- (Topic 1)
Which test is used to determine if an employer-employee relationship exists?

1. A. Time Test
2. B. Substantial Presence Test
3. C. Permanent Resident Test
4. D. Common Law Test

Correct Answer: D
Comprehensive and Detailed Explanation:TheCommon Law Testis used by theIRSto determine whether a worker is classified as anemployee or an independent contractor. The test evaluates factors related to:
✑ Behavioral control(Does the employer control what and how the worker performs
tasks?)
✑ Financial control(Are business expenses reimbursed? Is the worker making an independent profit or loss?)
✑ Type of relationship(Are there benefits like paid time off? Is the relationship expected to be long-term?)
✑ Option A (Time Test)is incorrect because it applies toqualifying earned income for tax benefits, not employment classification.
✑ Option B (Substantial Presence Test)is incorrect because it determinesresident alien tax status.
✑ Option C (Permanent Resident Test)is incorrect because it relates toimmigration status, not employment relationships.
Reference:
IRS Publication 15-A – Employer??s Guide to Worker Classification Payroll.org – Independent Contractor vs. Employee Compliance

- (Topic 2)
Payroll system security violations may result in:

1. A. Data entry errors
2. B. Unauthorized access
3. C. Validation edit failures
4. D. Unreconciled accounts

Correct Answer: B
✑ Unauthorized access (B) is a direct result of security breaches.
✑ Other options (A, C, D) may result from human error but not security violations. References:
✑ Payroll Security Guidelines (Payroll.org)

- (Topic 2)
The purpose of the prenotification process for direct deposit is to ensure that the transaction is:

1. A. Authorized by the company
2. B. Authorized by the employee
3. C. Acceptable to the receiving bank
4. D. Acceptable to the originating financial institution

Correct Answer: C
✑ Prenotification ensures that the receiving bank (C) accepts and properly routes the direct deposit transaction before funds are sent.
References:
✑ NACHA Direct Deposit Standards

- (Topic 1)
All of the following criteria are used to determine FMLA eligibility EXCEPT the number of:

1. A. Company Employees
2. B. Dependents in the Household
3. C. Hours Worked in the Previous 12 Months
4. D. Employees within 75 Miles of the Worksite

Correct Answer: B
Comprehensive and Detailed Explanation:To beeligible for leave under the Family and Medical Leave Act (FMLA), an employee must:
✑ Work for a covered employer (50+ employees) (Option A)
✑ Have worked at least 1,250 hours in the past 12 months (Option C)
✑ Work at a location with at least 50 employees within a 75-mile radius (Option D)
✑ Option B (Number of Dependents) is incorrectbecause FMLA eligibility is based onemployment factors, not personal circumstances.
Reference:
U.S. Department of Labor – Family and Medical Leave Act (FMLA) Eligibility Guidelines Payroll.org – FMLA Compliance Requirements

- (Topic 1)
An exempt employee is being paid an annual discretionary bonus. The employee has submitted a 2020 W-4. Calculate the net pay based on the following information:

1. A. $3,117.50
2. B. $3,267.50
3. C. $3,603.40
4. D. $3,932.83

Correct Answer: B
Comprehensive and Detailed Explanation:Using theIRS Supplemental Wage Method, theflat tax rateof22%applies tobonuses:
✑ Federal Income Tax:
✑ Social Security Tax:
✑ Medicare Tax:
✑ State Income Tax: Total Taxes Withheld:

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