A company engages a bookkeeper who works mostly from home, sets some of her own hours, and uses company accounting software under a manager's review. The company cannot decide whether she is an employee or an independent contractor and wants a formal federal determination before year-end reporting. What should the company do?

Have the worker complete Form W-9

A foreign national without a green card was present in the United States for 120 days this year, 150 days last year, and 180 days the year before that. Under the substantial presence test, how is the individual classified for this year?

Resident alien, because the weighted day count is 200

Resident alien, because the total day count is 450

Nonresident alien, because the weighted day count is 175

Nonresident alien, because only 120 days were spent here this year

New hires are frequently missing their first paycheck because HR sends new-hire paperwork to payroll after the processing cutoff. What is the BEST long-term solution?

Set a service level agreement with HR on data submission deadlines

Ask HR to e-mail payroll whenever paperwork will be late

Delay each new hire's start date until paperwork is received

Have payroll process every late new hire with an off-cycle manual check

An IRS examiner reviewing a worker's status groups the facts into behavioral control, financial control, and relationship of the parties. Which fact would the examiner place under financial control and treat as evidence of independent contractor status?

The worker has unreimbursed expenses and can realize a profit or loss

The company provides the worker with paid vacation and health insurance

The worker follows the company's detailed training on work methods

The parties signed a contract describing the worker as a contractor

Throughout last year, an employer had 42 full-time employees each month and 20 part-time employees who each worked 60 hours per month. Is the employer an applicable large employer under the ACA for the current year?

Yes; it has 52 full-time and full-time equivalent employees

No; it has 47 full-time and full-time equivalent employees

Yes; it has 62 employees because each part-timer counts as one

No; only its 42 full-time employees are counted

A U.S. company sends a U.S. citizen employee to work for two years at its branch in a country that has no totalization agreement with the United States. The employee remains on the U.S. payroll. How are the employee's wages treated for Social Security and Medicare tax?

Both taxes continue to apply to the wages

Neither tax applies because the work is abroad

Only Medicare tax applies while the employee is abroad

Neither tax applies if the wages are excluded from income

On payroll processing day, a payroll specialist has four tasks. Which should be completed FIRST?

Transmitting the direct deposit file before the bank's cutoff

Attending a planning meeting about next year's budget

Answering routine employee e-mails about their vacation balances

Preparing a quarterly headcount report due next week

FPC

Free FPC Practice Questions

10 sample questions for the FPC, with the correct answer and an explanation for each. No account needed. Try each one before you open the answer.

Sections covered on the exam: Workerstatusandclassification, Thefairlaborstandardsact, Calculation of the Paycheck, Core Payroll Concepts, Compliance, Research, and Resources, Professionalresponsibilityanddatasecurity, Methodsandtimingofpay, Wageattachmentsandvoluntarywageassignments, Payrollreportingrequirements, Recordretention, Penaltiesfornoncompliance, Otherfederallawsaffectingpayroll, Globalpayrollconcepts, Regularrateofpayandovertime, Voluntarydeductions, Gross-Ups,Supplementalwages,Andwagerecovery, Netpay,Employertaxes,Andtotalpayroll, Theemployeemasterfile, Payrollprocessingandsystemfunctionality, Integrations,Self-Service,Andreports, Systemsecurity, Payroll Process and Supporting Systems, Policies,Procedures,Anddocumentation, Interdepartmentalagreementsandgoals, Audits, Internalcontrols, Payrollandaccountingsystemcontrols, Validationandreconciliation, Accounting, Payrolljournalentries.

