Free APA FPC-Remote Practice Exam with Questions & Answers | Set: 3

Comprehensive and Detailed Explanation:TheReasonable Basis Testallows an employer to classify a worker as anindependent contractorif:

A previous IRS audit approved similar treatment

A court ruling or IRS ruling supports classification

Industry practices support independent contractor status

Option A (Common Law Test)determines if a worker should be anemployee or independent contractor, butdoes not override misclassification.

Option C (Physical Presence Test)applies toforeign earned income exclusions.

Option D (Permanent Resident Test)applies toimmigration status, not worker classification.

Comprehensive and Detailed Explanation:Social Security tax is6.2%forboth the employer and employee, so total liability is12.4%ofSocial Security taxable wages.

Calculate Social Security taxable wages:

Gross pay:$32,500.00

Less pre-tax deductions (Health Insurance & 401k do NOT reduce Social Security taxable wages):

Taxable Wages = $32,500.00 - $1,200.00 = $31,300.00

Calculate Social Security tax (12.4% total for employer & employee):

$31,300 × 12.4% = $3,881.20

Thus, the correct answer isC. $3,881.20.

Comprehensive and Detailed Explanation:If an employerover-withholds federal taxes from an employee's paycheck, the employer can file anadjustmentusingForm 941-X(Adjusted Employer's Quarterly Federal Tax Return).

Form 941 (Option A)is incorrect because it is used toreport current payroll taxes, not to correct past errors.

Form W-2 (Option C)is incorrect because itreports wages and taxes withheld but does not allow corrections.

Form W-4 (Option D)is incorrect because it isused by employees to adjust withholding allowances.

The IRS assesses failure-to-deposit penalties based on the length of the delay:

1-5 days late: 2% penalty

6-15 days late: 5% penalty (Correct Answer)

More than 15 days: 10% penalty

After delinquency notice: 15% penalty

References:

IRS Deposit Penalty Guidelines (Publication 15)

Step 1: Calculate disposable earnings

$300.00 - ($45.00 + $18.60 + $4.35) = $232.05

Step 2: Apply CCPA withholding limit

60% of $232.05 = $139.23

References:

Consumer Credit Protection Act (CCPA) - Federal Child Support Withholding Limits

Payroll Withholding Compliance Guide (Payroll.org)

Health Insurance (Biweekly) = ($1,500 ÷ 26) = $57.69

Life Insurance (Biweekly) = ($15 × 12 ÷ 26) = $6.92

Dental Insurance = $5.00

Total Biweekly Deduction = $57.69 + $6.92 + $5.00 = $69.61

References:

IRS Section 125 Cafeteria Plan Rules

ACA affordability safe harbors include (A), (C), and (D), but NOT Section 530 (B), which relates to independent contractor classification.

References:

Affordable Care Act Compliance Guide

Step 1: Calculate Medicare Tax

Medicare rate: 1.45% up to $200,000; 2.35% for amounts above $200,000

Medicare tax: ($2,500 × 2.35%) = $58.75

Step 2: Calculate FITW using the Optional Flat Rate (22%)

$2,500 × 22% = $550.00

Total tax liability = $550.00 + $58.75 = $606.75

References:

IRS Publication 15-B (Fringe Benefits Taxation)

Employers are not required to "gross up" (A) taxable awards unless they choose to cover the employee’s tax liability.

The IRS mandates taxation and W-2 reporting (B, C, D).

References:

IRS Publication 15-B

Direct deposit errors (A) may result in payroll mismatches and unrecorded transactions, causing the general ledger to be out of balance.

Other options (B, C, D) impact payroll costs but do not directly affect ledger balancing.

References:

Payroll Accounting Reconciliation Standards