Your FREE FPC Flashcards 2026 – 250+ Cards

Federal Insurance Contributions Act — Social Security (6.2%) + Medicare (1.45%) = 7.65%, paid by both employee and employer.

Employee's Withholding Certificate — tells the employer how much federal income tax to withhold.

Wage and Tax Statement — reports an employee's annual wages and withholdings; given to the employee and the SSA.

Exempt employees are not entitled to FLSA overtime; non-exempt employees must receive overtime over 40 hours/week.

Fair Labor Standards Act — federal law setting minimum wage, overtime, recordkeeping, and child-labor standards.

$7.25/hour (federal). Many states and cities set a higher minimum; the employer pays the higher rate.

A fixed, recurring period of 168 hours (7 consecutive 24-hour days). Overtime is figured per workweek, not per pay period.

Wages are taxable when made available to the employee without restriction, even if not yet physically received.

Compensation is treated as paid when set apart and available to the employee without substantial limitation.

A worker whose employer controls what work is done and how it is done; receives a W-2 and has taxes withheld.

A self-employed worker who controls how the work is done; receives Form 1099-NEC and pays self-employment tax.

Three categories of evidence for worker status: behavioral control, financial control, and the relationship of the parties.

Nonemployee Compensation — reports $600+ paid to an independent contractor during the year.

Employment Eligibility Verification — confirms a new hire's identity and authorization to work in the U.S.

Application for an Employer Identification Number (EIN), the employer's federal tax ID.

Application for a Social Security card / number, used to obtain or correct an SSN.

To be exempt from overtime, an employee must meet a salary-basis test, a salary-level test, and a duties test.

The currently enforced standard salary level is $684/week ($35,568/year); the 2024 increase was vacated by a court.

An exempt employee receives a predetermined, fixed salary that is not reduced for variations in quality or quantity of work.

Executive, Administrative, Professional, Outside Sales, and certain Computer employees may be exempt from FLSA overtime.

Pay left after legally required deductions (taxes) — the base for calculating most garnishments.

A court- or agency-ordered deduction from an employee's pay to satisfy a debt, such as child support or a tax levy.

The Consumer Credit Protection Act caps how much pay can be garnished and protects employees from being fired for one garnishment.

Child-support withholding orders generally take priority over other garnishments and can reach a higher percentage of pay.

Pay other than regular wages — bonuses, commissions, severance, overtime — that may be taxed by the flat or aggregate method.

Calculating a higher gross so that, after taxes are withheld, the employee nets a specific target amount.

Non-cash compensation (e.g., personal use of a company car); taxable unless specifically excluded by the IRC.

A benefit so small that accounting for it is unreasonable or impractical — excluded from taxable wages.

A plan letting employees choose pre-tax benefits (health premiums, FSA), reducing taxable wages.

A deduction taken before tax is calculated, lowering taxable wages (e.g., traditional 401(k), Section 125 health premiums).

A deduction taken from pay already taxed (e.g., Roth 401(k), garnishments, union dues).

Employer Identification Number — the IRS-issued number that identifies a business for payroll tax purposes.

A related corporation that pays employees of multiple group members, avoiding duplicate Social Security on shared employees.

A worker treated as an employee for FICA but who may report income on Schedule C (e.g., certain drivers, salespeople).

An employee who customarily receives more than $30/month in tips; a tip credit may apply toward minimum wage.

Employers must report new and rehired employees to the state directory, mainly to enforce child-support orders.

Rules limiting the hours and types of work for minors; stricter for those under 16.

Time that must be paid — including certain training, travel, and on-call time, under FLSA rules.

Requires prevailing wages on federal construction contracts over $2,000.

Sets labor standards (minimum wage, overtime, safety) for federal supply contracts over $10,000.

Requires prevailing wages and fringe benefits on federal service contracts over $2,500.

Family and Medical Leave Act — up to 12 weeks of unpaid, job-protected leave for eligible employees; affects pay continuity.

Protects the reemployment and benefit rights of employees who serve in the military.

Prohibits employment discrimination; relevant to equal pay and recordkeeping.

Requires equal pay for equal work regardless of sex within the same establishment.

Paid time off given instead of overtime cash — allowed only for public-sector employees under the FLSA.

Compensation paid on termination; treated as supplemental wages for withholding.