Question 1 · Workerstatusandclassification
A company engages a bookkeeper who works mostly from home, sets some of her own hours, and uses company accounting software under a manager's review. The company cannot decide whether she is an employee or an independent contractor and wants a formal federal determination before year-end reporting. What should the company do?
- A.File Form SS-4 with the IRS
- B.File Form SS-8 with the IRS
- C.Have the worker file Form 8919
- D.Have the worker complete Form W-9
Show answer and explanation
Answer: B. File Form SS-8 with the IRS
Form SS-8 asks the IRS to determine worker status for federal employment tax and income tax withholding purposes, and either the firm or the worker may file it. Form SS-4 applies for an employer identification number, Form 8919 is filed by a worker to report uncollected Social Security and Medicare tax after being treated as a contractor, and Form W-9 only certifies a payee's taxpayer identification number.
Question 2 · Calculation of the Paycheck
An employer wants an employee to net exactly $1,000 from a cash award. The employer uses the 22% optional flat rate for federal income tax, the employee is well below the Social Security wage base, and there is no state or local tax. What is the grossed-up amount of the award?
- A.$1,296.50
- B.$1,282.05
- C.$1,421.46
- D.$1,392.76
Show answer and explanation
Answer: C. $1,421.46
Gross-up divides the net amount by 1 minus the total tax rate: 22% + 6.2% + 1.45% = 29.65%, so $1,000 / 0.7035 = $1,421.46 (rounded to the cent). Multiplying the net by 1.2965 gives $1,296.50, which is too low because the added taxes are themselves taxable. Dividing by 0.78 ignores FICA, and dividing by 0.718 ignores Medicare.
Question 3 · Globalpayrollconcepts
A foreign national without a green card was present in the United States for 120 days this year, 150 days last year, and 180 days the year before that. Under the substantial presence test, how is the individual classified for this year?
- A.Resident alien, because the total day count is 450
- B.Nonresident alien, because the weighted day count is 175
- C.Nonresident alien, because only 120 days were spent here this year
- D.Resident alien, because the weighted day count is 200
Show answer and explanation
Answer: D. Resident alien, because the weighted day count is 200
The substantial presence test requires at least 31 days in the current year and at least 183 days using all current-year days, one-third of last year's days, and one-sixth of the days from two years ago: 120 + (150 / 3 = 50) + (180 / 6 = 30) = 200. Because 200 is at least 183, the individual is a resident alien. A simple total of 450 is not the test, and a count of 175 results from wrongly applying one-sixth to last year's days.
Question 4 · Gross-Ups,Supplementalwages,Andwagerecovery
An employee receives a $4,000 bonus paid separately from regular wages. The employer withholds federal income tax using the optional flat rate, and the employee's year-to-date wages are well below the Social Security wage base. Assume no state or local tax and no other deductions. What is the employee's net bonus?
- A.$3,120.00
- B.$2,814.00
- C.$2,734.00
- D.$2,872.00
Show answer and explanation
Answer: B. $2,814.00
Deductions are FIT $4,000 x 22% = $880.00, Social Security $4,000 x 6.2% = $248.00, and Medicare $4,000 x 1.45% = $58.00, so net pay is $4,000 - $1,186.00 = $2,814.00. The $3,120.00 figure withholds only federal income tax, $2,872.00 omits Medicare, and $2,734.00 uses the 24% backup withholding rate instead of the 22% supplemental rate.
Question 5 · Interdepartmentalagreementsandgoals
New hires are frequently missing their first paycheck because HR sends new-hire paperwork to payroll after the processing cutoff. What is the BEST long-term solution?
- A.Ask HR to e-mail payroll whenever paperwork will be late
- B.Set a service level agreement with HR on data submission deadlines
- C.Delay each new hire's start date until paperwork is received
- D.Have payroll process every late new hire with an off-cycle manual check
Show answer and explanation
Answer: B. Set a service level agreement with HR on data submission deadlines
A service level agreement defines each department's responsibilities, including when HR must deliver new-hire data for each pay cycle, and gives both sides a measurable standard. Routine manual checks treat the symptom and add cost and risk, late-notice e- mails do not prevent the problem, and delaying start dates harms the business without fixing the handoff.
Question 6 · Workerstatusandclassification
