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

Answer: A

2025 wages, because they were made available in 2025: Correct. Under constructive receipt, wages are paid when credited or made available without substantial restriction, so they are 2025 wages taxed at 2025 rates and wage bases (IRS Pub 15; Treas. Reg. 1.451-2; FPC K1701).

2026 wages, because the check cleared the bank in 2026: Clearing date does not control when wages are paid for tax purposes.

Split between 2025 and 2026 based on the days in each year: Wages are not apportioned; they are paid on a single date.

2026 wages, because she physically received the check in 2026: Actual receipt is not required; wages are paid when made available without restriction.

Wages are paid — and taxed — when actually or constructively received, i.e., made available without restriction.

Answer: B

1. Social Security wages = gross − pretax Sec. 125 elections (401(k) deferrals are NOT subtracted for FICA).
2. Sec. 125 total = $250.00 + $150.00 + $200.00 = $600.00.
3. $6,000.00 − $600.00 = $5,400.00.
4. The $360.00 401(k) deferral stays in FICA wages (it reduces only FIT wages).

$5,040.00: Also subtracts the $360 401(k) deferral, wrongly treating elective deferrals as exempt from FICA.

$5,400.00: Correct. Sec. 125 medical, health FSA and dependent care elections are excluded from FICA wages; 401(k) elective deferrals remain subject to FICA (IRS Pub 15 / Pub 15-B; FPC K1401).

$5,600.00: Excludes the medical premium and health FSA but treats the dependent care FSA election as subject to FICA.

$6,000.00: Uses gross salary and ignores the Sec. 125 exclusions from FICA.

Sec. 125 pretax elections reduce FIT and FICA wages; 401(k) deferrals reduce only FIT wages.

Answer: B

1. Regular rate = (hourly earnings + nondiscretionary bonus) ÷ total hours worked.
2. Straight-time earnings: 46 × $16.00 = $736.00; add bonus $92.00 = $828.00.
3. Regular rate: $828.00 ÷ 46 = $18.00.
4. Overtime premium: 0.5 × $18.00 × (46 − 40) = $54.00.
5. Gross pay: $828.00 + $54.00 = $882.00.

$876.00: Pays overtime at 1.5 × the $16.00 base rate and leaves the bonus out of the regular rate.

$882.00: Correct. Nondiscretionary bonuses go into the regular rate (29 CFR 778.208–.209): $828.00 straight time and bonus ÷ 46 hours = $18.00; plus the 0.5 × $18.00 × 6 premium of $54.00.

$890.10: Divides total straight-time pay by 40 instead of all 46 hours worked, overstating the regular rate at $20.70.

$891.00: Adds a daily-overtime hour for Tuesday's ninth hour to the 6 weekly overtime hours (7 × $9.00 premium); the FLSA has no daily overtime rule.

Regular rate = (all straight-time pay + nondiscretionary bonus) ÷ total hours; overtime premium = 0.5 × regular rate × hours over 40.

Answer: A

They are employees owed minimum wage and overtime under the FLSA: Correct. FLSA status rests on economic reality; Section 530 relief for federal employment taxes does not stop the drivers from being employees for wage-hour purposes (DOL WHD Fact Sheet #13).

They are employees, and Pine Ridge loses its Section 530 tax relief: The DOL finding does not revoke Section 530 relief; that tax safe harbor turns on reasonable basis and consistent treatment, not on FLSA status.

They remain contractors because Section 530 relief also covers the FLSA: Section 530 is a federal employment tax provision only; it does not govern FLSA status.

They remain contractors unless the IRS also reclassifies them: The DOL decides FLSA status under its own economic-reality test; it does not wait for or defer to an IRS determination.

A worker can be a contractor for tax purposes yet an employee under the FLSA, because each law uses its own test.

Answer: B

Withhold nothing, because the form claims exemption: A claim of exemption must be made on an unaltered form; an altered form is invalid and cannot be used for any purpose.

Treat the form as invalid and withhold as Single: Correct. Any unauthorized change or addition, including striking the certification language, makes a Form W-4 invalid; with no earlier valid form, withhold as Single or Married filing separately with no other entries and ask for a new form (IRS Pub 15 (2026) §9; FPC K2201).

Withhold at the 24% backup rate until a valid form arrives: Backup withholding applies to reportable nonwage payments to payees with TIN problems, not to employee wages.

Withhold at the 22% flat rate until a valid form arrives: The 22% optional flat rate is for supplemental wages; it is not the default for regular wages without a valid Form W-4.

An altered Form W-4 is invalid: use the employee's earlier valid form, or for a new hire withhold as Single/MFS with no adjustments until a valid form is given.

