CPP Practice Questions (2026) — Free Sample Questions with Answers

Answer: B

Send it as usual with a November 11 settlement date, because ACH settles every weekday: ACH settlement follows the Federal Reserve calendar; there is no settlement on a holiday.

Send it early with a November 10 settlement date, because ACH does not settle on the holiday: Correct. ACH entries do not settle on Federal Reserve holidays, so the file must be sent early enough to settle on the prior business day — Core Payroll Concepts 1.7.

Send it as usual with a November 12 settlement date, because the holiday moves payday: Funds would arrive after the scheduled payday, breaking the stated policy.

Replace direct deposits with paper checks dated November 11 for this payday: Switching methods disrupts employees and ignores the simple fix of an earlier settlement date.

Plan ACH transmissions around the Federal Reserve holiday calendar; when payday falls on a holiday, settle on the prior business day.

Answer: D

1. 1. Target net pay: $703.50; tax rates: FIT 22% + Social Security 6.2% + Medicare 1.45% = 29.65%.
2. 2. No pre-tax deductions; the award is fully taxable supplemental wages.
3. 3. Gross = $703.50 ÷ (1 − 0.2965) = $703.50 ÷ 0.7035 = $1,000.00.
4. 4. Taxes on $1,000.00: FIT $220.00, Social Security $62.00, Medicare $14.50 = $296.50.
5. 5. Verify: $1,000.00 − $296.50 = $703.50 net, exactly the target.

$761.78: Divides by (1 − 7.65%) only, grossing up for FICA but not federal income tax.

$901.92: Divides by (1 − 22%) only, grossing up for federal income tax but not FICA.

$979.81: Grosses up for FIT and Social Security but omits Medicare: $703.50 ÷ (1 − 0.22 − 0.062) = $703.50 ÷ 0.718 = $979.81, which leaves the employee short by the Medicare tax.

$1,000.00: Correct. Divide the net by 1 minus all flat rates: $703.50 ÷ (1 − 0.22 − 0.062 − 0.0145) = $703.50 ÷ 0.7035 = $1,000.00 — Core Payroll Concepts 1.4.

Gross pay = net ÷ (1 − sum of flat tax rates); always verify by taking the taxes back out.

Answer: B

1. 1. Straight-time earnings: 46 × $18.00 = $828.00.
2. 2. Add the nondiscretionary production bonus: $828.00 + $46.00 = $874.00 of regular-rate compensation.
3. 3. Exclude the gift ($60.00) and the tool reimbursement ($25.00) under Sec. 7(e).
4. 4. Regular rate = $874.00 ÷ 46 hours = $19.00.
5. 5. For reference: OT premium 6 × ($19.00 × 0.5) = $57.00; FLSA pay $931.00, plus the $60.00 gift and $25.00 reimbursement.

$18.00: Uses the base hourly rate and leaves out the nondiscretionary production bonus.

$19.00: Correct. The nondiscretionary bonus is included, while the gift and expense reimbursement are excluded under FLSA Sec. 7(e): ($828.00 + $46.00) ÷ 46 = $19.00 — Core Payroll Concepts 1.2.

$20.30: Also includes the anniversary gift, which is excludable because it is not measured by hours or production.

$21.85: Divides by 40 hours instead of all 46 hours worked.

Regular rate = (all includable compensation for the workweek) ÷ (all hours worked); gifts, discretionary bonuses and expense reimbursements are excluded.

Answer: C

Brightwater owes the back taxes unless each installer first filed Form SS-8: Section 530 has no SS-8 requirement; an SS-8 is a separate determination request.

Brightwater owes the back taxes, because the common-law test overrides industry practice: Ignores Section 530: it relieves the employment tax liability even when the common-law test shows employee status.

Section 530 relief bars the federal employment tax assessment for the installers: Correct. Section 530 of the Revenue Act of 1978 protects a business that meets reporting consistency (all 1099s filed), substantive consistency (no similar worker treated as an employee) and a reasonable basis (here, long-standing industry practice) from federal employment tax liability, even though the workers are common-law employees — Core Payroll Concepts 1.1.

Section 530 relief bars the assessment and also exempts the installers from FLSA overtime: Section 530 is a federal employment tax provision only; FLSA status is decided separately under the economic-reality test.

Section 530 relief needs reporting consistency, substantive consistency and a reasonable basis (precedent, prior audit, industry practice); it relieves federal employment taxes only.