An IRS examiner reviewing a worker's status groups the facts into behavioral control, financial control, and relationship of the parties. Which fact would the examiner place under financial control and treat as evidence of independent contractor status?
- A.The company provides the worker with paid vacation and health insurance
- B.The worker follows the company's detailed training on work methods
- C.The worker has unreimbursed expenses and can realize a profit or loss
- D.The parties signed a contract describing the worker as a contractor
Show answer and explanation
Answer: C. The worker has unreimbursed expenses and can realize a profit or loss
Financial control covers significant investment, unreimbursed business expenses, the opportunity for profit or loss, offering services to the market, and the method of payment. Training on how to do the work is behavioral control and points toward employee status. Employee-type benefits and written contracts are relationship-of-the-parties factors, and a contract's label does not override the actual relationship.
Question 7 · Core Payroll Concepts
Throughout last year, an employer had 42 full-time employees each month and 20 part-time employees who each worked 60 hours per month. Is the employer an applicable large employer under the ACA for the current year?
- A.No; it has 47 full-time and full-time equivalent employees
- B.Yes; it has 62 employees because each part-timer counts as one
- C.No; only its 42 full-time employees are counted
- D.Yes; it has 52 full-time and full-time equivalent employees
Show answer and explanation
Answer: D. Yes; it has 52 full-time and full-time equivalent employees
An employer is an ALE if it averaged at least 50 full-time employees, including full-time equivalents, in the prior year. Part-time hours are totaled and divided by 120 each month: 20 x 60 = 1,200 / 120 = 10 FTEs, so 42 + 10 = 52. Dividing part-time hours by 240 understates FTEs, and counting each part-timer as one overstates them.
Question 8 · Globalpayrollconcepts
A U.S. company sends a U.S. citizen employee to work for two years at its branch in a country that has no totalization agreement with the United States. The employee remains on the U.S. payroll. How are the employee's wages treated for Social Security and Medicare tax?
- A.Neither tax applies because the work is abroad
- B.Both taxes continue to apply to the wages
- C.Only Medicare tax applies while the employee is abroad
- D.Neither tax applies if the wages are excluded from income
Show answer and explanation
Answer: B. Both taxes continue to apply to the wages
U.S. citizens and resident aliens employed abroad by an American employer remain subject to Social Security and Medicare tax unless a totalization agreement assigns coverage to the other country. The foreign earned income exclusion affects income tax only, not FICA, and there is no rule that applies Medicare tax alone to work abroad.
Question 9 · Gross-Ups,Supplementalwages,Andwagerecovery
An executive has received $900,000 of supplemental wages from the employer so far this year. She now receives a $300,000 bonus. The employer uses the optional 22% flat rate for supplemental wages up to $1 million. How much federal income tax must be withheld from the bonus?
- A.$74,000.00
- B.$66,000.00
- C.$111,000.00
- D.$96,000.00
Show answer and explanation
Answer: D. $96,000.00
Supplemental wages over $1 million in a calendar year are subject to mandatory 37% withholding. The first $100,000 of the bonus brings her to $1 million and is withheld at the optional 22% flat rate ($22,000), and the remaining $200,000 is withheld at 37% ($74,000), for $96,000.00. Applying 22% to the whole bonus gives $66,000.00, applying 37% to the whole bonus gives $111,000.00, and $74,000.00 covers only the portion over $1 million.
Question 10 · Interdepartmentalagreementsandgoals
On payroll processing day, a payroll specialist has four tasks. Which should be completed FIRST?
- A.Transmitting the direct deposit file before the bank's cutoff
- B.Attending a planning meeting about next year's budget
- C.Answering routine employee e-mails about their vacation balances
- D.Preparing a quarterly headcount report due next week
Show answer and explanation
Answer: A. Transmitting the direct deposit file before the bank's cutoff
Effective time management puts the most time-critical, high-impact task first. Missing the bank's ACH cutoff would delay pay for every direct deposit employee, so the file must be transmitted on time. Routine e-mails, a report due next week, and a planning meeting can be scheduled around that deadline without harming employees.

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