Extra pay for holidays is a matter of policy, not FLSA — but it must be included in the regular rate if nondiscretionary.

Corrected Wage and Tax Statement — used to fix an error on a previously filed W-2.

Withholding certificates for pension/annuity payments and nonperiodic distributions.

Compensation deferred under a nonqualified plan; special FICA timing (special-timing rule) applies.

Health Savings Account — pre-tax contributions (with a high-deductible plan) that reduce taxable wages.

Flexible Spending Account — pre-tax salary set aside for medical or dependent-care expenses.

Up to $5,000/year of employer dependent-care benefits may be excluded from taxable wages.

Employer-provided adoption help is excludable from income tax (but subject to FICA) up to a limit.

Up to $5,250/year of employer education aid is excludable from taxable wages.

An expense-reimbursement plan meeting IRS rules so reimbursements are not taxable wages.

An expense-reimbursement arrangement that fails the IRS rules — payments are taxable wages.

Employer's Quarterly Federal Tax Return — reports wages, withheld income tax, and both shares of FICA each quarter.

Employer's Annual Federal Unemployment (FUTA) Tax Return — filed once a year.

Annual federal tax return for the smallest employers (under ~$1,000 in annual liability), filed instead of quarterly 941s.

Transmittal of Wage and Tax Statements — the summary that accompanies all W-2s sent to the SSA.

Annual Return of Withheld Federal Income Tax — for non-payroll withholding (e.g., backup withholding, pensions).

Electronic Federal Tax Payment System — the IRS's free system employers use to deposit federal payroll taxes electronically.

An employer with $50,000 or less in lookback-period tax liability; deposits by the 15th of the following month.

An employer with more than $50,000 in lookback liability; deposits Wed or Fri depending on payday.

The 12-month period (July 1–June 30) used to set whether an employer is a monthly or semiweekly depositor.

If accumulated tax liability reaches $100,000, the deposit is due by the next business day.

Federal Unemployment Tax — 6.0% on the first $7,000 of each employee's wages, reduced to 0.6% with the state credit.

State Unemployment Tax Act — state unemployment tax, usually employer-paid, at an experience-rated rate on a state wage base.

An illegal scheme to manipulate experience rating (e.g., shifting payroll to a low-rate entity) to lower unemployment tax.

A state's method of setting an employer's SUTA rate based on its history of unemployment claims.

When a state has not repaid federal unemployment loans, employers there lose part of the FUTA credit and pay more.

Payroll records must generally be kept at least 3 years; records used to compute pay (time cards) at least 2 years.

Employment tax records must be kept at least 4 years after the tax becomes due or is paid, whichever is later.

W-2s are due to employees and to the SSA by January 31 of the following year.

Filed by the last day of the month after each quarter (Apr 30, Jul 31, Oct 31, Jan 31).

A flat federal withholding (24%) on certain payments when a payee fails to furnish a correct TIN.

Internal Revenue Code — the federal statute governing federal income tax and employment tax.

The IRS Employer's Tax Guide — the primary reference for federal withholding rules and deposit rules.

Request for Taxpayer Identification Number — collected from contractors to support 1099 reporting.

A graduated penalty (2%–15%) based on how many days late an employment-tax deposit is.

Income tax and the employee share of FICA the employer holds 'in trust' for the government before remitting.

A 100% penalty the IRS can assess on responsible persons who willfully fail to remit trust-fund taxes.

Applicable large employers report offers of health coverage on Form 1095-C.

Most states require employers to withhold state income tax, using state-specific tables and forms.

An agreement letting an employee pay income tax to the home state instead of the work state.

Employers must honor valid withholding orders, remit on time, and follow CCPA limits to avoid liability.

Generally 3 years from filing to claim an employment-tax refund or correction.

Annual Summary and Transmittal of U.S. Information Returns — the paper transmittal for 1099s sent to the IRS.

Adjusted Employer's Quarterly Federal Tax Return — corrects errors on a previously filed Form 941.

Box 1 = federal taxable wages (after pre-tax FIT items); Box 3 = Social Security wages (capped at the wage base).

Federal Income Tax Withholding Methods — the IRS guide with the percentage and wage-bracket withholding tables.