Answer: B

1. 1. 3 years after the hire date: March 2, 2020 + 3 years = March 2, 2023.
2. 2. 1 year after termination: June 30, 2026 + 1 year = June 30, 2027.
3. 3. Keep until the later date: June 30, 2027.

March 2, 2023: Uses only the 3-years-after-hire date; the later of the two dates controls, and he was still employed then.

June 30, 2027: Correct. Keep Form I-9 for 3 years after hire or 1 year after termination, whichever is later: March 2, 2023 vs. June 30, 2027 — Compliance/Research and Resources 2.4.

June 30, 2029: Counts 3 years from termination; the rule is 1 year after termination.

June 30, 2030: Applies the IRS 4-year employment tax rule to an immigration form.

Form I-9: retain 3 years after hire or 1 year after termination, whichever is later.

Answer: C

1. 1. Flat-rate test: Corwin has not withheld FIT from her regular wages in 2026 or 2025 (a prior employer's withholding does not count), so the 22% optional rate is not available; use the aggregate method.
2. 2. Combine the bonus with the most recent regular wages: $600.00 + $4,000.00 = $4,600.00; × 26 = $119,600; minus line 1g $8,600 = $111,000.
3. 3. Table row $57,900–$113,200: $5,800.00 + 22% × ($111,000 − $57,900) = $5,800.00 + $11,682.00 = $17,482.00; ÷ 26 = $672.38.
4. 4. FIT already withheld from the $600.00 regular wages: $0.00 ($15,600 − $8,600 = $7,000, below the $7,500 start of the table).
5. 5. FIT on the bonus: $672.38 − $0.00 = $672.38.

$540.38: Applies the percentage method to the $4,000.00 bonus alone ($104,000 − $8,600 = $95,400 → $5,800.00 + 22% × $37,500 = $14,050.00 ÷ 26) instead of combining it with the regular wages.

$636.00: Subtracts the $12,900 married-filing-jointly line 1g amount ($119,600 − $12,900 = $106,700 → $16,536.00 ÷ 26); she files single, so line 1g is $8,600.

$672.38: Correct. The optional flat rate is unavailable because Corwin has withheld no FIT from her regular wages this year or last, so the bonus is aggregated with the $600.00 regular wages: $17,482.00 ÷ 26 = $672.38, less $0.00 already withheld — Compliance/Research and Resources 2.2.

$880.00: Applies the 22% optional flat rate; it is unavailable because Corwin itself has not withheld income tax from her regular wages in 2026 or 2025, and her prior employer's withholding does not count.

The 22% optional rate requires that the same employer withheld FIT from the employee's regular wages in the current or preceding year; otherwise use the aggregate method: tax on (supplemental + most recent regular wages) minus the tax already withheld on those regular wages.

Answer: B

1. Gross wages: $310.00.
2. Deductions required by law: FIT $8.00 + Social Security $19.22 + Medicare $4.50 + state tax $4.28 = $36.00.
3. Disposable earnings: $310.00 – $36.00 = $274.00 (voluntary dues and premiums are not subtracted).
4. Test 1: 25% × $274.00 = $68.50. Test 2: $274.00 – $217.50 = $56.50.
5. Maximum garnishment: the lesser amount, $56.50.

$31.50: Subtracts the voluntary union dues and medical premium; disposable earnings exclude only deductions required by law.

$56.50: Correct — disposable earnings $274.00; the limit is the lesser of 25% ($68.50) or the amount over 30 × $7.25 = $217.50 ($56.50) (15 U.S.C. 1673) — Calculation of the Paycheck 3.3.

$68.50: Takes 25% of disposable earnings without checking the 30 × minimum wage floor, which is lower here.

$77.50: Applies 25% to gross wages instead of disposable earnings.

Ordinary garnishment limit = lesser of 25% of disposable earnings or disposable earnings minus 30 × the federal minimum wage ($217.50 a week).

Answer: B

1. Excess coverage: $230,000 – $50,000 = $180,000 = 180 units of $1,000.
2. Table I cost (age 52, band 50–54): 180 × $0.23 = $41.40 a month.
3. Less after-tax employee contribution: $41.40 – $10.00 = $31.40 imputed income a month (subject to Social Security and Medicare).

$17.00: Uses the 45–49 age band; Table I uses the employee's age at the end of the tax year.

$31.40: Correct — ($230,000 – $50,000) ÷ $1,000 × $0.23 = $41.40, less her $10.00 after-tax contribution (IRC 79; Pub. 15-B) — Calculation of the Paycheck 3.2.

