Payroll FPC-REMOTE Practice Exams
Last updated on Oct 22,2026- Exam Code: FPC-REMOTE
- Exam Name: Fundamental Payroll Certification
- Certification Provider: Payroll
- Latest update: Oct 22,2026
Question #151
Which of the following forms is used to report federal income tax withheld from payments to an independent contractor?
- A . Form 940
- B . Form 941
- C . Form 944
- D . Form 945
Correct Answer: D
D
Explanation:
Form 945 is used by employers to report federal income tax withholding from non-payroll payments, including payments to independent contractors if subject to backup withholding.
Option A (Form 940) is incorrect because Form 940 reports federal unemployment taxes (FUTA). Option B (Form 941) is incorrect because it is used for employee payroll tax reporting. Option C (Form 944) is incorrect because it is used for small employers filing annually.
Reference: IRS Form 945 Instructions
Payroll.org C Independent Contractor Withholding Rules
D
Explanation:
Form 945 is used by employers to report federal income tax withholding from non-payroll payments, including payments to independent contractors if subject to backup withholding.
Option A (Form 940) is incorrect because Form 940 reports federal unemployment taxes (FUTA). Option B (Form 941) is incorrect because it is used for employee payroll tax reporting. Option C (Form 944) is incorrect because it is used for small employers filing annually.
Reference: IRS Form 945 Instructions
Payroll.org C Independent Contractor Withholding Rules
Question #152
A payroll employee has just entered a group of timecards for one of their 25 retail stores.
What is the BEST way to verify that the data was entered accurately?
- A . Review a few employees from the batch
- B . Check totals on the check register
- C . Review earnings report after payroll is processed
- D . Run a batch total report
Correct Answer: D
D
Explanation:
The best way to verify payroll accuracy is to run a batch total report (Option D) because it:
Compares actual payroll totals to expected amounts
Identifies discrepancies before payroll processing
Option A (Review a few employees) is insufficient because errors in other records might be missed.
Option B (Check Register) occurs after payroll is processed.
Option C (Earnings Report) is useful but is generated after payroll is processed, making corrections harder.
Reference: Payroll.org C Payroll Data Verification Best Practices
IRS C Payroll Accuracy and Compliance Guidelines
D
Explanation:
The best way to verify payroll accuracy is to run a batch total report (Option D) because it:
Compares actual payroll totals to expected amounts
Identifies discrepancies before payroll processing
Option A (Review a few employees) is insufficient because errors in other records might be missed.
Option B (Check Register) occurs after payroll is processed.
Option C (Earnings Report) is useful but is generated after payroll is processed, making corrections harder.
Reference: Payroll.org C Payroll Data Verification Best Practices
IRS C Payroll Accuracy and Compliance Guidelines
Question #153
When a payer receives a “B” Notice, it must send a copy of the notification to the payee within:
- A . 15 days.
- B . 30 days.
- C . 60 days.
- D . 90 days.
Correct Answer: B
B
Explanation:
A "B" Notice (Backup Withholding Notice) is sent by the IRS when a payee’s taxpayer ID does not match records.
The employer must notify the payee within 30 days to correct their details.
Failure to comply results in backup withholding of 24% on future payments.
Reference: IRS Publication 1281 (Backup Withholding Notices)
B
Explanation:
A "B" Notice (Backup Withholding Notice) is sent by the IRS when a payee’s taxpayer ID does not match records.
The employer must notify the payee within 30 days to correct their details.
Failure to comply results in backup withholding of 24% on future payments.
Reference: IRS Publication 1281 (Backup Withholding Notices)
Question #154
Which of the following taxes are NOT withheld from allocated tips?
- A . Medicare and FIT only
- B . FIT and Social Security only
- C . Social Security and Medicare only
- D . FIT, Social Security, and Medicare only
Correct Answer: D
D
Explanation:
Allocated tips are NOT subject to withholding unless reported by the employee.
If not reported, FIT, Social Security, and Medicare (D) are not withheld but are still taxable.
Reference: IRS Publication 531 (Reporting Tip Income)
D
Explanation:
Allocated tips are NOT subject to withholding unless reported by the employee.
If not reported, FIT, Social Security, and Medicare (D) are not withheld but are still taxable.
Reference: IRS Publication 531 (Reporting Tip Income)
Question #155
Which of the following account types has a normal debit balance?
- A . Asset
- B . Capital
- C . Liability
- D . Revenue
Correct Answer: A
A
Explanation:
In accounting, a normal balance refers to the side (debit or credit) that increases the account balance.
Assets (Option A) normally have a debit balance because they represent resources owned by the company (cash, accounts receivable, equipment, etc.).
Liabilities (Option C) and Revenue (Option D) normally have credit balances, meaning they increase with credits.
Capital (Option B) also has a normal credit balance, as it represents owner’s equity.
Reference: GAAP Accounting Principles C Normal Account Balances
Payroll.org C Payroll Accounting Basics
A
Explanation:
In accounting, a normal balance refers to the side (debit or credit) that increases the account balance.
Assets (Option A) normally have a debit balance because they represent resources owned by the company (cash, accounts receivable, equipment, etc.).
Liabilities (Option C) and Revenue (Option D) normally have credit balances, meaning they increase with credits.