Employer's Tax Guide to Fringe Benefits — explains which fringe benefits are taxable.

Most states require new-hire reports within 20 days of hire (some sooner) to the state directory.

An employee working in multiple states may owe tax in more than one; rules and reciprocity vary by state.

FLSA violations (unpaid overtime, misclassification) can mean back pay plus liquidated damages.

1.5× the regular rate for hours worked over 40 in a workweek (non-exempt employees).

Take-home pay — gross pay minus all taxes and deductions.

Total earnings before any deductions: wages, overtime, bonuses, commissions, and other compensation.

All compensation for the workweek (including most bonuses) divided by total hours worked — the base for overtime.

The extra half-time owed on overtime hours: 0.5 × regular rate × overtime hours, on top of straight time.

Convert salary to an hourly regular rate, then pay 1.5× that rate for hours over 40.

A federal income tax withholding method using formulas and the W-4 — works for any wage amount, used by software.

A federal income tax withholding method that reads tax directly from IRS tables by wage range and W-4 status.

Optional 22% federal withholding on supplemental wages paid separately from regular wages (37% over $1 million).

Withholding on supplemental wages by combining them with regular wages and taxing the total per the W-4.

6.2% of wages up to the annual wage base; the employer matches it.

1.45% of all wages with no wage limit; the employer matches it.

An extra 0.9% withheld on employee wages over $200,000; employee only, no employer match.

$184,500 — the maximum wages subject to the 6.2% Social Security tax in 2026 (SSA).

$176,100 — the maximum wages subject to Social Security tax in 2025 (SSA).

Taxable wages = gross pay minus pre-tax deductions; each tax (FIT, SS, Medicare) can have a slightly different base.

The value of a non-cash benefit added to taxable wages (e.g., group-term life over $50,000, personal car use).

Employer-paid coverage above $50,000 creates imputed income taxed for income tax and FICA (not federal income tax withholding required, but FICA applies).

The employee elective deferral limit is $24,500 (2026, IRS), plus an age-50 catch-up of $8,000.

$0.725/mile for business use (IRS, 2026) — used for accountable-plan reimbursements.

Reduces federal (and usually state) taxable wages, but is still subject to Social Security and Medicare tax.

After-tax: it does NOT reduce taxable wages; qualified withdrawals are tax-free.

Pre-tax under a cafeteria plan — reduce wages for income tax AND for Social Security and Medicare.

Gross pay minus legally required deductions (taxes) — NOT minus voluntary deductions like 401(k).

Lets an employer count a limited amount of tips toward the minimum-wage obligation for tipped employees.

Extra pay for working less desirable shifts; included in the regular rate for overtime.

Pay for time an employee must be available; may be compensable depending on the restrictions imposed.

Wages owed for a past period (e.g., a delayed raise); taxed when paid, often as supplemental wages.

Nondiscretionary bonuses must be added back into the regular rate, increasing overtime due.

A bonus the employer is not contractually obligated to pay; excluded from the regular rate.

When an employee works at two rates, overtime is based on the blended (weighted-average) regular rate.

An IRS levy on wages; the exempt amount is based on filing status and standard deduction, not CCPA limits.

Solve gross from a desired net by dividing the net by (1 − total tax rate).

The 7-minute rule: time may be rounded to the nearest quarter hour if it averages out fairly over time.

Withheld using the employee's Form W-4 and IRS Pub. 15-T (percentage or wage-bracket method).

Hours at all of one employer's locations in a workweek combine for the 40-hour overtime threshold.

Generally the lesser of 25% of disposable earnings or the amount over 30× the federal minimum wage.

Most Section 125 elections are exempt from FICA; 401(k) deferrals are NOT exempt from FICA.

A highly compensated employee earning at least $107,432/year can be exempt with only a minimal duties test.

Withholding methods differ: most use the per-period (annualized) approach; the cumulative method smooths uneven pay.

Time may be rounded (e.g., nearest ¼ hour) only if the practice averages out and does not consistently shortchange employees.

A salaried non-exempt employee's regular rate = weekly salary ÷ hours the salary is intended to cover.

Splitting an annual salary across pay periods (annual ÷ number of pays) to find period pay.

If supplemental and regular wages are paid together, withhold as if one total (aggregate method).

Software that captures hours worked, feeding gross-pay calculation and reducing manual error.

