FPC-Remote Free Practice Test

- (Topic 1)
Which of the following statements about payments made under workers' compensation benefits is FALSE?

1. A. They are not included in the employee's gross income
2. B. They are received for injuries or illnesses suffered on the job
3. C. They are subject to FUTA if they do not exceed the employee's benefits
4. D. They are not subject to FICA if payments are made under state regulations

Correct Answer: C
Comprehensive and Detailed Explanation:Workers' compensation benefitsare NOT subject to FUTA (Federal Unemployment Tax Act)as long as they are paid under aworkers' compensation law.
✑ Option A (Not included in gross income) is correctbecauseworkers' compensation
is tax-exemptunder IRS rules.
✑ Option B (Received for work-related injuries/illnesses) is correctbecause these paymentsreplace lost wagesdue to job-related incidents.
✑ Option D (Not subject to FICA under state laws) is correctbecauseworkers' compensation payments are exempt from Social Security & Medicare taxesif they are made under astate-approved program.
✑ Option C is incorrectbecause workers' compensation paymentsare NOT subject to FUTA, regardless of the amount paid.
Reference:
IRS Publication 525 – Taxability of Workers?? Compensation
Payroll.org – Payroll Taxation of Disability and Workers' Compensation Benefits

- (Topic 2)
When providing wage data for a workers?? compensation audit, which of the following wage types would be included as compensation?

1. A. Gratuities
2. B. Commissions
3. C. Third-party sick pay
4. D. Work uniform stipend

Correct Answer: B
✑ Workers?? compensation includes commissions (B) as part of employee earnings.
✑ Gratuities (A) and uniform stipends (D) are usually excluded. References:
✑ State Workers' Compensation Audit Guidelines

- (Topic 2)
Examples of positive active listening through body language include all of the following actions EXCEPT:

1. A. Avoiding slouching posture.
2. B. Shrugging your shoulders.
3. C. Making eye contact.
4. D. Nodding your head.

Correct Answer: B
✑ Shrugging shoulders (B) is a sign of uncertainty or disinterest, making itnegative body language.
✑ Making eye contact (C), nodding (D), and avoiding slouching (A) are positive
active listening cues. References:
✑ Effective Communication in Payroll Training Guide (Payroll.org)

- (Topic 2)
The FLSA requires employers to retain employee work time schedules for at least:

1. A. 2 years.
2. B. 3 years.
3. C. 4 years.
4. D. 7 years.

Correct Answer: B
✑ FLSA requires that work time schedules, payroll records, and related documents be kept for a minimum of 3 years.
References:
✑ Fair Labor Standards Act (FLSA) Recordkeeping Requirements (DOL)

- (Topic 1)
All of the following statements are correct regarding independent contractors EXCEPT that they:

1. A. Receive a salary
2. B. Risk profit or loss
3. C. Can hire assistants
4. D. Can end the relationship at any time

Correct Answer: A
Comprehensive and Detailed Explanation:Independent contractors do NOT receive a salary.They:
✑ Invoice for services renderedrather than receivingfixed wages.
✑ Risk profit or loss(Option B) based on how they manage expenses.
✑ Can hire assistants(Option C) to help complete tasks.
✑ Can end the relationship at any time(Option D) unless bound by a contract.
✑ Option A (Receive a salary) is incorrectbecausesalaries are paid only to employees, not independent contractors.
Reference:
IRS – Independent Contractor vs. Employee Classification Payroll.org – Guidelines for Contractor Payments and Taxation