Capital (Option B) also has a normal credit balance, as it represents owner’s equity.
Reference: GAAP Accounting Principles C Normal Account Balances
Payroll.org C Payroll Accounting Basics
Question #156
To stop payment on an employee’s check, the employer must work with the:
- A . IRS
- B . Payroll provider
- C . Employer’s bank
- D . Employee’s bank
Correct Answer: C
C
Explanation:
Only the employer’s bank (C) can place a stop payment request.
Payroll providers (B) may facilitate, but do not issue bank stops.
Reference: Payroll Banking & Direct Deposit Standards (Payroll.org)
C
Explanation:
Only the employer’s bank (C) can place a stop payment request.
Payroll providers (B) may facilitate, but do not issue bank stops.
Reference: Payroll Banking & Direct Deposit Standards (Payroll.org)
Question #157
Which of the following statements is TRUE regarding the pre-notification process?
- A . Sent at least five days prior to payday
- B . Required prior to direct deposit beginning
- C . Verifies the employee’s name is on the bank account
- D . Involves sending a zero-dollar transaction through ACH
Correct Answer: D
D
Explanation:
A pre-notification (pre-note) process is used by payroll departments to verify banking details before initiating direct deposit payments.
A zero-dollar transaction is sent via ACH (Automated Clearing House) to ensure account validity.
This step prevents payment errors and fraudulent transactions.
Option A is incorrect because pre-notes are usually processed 3C6 days before payday, but not necessarily five days in all cases.
Option B is incorrect because not all employers require a pre-note before direct deposit begins. Option C is incorrect because ACH verification does not confirm the employee’s full legal name.
Reference: National Automated Clearing House Association (NACHA) C ACH Pre-Notification Guidelines Payroll.org C Direct Deposit Compliance Rules
D
Explanation:
A pre-notification (pre-note) process is used by payroll departments to verify banking details before initiating direct deposit payments.
A zero-dollar transaction is sent via ACH (Automated Clearing House) to ensure account validity.
This step prevents payment errors and fraudulent transactions.
Option A is incorrect because pre-notes are usually processed 3C6 days before payday, but not necessarily five days in all cases.
Option B is incorrect because not all employers require a pre-note before direct deposit begins. Option C is incorrect because ACH verification does not confirm the employee’s full legal name.
Reference: National Automated Clearing House Association (NACHA) C ACH Pre-Notification Guidelines Payroll.org C Direct Deposit Compliance Rules
Question #158
An out-of-balance condition in the general ledger could be caused by:
- A . A direct deposit error
- B . Increased overtime
- C . Vacation payout
- D . High turnover
Correct Answer: A
A
Explanation:
Direct deposit errors (A) may result in payroll mismatches and unrecorded transactions, causing the general ledger to be out of balance.
Other options (B, C, D) impact payroll costs but do not directly affect ledger balancing.
Reference: Payroll Accounting Reconciliation Standards
A
Explanation:
Direct deposit errors (A) may result in payroll mismatches and unrecorded transactions, causing the general ledger to be out of balance.
Other options (B, C, D) impact payroll costs but do not directly affect ledger balancing.
Reference: Payroll Accounting Reconciliation Standards
Question #159
Exempt employee master file data should include all of the following elements EXCEPT:
- A . Minimum Wage
- B . Payment Dates
- C . Work Location
- D . Rate of Pay
Correct Answer: A
A
Explanation:
The employee master file for an exempt employee should include:
Payment Dates (B) C To ensure timely payroll processing.
Work Location (C) C For tax and compliance purposes.
Rate of Pay (D) C Required for salary calculations.
Option A (Minimum Wage) is incorrect because exempt employees are not subject to minimum wage laws under FLSA.
Reference: Fair Labor Standards Act (FLSA) C Exempt Employee Requirements Payroll.org C Employee Master File Best Practices
A
Explanation:
The employee master file for an exempt employee should include:
Payment Dates (B) C To ensure timely payroll processing.
Work Location (C) C For tax and compliance purposes.
Rate of Pay (D) C Required for salary calculations.
Option A (Minimum Wage) is incorrect because exempt employees are not subject to minimum wage laws under FLSA.
Reference: Fair Labor Standards Act (FLSA) C Exempt Employee Requirements Payroll.org C Employee Master File Best Practices
Question #160
The reconciliation of an employee federal income tax withholding account occurs when which type of account is balanced?
- A . Asset
- B . Equity
- C . Expense
- D . Liability
Correct Answer: D
D
Explanation:
Payroll taxes withheld from employees are considered liabilities until they are remitted to the IRS or state agencies.
Liability accounts track amounts owed, including federal income tax, Social Security, and Medicare withholdings.
Expense accounts (C) track company payroll expenses but are not used for withholding reconciliations.
Reference: IRS Payroll Accounting Guidelines
Payroll Tax Reconciliation Guide (Payroll.org)
D
Explanation:
Payroll taxes withheld from employees are considered liabilities until they are remitted to the IRS or state agencies.
Liability accounts track amounts owed, including federal income tax, Social Security, and Medicare withholdings.
Expense accounts (C) track company payroll expenses but are not used for withholding reconciliations.
Reference: IRS Payroll Accounting Guidelines
Payroll Tax Reconciliation Guide (Payroll.org)