FPC Exam Chapter 1 Questions & Answers
Challenges to payroll
1. Complexity = Federal, state and local laws change frequently and must be incorporated into company policies
2. Communication = clear, consise payroll information
3. Technology = software, equipment and web-based applications ca...
FPC Exam Chapter 1 Questions &
Answers
Challenges to payroll - answer 1. Complexity = Federal, state and local laws change
frequently and must be incorporated into company policies
2. Communication = clear, consise payroll information
3. Technology = software, equipment and web-based applications can enhance payroll
process (automatic time keeping, record storage and retrieval)
4. Accuracy = employee's pay, tax filing, management of reports, etc.
Employees vs. Independent Contractors - answer Employees: Federal income tax,
social security tax, medicare tax, state income tax and local income tax are with held by
employer
Independent Contractor: taxes are not withheld. They provide a taxpayer Identification
number ( TIN)
Who decides whether you are an employee or an Independent contractor? - answer
Designated by employer.
Primary way to do this is by using the common law test
EXCEPT when the employer can classify an employee as a independent contractor
under the reasonable basis test
The common law test - answer 2 questions
How independent is the employee?
How much control can be exercised over the worker?
Basically,
if the person works strictly for the company and gets paid by them only its an employee
and if they make their own hours and can hire outside of the company its an
independent contractor
reasonable basis test - answer Employers can classify a worker who meets the
Common law test as an employee, instead as an independent contractor if:
- constantly treated as an IC and filed taxes as such
, - longstanding, recognized practice in a significant segment of the employers industry of
treating similar workers as ICs
- Have a judicial precedent
- ABle to demonstrate that the IRS ruled it ( published ruling or private letter ruling,
previous audit)
- Received Guidance from attorney or CPA
What happens when you have workers that aren't classified as EE or IC? - answer
Temporary Service agency, leasing companies or Professional Employer organizations
(PEO)
What are these companies responsible? - answer paying, withholding, reporting,
providing benefits. The company receiving the services contracts with these
organizations rather than the employee
What happens when you misclassify a worker - answer Misclassifications represent
a potential loss of revenue for all levels of govt so the IRS, department of labor, state
unemployment agencies and other state and local govt agencies have come together to
scope out and give sever penalties
The immigration Reform and control act of 1986 (IRCA) - answer requires employers
to verify EE's eligibility for employment in the U.S
What key provisions of the IRCA law affect employers? - answer Employer
Sanctions: Having knowledge that an employee is no longer authorized to work in the
USA
Anti-discrimination: the law prohibits discrimination in hiring or recruiting workers on the
basis of national origin or citizenship.
Verification of eligibility: the burden to verify an EE falls on the ER. First day of work the
EE must fill out the I-9 ( Employment eligibility verification) Company mus hold for 3
years or 1 year after termination, whichever comes first
Social Security Numbers and the Social Security Administration (SSA) - answer
Employers to verify the SSN on the W4 form ( EE withholding allowance certificate)
Submit any discrepancies to the SSA
Are there other ways for ER to check for discrepencies before its too late? - answer
Yes, they can use the Social Security Number Verification Service ( SSNVS) and the
Department of HOmelands security's (DHS) E-verify by supplying the Federal EMployer
Identification Number (FEIN) plus the following:
- EE first and last name plus middle initial if applicable
- EE SSN
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