Experience the Quality With Free Fundamental Payroll Exam Questions That Helps Candidates Pass

The Federal Insurance Contributions Act (FICA) funds Social Security and Medicare through payroll taxes paid by both employers and employees. FUTA, not FICA, funds unemployment; OSHA governs safety; and ERISA governs pensions and benefits. APA stresses that payroll professionals must accurately apply FICA taxes and annual wage bases. Misapplication results in compliance risks, incorrect employee withholdings, and inaccurate financial reporting.

Cash tips reported to the employer are fully taxable and subject to federal income tax, Social Security, and Medicare withholding. Employer retirement contributions and health insurance premiums are excluded, and transportation benefits are tax-free up to IRS limits. APA emphasizes payroll professionals must track reported tips carefully, as misreporting creates compliance issues and IRS penalties.

Regular pay = 40 × $20 = $800.

Overtime = 3 × ($20 × 1.5) = 3 × $30 = $90.

Total gross = $800 + $90 = $890.

Correct answer = C ($890).

APA stresses payroll professionals must calculate overtime correctly to comply with FLSA. Even small errors in overtime pay create compliance risks and wage disputes.

The Social Security Administration (SSA) requires employers to file Form W-2 for employees and Form W-3 as the transmittal summary. The IRS enforces income tax laws, the DOL enforces labor standards, and the EEOC handles discrimination laws. APA stresses the importance of accurate and timely W-2/W-3 submission to ensure employees receive correct earnings records and the SSA maintains accurate benefit data.

The Fair Labor Standards Act (FLSA) governs federal minimum wage, overtime requirements, and recordkeeping obligations. ERISA covers benefits, FMLA provides unpaid leave, and COBRA covers health continuation. APA stresses that payroll professionals must ensure FLSA compliance to avoid penalties, lawsuits, and employee wage claims.