A report listing each employee's earnings, deductions, taxes, and net pay for a pay period.

The deadline for submitting time data so payroll can be processed on schedule.

Electronic transfer of net pay to an employee's bank account via the ACH network.

A reloadable debit card used to pay employees who lack a bank account; subject to fee disclosure rules.

A record of earnings, deductions, and net pay; required in most states each payday.

Human Resource Information System — integrates HR data (employees, benefits) with payroll.

Linking systems (time, HR, GL) so data flows automatically and is not re-keyed.

Running a group of transactions (a full payroll) together at scheduled times.

Running a new payroll system alongside the old one to confirm identical results before go-live.

Automated rules that flag out-of-range or missing data before payroll is finalized.

Stored standing data for each employee (rate, status, deductions) used every payroll.

The schedule of pay periods, paydays, cut-offs, and deposit due dates.

How often employees are paid: weekly, biweekly, semimonthly, or monthly.

Biweekly = 26 pays/year (every 2 weeks); semimonthly = 24 pays/year (twice a month, e.g., 15th & last).

User permissions and authentication that limit who can view or change payroll data.

Plans and copies that let payroll continue after a system failure or outage.

A system letting employees view pay stubs, update W-4s, and change direct deposit themselves.

Using a Payroll Service Provider to process payroll; the employer usually retains tax-liability responsibility.

Professional Employer Organization — a co-employment arrangement that handles payroll and HR under its own EIN.

An authorized third party that signs and files payroll tax returns and makes deposits for the employer.

The link that posts payroll totals into the accounting system's GL accounts.

Migrating employee and history data when implementing a new payroll system.

A log of who changed what and when, supporting control and investigation.

Typical project stages: planning, design, build, test (parallel), train, go-live, and support.

A payment made outside the normal payroll run to correct an error or pay a termination.

Unclaimed wages must be turned over to the state after a dwell period (unclaimed property law).

A bank fraud-control service that matches issued checks against those presented for payment.

Correcting a direct-deposit error by reversing the transaction within the NACHA time limits.

Systems must handle penny rounding consistently so the register and GL tie out.

Devices that capture clock-in/out; biometric data may trigger state privacy-law obligations.

Routing changes (new hire, rate change) to the right approver before they affect pay.

Letting employees access earned wages before payday; must be administered within wage-payment law.

Comparing actual payroll results to budget or prior periods to spot and explain differences.

Comparing payroll metrics (cost, error rate, cycle time) against peers or standards.

A measurable metric (e.g., payroll accuracy %, on-time pay %) used to manage performance.

A documented commitment to a service standard (e.g., 99% on-time pay) between payroll and stakeholders.

Treating employees and departments as customers; timely, accurate answers build trust in payroll.

Payroll data is highly sensitive; access must be restricted and privacy laws followed.

Written procedures (the payroll calendar, checklists, desk procedures) that ensure consistency and continuity.

Training multiple staff on payroll tasks so the function continues if someone is absent.

Paying workers across countries — must address local tax, currency, and labor law differences.

Match features to needs: compliance, scalability, integration, support, and total cost of ownership.

Overseeing third-party providers against contracts and SLAs, including data security.

Managing the people side of process or system change to gain adoption and reduce disruption.

Regularly refining payroll processes to cut errors, time, and cost.

Planning, scheduling, and controlling work (e.g., a system implementation) to meet goals.

Protecting payroll data with encryption, access controls, and breach-response plans.

Fraudulent requests for W-2 or payroll data; staff training is the primary defense.

Internal rules (overtime approval, expense reimbursement) that govern how payroll operates.

Keeping HR, finance, and employees informed of payroll changes and deadlines.

Documenting tribal knowledge so expertise isn't lost when employees leave.

Errors cause overpayments, penalties, rework, and lost trust — measured and minimized.

Forecasting labor cost, taxes, and benefits for the financial plan.

Summaries (labor cost by department, headcount) that inform business decisions.

A clock hour of approved payroll education; the FPC requires 60 RCHs over 3 years to recertify.

Ongoing payroll education (PayrollOrg courses, conferences) that keeps skills and certification current.

Defined goals (accuracy, timeliness) that guide how the payroll department operates.

A written schedule stating how long each payroll record is kept, per FLSA and IRS rules.