$41.40: Forgets to subtract the employee's after-tax contributions toward the coverage.

$42.90: Applies Table I to the full coverage instead of the coverage over $50,000.

GTL imputed income = (coverage – $50,000) ÷ $1,000 × Table I rate for the age at year end × months, minus after-tax employee contributions.

Answer: D

1. Applicable rates: 22% optional flat FIT + 6.2% Social Security (YTD is far below the wage base) + 1.45% Medicare = 29.65%.
2. Gross: $1,500.00 ÷ (1 – 0.2965) = $1,500.00 ÷ 0.7035 = $2,132.20.
3. Taxes: FIT $469.08; Social Security $132.20; Medicare $30.92.
4. Check: $2,132.20 – $469.08 – $132.20 – $30.92 = $1,500.00.

$1,624.26: Grosses up for Social Security and Medicare only and leaves out federal income tax.

$1,923.08: Divides by (1 – 22%) only, so the Social Security and Medicare taxes come out of the target net.

$1,944.75: Multiplies the net by (1 + 29.65%) instead of dividing; the taxes on the added amount are not covered.

$2,132.20: Correct — gross = net ÷ (1 – 22% – 6.2% – 1.45%) = $1,500.00 ÷ 0.7035; the check line returns exactly $1,500.00 (Pub. 15 supplemental-wage rules) — Calculation of the Paycheck 3.1.

Gross pay = net ÷ (1 – sum of the flat tax rates that apply to the payment); always verify by recomputing each tax.

Answer: C

Override the 40 deductions in the new system and proceed to go-live: Overriding the results hides the setup error instead of fixing it, and skipping the retest leaves the cause unconfirmed.

Accept the difference as rounding within tolerance: An identical $3.12 for one plan's enrollees is a pattern, not rounding.

Correct the vision-plan setup and rerun the parallel test: Correct. A uniform difference tied to one plan points to a configuration error; parallel differences must be explained and fixed, then retested, before go-live — parallel testing, Payroll Process 4.4.

Log the difference as a known issue and fix it after go-live: Going live with a known setup error means it will repeat every pay period and require corrections for 40 employees.

In parallel testing, the same inputs run through both systems; every difference is researched to its cause and resolved before sign-off.

Answer: A

1. 1. Add the keyed hours: 40.00 + 32.75 + 38.50 + 16.00 + 41.25 + 29.00 = 197.50.
2. 2. Compare with the control sheet: 197.50 − 188.50 = 9.00 hours over; record counts agree (6 = 6), so no record was added or dropped.
3. 3. A difference evenly divisible by 9 (9.00 ÷ 9 = 1.00) signals a transposition.
4. 4. Test each entry: 32.75 vs. 23.75 = 9.00 ✓; 38.50 vs. 83.50 = 45.00; 16.00 vs. 61.00 = 45.00; 41.25 vs. 14.25 = 27.00; 29.00 vs. 92.00 = 63.00; 40.00 vs. 04.00 = 36.00.
5. 5. Correct employee 1057 to 23.75: 197.50 − 9.00 = 188.50, which agrees with the control total.

Employee 1057 (32.75 hours): Correct. The keyed total (197.50) is 9.00 hours over the control total while the record counts agree, so no record is missing or extra. A difference evenly divisible by 9 points to a transposition, and 32.75 keyed for 23.75 is exactly 9.00 high — batch control totals, Payroll Process 4.1.

Employee 1062 (38.50 hours): Transposing digits in 38.50 (83.50) would create a 45.00-hour difference, not 9.00.

Employee 1078 (16.00 hours): The smallest entry looks like a partial period, but low hours are not an error by themselves; transposing 16.00 and 61.00 would create a 45.00-hour difference, not 9.00.

Employee 1081 (41.25 hours): Picks the only overtime entry; transposing 41.25 and 14.25 would create a 27.00-hour difference.

Compare record counts first, then the amount: an equal count with a difference evenly divisible by 9 usually means a transposition, not a missing or duplicate record.

Answer: D

Explain that the 2026 withholding tables increased his income tax: The stub comparison shows FIT changed by less than $5.00, so the tables do not explain a $465.00 drop.

Open a system ticket, since his deductions changed without any new elections: Investigating is reasonable when the cause is unknown, but here the cause is visible on the stubs and is not an error.

Suggest a new Form W-4 to offset the lower net pay: Changing income tax withholding to make up for a correct Social Security deduction treats the symptom and could leave him underwithheld.