Answer: B

Wednesday, March 18, 2026: Uses the next-business-day rule, which applies only when accumulated liability reaches $100,000.

Friday, March 20, 2026: Correct. Lookback liability over $50,000 makes the employer a semiweekly depositor; taxes for a Saturday–Tuesday payday are due the following Friday — IRS Pub 15 (2026) §11; FPC K2103.

Wednesday, March 25, 2026: Combines the bonus with the March 20 regular payroll; deposits follow each payday's own date.

Wednesday, April 15, 2026: Applies the monthly schedule, which is only for lookback liability of $50,000 or less.

Semiweekly depositors deposit Wednesday–Friday payday taxes by the next Wednesday and Saturday–Tuesday payday taxes by the next Friday.

Answer: B

1. Formula: limit = lesser of 25% of disposable earnings or disposable earnings − $217.50 per week.
2. Required deductions: $70.00 + $55.80 + $13.05 + $30.00 = $168.85.
3. Disposable earnings: $900.00 − $168.85 = $731.15.
4. 25%: $731.15 × 0.25 = $182.79.
5. Excess over $217.50: $513.65.
6. Lesser amount: $182.79.

$156.54: subtracts the voluntary 401(k) and medical deductions; disposable earnings exclude only legally required deductions.

$182.79: Correct — disposable = $900.00 − $168.85 required taxes = $731.15; 25% = $182.79 is less than $731.15 − $217.50 = $513.65 (CCPA 15 U.S.C. 1673; FPC K3304).

$225.00: applies 25% to gross wages instead of disposable earnings.

$513.65: uses the excess over $217.50 (30 × $7.25) instead of the lesser of the two limits.

Creditor garnishments are capped at the lesser of 25% of disposable earnings or the amount over 30 times the federal minimum wage.

Answer: B

1. Formula: SS = 6.2% × (lesser of current wages or wage base − YTD wages); Medicare = 1.45% × all wages.
2. Room under the base: $184,500 − $182,000 = $2,500.
3. SS: $2,500 × 6.2% = $155.00.
4. Medicare: $6,000 × 1.45% = $87.00.
5. Total: $242.00.

$87.00: withholds Medicare only, as if the 2025 $176,100 wage base still applied and had already been reached.

$242.00: Correct — only $2,500 remains under the $184,500 wage base: SS $2,500 × 6.2% = $155.00; Medicare $6,000 × 1.45% = $87.00; total $242.00 (Pub 15 §9; FPC K3301).

$304.00: applies Social Security to the $3,500 above the wage base instead of the $2,500 below it.

$459.00: takes Social Security on the full $6,000, past the $184,500 wage base.

Social Security stops at the $184,500 wage base in 2026; Medicare continues on every dollar.

Answer: A

1. Formula: (coverage − $50,000) ÷ $1,000 × Table I rate − employee after-tax payments.
2. Excess coverage: $150,000 − $50,000 = $100,000 = 100 units.
3. Cost: 100 × $0.23 = $23.00.
4. Less after-tax contribution: $23.00 − $4.00 = $19.00.

$19.00: Correct — ($150,000 − $50,000) ÷ $1,000 = 100 × $0.23 = $23.00 − $4.00 after-tax contribution = $19.00 (IRC 79; Pub 15-B; FPC K3201).

$23.00: subtracts the $50,000 exclusion but not the employee's $4.00 after-tax contribution.

$30.50: applies Table I to all $150,000 without first excluding the $50,000.

$34.50: skips both the $50,000 exclusion and the employee's after-tax contribution.

GTL imputed income is the Table I cost of coverage over $50,000, reduced by what the employee pays after tax.

Answer: C

1. Formula: regular rate = (straight-time pay for all hours + nondiscretionary bonus) ÷ total hours; OT premium = 0.5 × regular rate × OT hours.
2. Straight time: 44 × $17.00 = $748.00; plus bonus $88.00 = $836.00.
3. Regular rate: $836.00 ÷ 44 = $19.00.
4. OT premium: 4 × (0.5 × $19.00) = 4 × $9.50 = $38.00.
5. Total gross: $836.00 + $38.00 = $874.00.

$782.00: pays overtime at 1.5 × the $17.00 base rate and leaves the promised production bonus out of pay entirely ($680.00 + 4 × $25.50).

$870.00: adds the bonus but figures the overtime premium on the $17.00 base rate instead of the regular rate that includes the bonus ($836.00 + 4 × $8.50).

$874.00: Correct — straight-time pay plus bonus = $836.00; regular rate = $836.00 ÷ 44 = $19.00; OT premium = 4 × $9.50 = $38.00; total $874.00 (29 CFR 778.208–.210; FPC K3102).