A documented plan to keep paying employees during a disruption.

A review verifying that pay, taxes, and deductions are accurate, authorized, and compliant.

Procedures (segregation of duties, approvals, reconciliations) that prevent and detect errors and fraud.

Splitting tasks (hiring, time entry, pay approval, distribution) so no one person controls a whole transaction.

A traceable record of every transaction and change, letting an auditor follow the flow.

Matching one record to another (payroll register to GL, 941 to W-2s) to confirm agreement.

Confirming the four 941s' totals tie to the year's W-2/W-3 wages and taxes.

Verifying total wages, withholdings, and deposits agree across 941s, W-2s, W-3, and the GL before filing.

A fake employee added to payroll to divert pay — a classic fraud internal controls aim to prevent.

Hours not actually worked entered to inflate pay — detected by approval and review controls.

Requires public companies to maintain and attest to effective internal controls over financial reporting, including payroll.

Detailed checks of transactions and balances to confirm amounts are correct.

Examining a representative subset of transactions to draw conclusions about the whole population.

A review confirming payroll follows laws and regulations (FLSA, tax deposits, garnishments).

An insurer's review of payroll by class code to set the correct workers' compensation premium.

A review of Form I-9s for completeness and compliance, often triggered by ICE.

Payroll's own periodic review to catch errors before an external auditor or agency does.

Source records (time cards, authorizations, returns) that support audited amounts.

Requiring proper approval (for new hires, rate changes, overtime) before changes take effect.

Matching the payroll bank account to records to find unclaimed or duplicate checks.

A report listing items outside normal parameters (e.g., negative net pay) for review.

Identifying where payroll is most exposed to error or fraud to focus controls and audits.

Internal auditors work for the company; external auditors are independent and report to stakeholders.

The threshold at which an error is large enough to influence a decision — guides audit focus.

Tracing one transaction through the whole process to confirm controls work as described.

Confirming the sum of the four quarterly 941s equals the annual W-2/W-3 totals.

An exception review flagging any paycheck where deductions exceed gross pay.

Double-entry rule: every entry has equal debits and credits; debits increase assets/expenses, credits increase liabilities/revenue/equity.

Records gross wages and employer taxes as expenses (debits) and amounts owed as liabilities/cash (credits).

An expense account, debited for gross pay in the payroll entry.

An expense account for the employer's share of FICA, FUTA, and SUTA; appears on the income statement.

A liability account for taxes withheld and the employer share, until remitted to the agencies.

A liability for net pay owed to employees until the checks clear or deposits post.

A liability recorded for wages earned but not yet paid at period-end (matching principle).

Expenses are recorded in the same period as the revenue they help generate — so wages accrue when earned.

Recording revenue when earned and expenses when incurred, regardless of cash timing.

Recording revenue and expenses only when cash is received or paid.

An account for amounts owed (taxes payable, deductions payable); a credit balance increases it.

An account for costs of operating (wages, payroll taxes); a debit balance increases it.

An account for resources owned (cash); debited to increase.

The master record of all accounts and balances where payroll totals are posted.

The organized list of all GL accounts a company uses.

A list of all GL account balances proving total debits equal total credits.

Reports revenues and expenses (including wages and payroll taxes) over a period.

Reports assets, liabilities (e.g., taxes payable), and equity at a point in time.

An entry that cancels a prior accrual at the start of the next period to avoid double-counting.

Debit Wages Expense, credit Wages Payable for wages earned but unpaid at period-end.

Debit Payroll Tax Expense; credit the related Taxes Payable liabilities.

Recording the estimated workers' compensation cost as an expense and liability.

Recording earned but unused paid time off as a liability and expense.

A bonus is a compensation expense; accrue it when earned, pay (and tax) it when paid.

The side (debit or credit) that increases an account: assets/expenses = debit; liabilities/revenue/equity = credit.

Transferring journal entries into the individual general-ledger accounts.

A detailed ledger (e.g., by employee) supporting a control account in the GL.

Distributing wage and tax expense to departments, jobs, or cost centers.

Debit Payroll Tax Expense and credit FICA/FUTA/SUTA Payable for the employer's own taxes.

A complete payroll entry whose debits (expenses) equal its credits (liabilities + cash).