Show him that Social Security tax restarted with the new wage-base year: Correct. He paid no Social Security tax after reaching the 2025 wage base; it restarts on January 1 ($7,500.00 × 6.2% = $465.00), which exactly explains the drop — customer service and communication, Administration and Management 5.3.

Before acting on a pay complaint, compare the stubs and explain the cause; a January drop for a high earner is often Social Security tax restarting with the new wage-base year.

Answer: D

1. Identify the errors in the KPI definition: only payroll-caused corrections = 96.
2. Error-free payments: 12,480 − 96 = 12,384.
3. Accuracy rate: 12,384 ÷ 12,480 = 0.992308 → 99.23%.
4. Check the distractors: (12,480 − 252) ÷ 12,480 = 97.98%; (12,480 − 228) ÷ 12,480 = 98.17%; (12,480 − 120) ÷ 12,480 = 99.04%.

97.98%: Counts all 252 corrections, including manager-approval errors and new-hire checks that payroll did not cause.

98.17%: Counts the 132 manager-approval corrections as payroll errors (96 + 132 = 228).

99.04%: Counts the 24 new-hire checks issued because of hires after the cutoff as payroll errors (96 + 24 = 120).

99.23%: Correct. Only the 96 corrections caused by payroll count: (12,480 − 96) ÷ 12,480 = 99.23% — KPIs and dashboards, Administration and Management 5.2.

A KPI is only meaningful if its formula follows its definition: accuracy = (payments − payroll-caused errors) ÷ payments.

Answer: A

Matching direct-deposit accounts and addresses across employees and investigating duplicates: Correct. A ghost employee's pay must land in an account the fraudster controls, so bank accounts or addresses shared with another employee (often the clerk) are the classic red flag — Audits 6.1 fraud detection.

Comparing each department's gross pay with the prior year's budget: A department-level analytic is too aggregated; one extra salary can hide inside normal growth or turnover.

Recomputing federal income tax withholding on a random sample of paychecks: Recomputing withholding tests calculation accuracy; a ghost employee's taxes can be computed perfectly.

Confirming that the supervisor approved every payroll run before release: Approval of the run total already existed and failed; confirming it again does not test whether each payee exists.

Ghost-employee tests look for payees with no independent existence: duplicate bank accounts or addresses, no benefit deductions or leave use, and no match to HR hire records.

Answer: C

1. 1. Gross wages: $82,400.00.
2. 2. Social Security wages: subtract Sec. 125 premiums only ($82,400.00 − $3,900.00 = $78,500.00); 401(k) deferrals stay in FICA wages; union dues are after-tax.
3. 3. Employee Social Security: $78,500.00 × 6.2% = $4,867.00.
4. 4. Employer Social Security: $78,500.00 × 6.2% = $4,867.00.
5. 5. Credit to Social Security Tax Payable: $4,867.00 + $4,867.00 = $9,734.00.

$4,867.00: Records only the employee's withheld share; the compound entry also includes the employer's matching share.

$9,223.12: Also excludes the 401(k) deferrals from Social Security wages; elective deferrals are subject to FICA.

$9,734.00: Correct. Social Security wages = $82,400.00 − $3,900.00 Sec. 125 = $78,500.00; × 12.4% (employee + employer) = $9,734.00 — Accounting 7.3 compound entries.

$10,217.60: Applies the tax to full gross wages, charging FICA on the Section 125 premiums.

Section 125 premiums reduce FICA wages but 401(k) deferrals do not; a compound entry credits the payable for both the employee and employer shares.

Answer: C

1. 1. March workdays in the period: Mon Mar 23 – Fri Mar 27 (5) + Mon Mar 30 – Tue Mar 31 (2) = 7.
2. 2. Daily wages: $140,000.00 ÷ 10 workdays = $14,000.00.
3. 3. Accrual: 7 × $14,000.00 = $98,000.00 (debit Wages Expense, credit Accrued Wages Payable).

$42,000.00: Uses the 3 April workdays (April 1–3); those wages belong to April, not March.

$90,000.00: Prorates on calendar days (9 of 14) although the policy prorates by workdays.

$98,000.00: Correct. March workdays in the period: March 23–27 and 30–31 = 7; $140,000.00 ÷ 10 × 7 = $98,000.00 — Accounting 7.1 matching principle.

$140,000.00: Accrues the whole period, including the April wages, because the full payroll is unpaid at March 31.

Accrued wages = period gross × (workdays earned in the closing month ÷ workdays in the period); the matching principle puts the expense in the month it was earned.