✔✔Percentage method of withholding- - ✔✔A procedure for calculating the amount of
income tax to withhold from wages using mathematical formulas rather than simple
tables
✔✔Premium pay - ✔✔The portion of pay, over and above the regular hourly rate, paid
for overtime hours worked.
✔✔Pretax deduction - ✔✔A deduction from pay that reduces taxable wages
✔✔W-2 - ✔✔Wage and Tax Statement
✔✔W-4S - ✔✔Request for Federal Income Tax Withholding From Sick Pay
✔✔668-W - ✔✔Notice of Levy on Wages, Salary, and Other Income
✔✔941 - ✔✔Employer's Quarterly Federal Tax Return
✔✔Wage - ✔✔The amount paid to an employee for every hour worked
✔✔Salary - ✔✔A fixed annual(yearly) sum of money divided among equal pay periods
✔✔Biweekly - ✔✔employees are paid every two weeks. 26 times a year
✔✔Accounting Period - ✔✔the period of time covered in an income statement
✔✔Aggregate method - ✔✔method of withholding federal income tax from
supplemental wages in which the supplemental payment is combined with the regular
wages paid during the most recent payroll period.
✔✔Balance sheet - ✔✔a financial statement that presents the business's financial
position in terms of assets, liabilities and owner's equity as of a certain date
✔✔Asset - ✔✔resource acquired by a business that is consumed by the business
✔✔Employee identification number (EIN) - ✔✔the employer's account number with the
Internal Revenue
QUESTIONS AND SOLUTIONS RATED A+
✔✔What information must an employer report for new hires? - ✔✔Name, Date of Hire,
Address, SS, Employer's Name, Address, and EIN
✔✔Fair Labor Standards Act of 1938 (FLSA) - ✔✔Guarantees employees a minimum
wage, requires employers to pay an overtime premium, limits when minors can work,
and provides equal pay protection.
✔✔Who is protected by FLSA? - ✔✔Nonexempt employees
✔✔Minimum weekly salary required for exempt employees - ✔✔$455
✔✔4 categories of exempt employees - ✔✔Executives, Administrative Employee,
Professional, Outside Sales People
✔✔Special FLSA provisions exist for... - ✔✔Various transportation workers, agricultural
workers, hospital employees, and public sector employees.
✔✔Automated clearing house (ACH)- - ✔✔An entity which serves as the central agency
for processing and transferring funds from one financial institution to another via
electronic data transmission. ACHs operate under rules and standards established by
the National Automated Clearing House Association (NACHA)
✔✔Circular E - ✔✔Employer's Tax Guide (IRS Publication 15). The basic IRS
reference. Provides explanation and illustration of an employer's federal tax withholding,
depositing, and reporting obligations. Circular E provides information relevant to all
employers, while Publication 15-A, Employer's Supplemental Tax Guide , is intended to
provide additional information required by larger employers.
✔✔Disposable earnings - ✔✔That portion of earnings remaining after deductions
required by law have been made; used to calculate the maximum amount of an
employee's wages subject to garnishment
✔✔Electronic funds transfer (EFT) - ✔✔The electronic movement of funds from one
bank account to another. Direct deposit of employees' paychecks is an example of EFT.
✔✔Exempt employees - ✔✔Generally, employees who are exempt from the minimum
wage and overtime provisions of the Fair Labor Standards Act
✔✔FICA - ✔✔The Federal Insurance Contributions Act which imposes employer and
employee taxes to fund the federal government's old-age, survivors, and disability
insurance (OASDI/Social Security) and health insurance (HI/Medicare) trust funds.
, ✔✔Gross-up - ✔✔The formula for determining the total taxable gross when the
employer pays the employee's share of tax
✔✔Noncash fringe benefits - ✔✔Benefits paid to employees in a form other than cash
(e.g., health insurance, company-provided vehicles, group-term life insurance)
✔✔Percentage method of withholding- - ✔✔A procedure for calculating the amount of
income tax to withhold from wages using mathematical formulas rather than simple
tables
✔✔Premium pay - ✔✔The portion of pay, over and above the regular hourly rate, paid
for overtime hours worked.
✔✔Pretax deduction - ✔✔A deduction from pay that reduces taxable wages
✔✔W-2 - ✔✔Wage and Tax Statement
✔✔W-4S - ✔✔Request for Federal Income Tax Withholding From Sick Pay
✔✔668-W - ✔✔Notice of Levy on Wages, Salary, and Other Income
✔✔941 - ✔✔Employer's Quarterly Federal Tax Return
✔✔Wage - ✔✔The amount paid to an employee for every hour worked
✔✔Salary - ✔✔A fixed annual(yearly) sum of money divided among equal pay periods
✔✔Biweekly - ✔✔employees are paid every two weeks. 26 times a year
✔✔Accounting Period - ✔✔the period of time covered in an income statement
✔✔Aggregate method - ✔✔method of withholding federal income tax from
supplemental wages in which the supplemental payment is combined with the regular
wages paid during the most recent payroll period.
✔✔Balance sheet - ✔✔a financial statement that presents the business's financial
position in terms of assets, liabilities and owner's equity as of a certain date
✔✔Asset - ✔✔resource acquired by a business that is consumed by the business
✔✔Employee identification number (EIN) - ✔✔the employer's account number with the
Internal Revenue