$950.00: pays a full 1.5 × regular rate for the 4 overtime hours on top of straight time already paid for all 44 hours ($836.00 + 4 × $28.50).

A promised production bonus is nondiscretionary, so it goes into the regular rate before the overtime premium is figured.

Answer: B

Its IT plan to restore the payroll server from backup: Restoring the system is IT recovery work and, as the stem states, will not finish in time for payday.

Its emergency procedure to pay from the prior file: Correct. A payroll BCP documents an emergency procedure, such as resending the last period's net-pay file or issuing pay from backup data, then truing up on the next payroll (K4201).

Its call tree to tell employees pay will be late: Communication is part of a BCP, but the plan's purpose is to keep pay on time, not to announce a delay.

Its vendor contract's service-level penalty terms: SLA penalties compensate the employer later; they do not get employees paid on payday.

A payroll BCP must state how employees will be paid on time when the system, site or staff are unavailable, not just how IT will restore the system.

Answer: C

1. Difference = $18,540.00 − $18,450.00 = $90.00
2. Record counts match (25 = 25), so omission and duplication are ruled out.
3. $90.00 ÷ 9 = 10, a whole number, which points to transposed digits.

One bonus was keyed to the wrong employee: A wrong employee number does not change the dollar total; a hash total of employee numbers would catch it.

One bonus payment was keyed twice: A duplicate would raise the system count to 26 and make the system total higher, not lower.

One amount was keyed with transposed digits: Correct. The record counts agree, so no record is missing or duplicated, and the $90.00 difference is evenly divisible by 9 — the classic sign of a transposition (for example, $540 keyed as $450) (K4102 batch totals).

One bonus payment was left out of the batch: An omitted record would drop the system record count to 24, but both counts are 25.

When record counts agree but dollar totals differ by an amount divisible by 9, look first for a transposition error.

Answer: D

IRS Publication 15-T, withholding methods: Pub 15-T gives income tax withholding tables and methods, not the meaning of Form W-2 box codes.

IRS Publication 15-A, supplemental guide: Pub 15-A covers specialized topics such as sick pay and worker status, not Form W-2 box 12 code definitions.

Instructions for Form 941, quarterly return: The Form 941 instructions cover the quarterly employment tax return, not individual Form W-2 codes.

General Instructions for Forms W-2 and W-3: Correct. The W-2/W-3 instructions define every box 12 code; code DD is the cost of employer-sponsored health coverage, reported for information only and not taxable (IRS General Instructions for Forms W-2 and W-3; FPC K5304).

Resolve employee questions from the authoritative source for the topic: Form W-2 box questions go to the W-2/W-3 instructions.

Answer: B

1. Over-withheld = (YTD SS wages − $184,500) × 6.2%.
2. $191,200 − $184,500 = $6,700.
3. $6,700 × 0.062 = $415.40.
4. Check: $11,854.40 − $11,439.00 maximum = $415.40.

$97.15: Applies the 1.45% Medicare rate to the excess wages.

$415.40: Correct. Wages over the $184,500 base ($6,700) were taxed at 6.2%; the employee maximum is $11,439.00 — IRS Pub 15 (2026); FPC K6102.

$512.55: Applies the 7.65% FICA rate, but Medicare has no wage base and was properly withheld.

$830.80: Applies 12.4%, adding the employer share to the employee's over-withholding.

The Social Security wage accumulator must stop at $184,500 (maximum employee tax $11,439.00); any excess must be repaid.

Answer: B

1. Employer tax expense = employer Social Security + employer Medicare + FUTA + SUI.
2. Employer Social Security = $120,000.00 × 6.2% = $7,440.00 (matches the amount withheld).
3. Employer Medicare = $120,000.00 × 1.45% = $1,740.00.
4. FUTA and SUI = $0 (wage bases already met).
5. Payroll tax expense = $7,440.00 + $1,740.00 = $9,180.00; credit Social Security tax payable $7,440.00 and Medicare tax payable $1,740.00.

$8,721.00: Excludes the 401(k) deferrals from FICA wages (($120,000.00 − $6,000.00) × 7.65%); elective deferrals are subject to Social Security and Medicare.

$9,180.00: Correct. The employer matches employee Social Security ($7,440.00) and Medicare ($1,740.00), and no FUTA or SUI is due, so employer tax expense is $9,180.00 (K7202).

$18,360.00: Adds the employee withholdings to the employer match; withheld taxes are liabilities taken from wages, not employer expense.

$23,580.00: Treats withheld federal income tax ($14,400.00) as an employer expense on top of the $9,180.00 employer FICA.

Only the employer's own taxes are debited to payroll tax expense; amounts withheld from employees are already part of gross wages expense and are credited to liabilities.