21 Deposits, Returns & Year-End Practice Questions & Answers

Every Deposits, Returns & Year-End practice question from the FPC Payroll Certification Practice Test, with the correct answer and a short explanation.

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1. An employer that files a quarterly federal employment tax return must set its deposit schedule from a lookback period. Which period is the lookback period?
- A.The four calendar quarters of the immediately preceding calendar year, January through December
- B.The employment tax liability accrued so far this year, recomputed at the close of each quarter
- C.The eight weeks of payrolls run just before the first payday of the current calendar year
- D.The 12 months from July 1 of the second preceding year through June 30 of the prior year✓ Answer
The lookback period runs backward across two calendar years: it opens July 1 of the second preceding year and closes June 30 of the preceding year. The total liability reported in that window sets the depositor status, which is then fixed for the entire calendar year rather than recalculated as the year goes on.
Source: Treasury Regulation 31.6302-1; IRS Publication 15 (Circular E), Depositing TaxesReport a problem with this question
2. An employer reported a total employment tax liability of $61,000 during its lookback period. Which deposit schedule applies for the current calendar year?
- A.Semiweekly for the first two quarters and monthly thereafter
- B.Semiweekly, because the lookback total is more than $50,000✓ Answer
- C.Monthly, because the lookback total is still below $100,000
- D.Monthly, because the status is redetermined at each quarter end
The dividing line is $50,000 of aggregate liability in the lookback period: at or below that figure the employer is a monthly depositor, and above it the employer is a semiweekly depositor. The $100,000 figure is a different rule entirely, and depositor status does not change quarter by quarter.
Source: Treasury Regulation 31.6302-1; IRS Publication 15 (Circular E), Depositing TaxesReport a problem with this question
3. A newly formed business hires its first employees and has no prior employment tax history at all. Which deposit schedule applies during its first calendar year?
- A.Quarterly, matching the frequency of the return the employer files
- B.Monthly, because its lookback period liability is treated as zero✓ Answer
- C.Semiweekly, because a new employer must use the safer schedule
- D.None; a first-year employer simply pays the tax with each return
An employer with no lookback history has a lookback liability of zero, which is not more than $50,000, so it is a monthly schedule depositor for its first calendar year. It can still be pulled onto a different footing during the year if a single day's accumulated liability reaches $100,000.
Source: IRS Publication 15 (Circular E), Depositing Taxes; Treasury Regulation 31.6302-1Report a problem with this question
4. A monthly schedule depositor pays wages on four separate paydays during the month of May. When must the resulting employment tax liability be deposited?
- A.In a single deposit by the 15th day of June✓ Answer
- B.In a single deposit by the last day of May
- C.In a single deposit by the last day of June
- D.Within three banking days after each payday
A monthly schedule depositor combines everything accumulated in a calendar month into one deposit due by the 15th day of the following month, no matter how many paydays fell within that month. The number of paydays affects the size of the deposit, never its due date.
Source: Treasury Regulation 31.6302-1; IRS Publication 15 (Circular E), Depositing TaxesReport a problem with this question
5. A semiweekly schedule depositor dates and distributes its paychecks on a Thursday. By when is the deposit of the resulting liability due?
- A.By the following banking day
- B.By the following Wednesday✓ Answer
- C.By the following Friday
- D.By the 15th of next month
Under the semiweekly rule, wages paid on a Wednesday, Thursday, or Friday are deposited by the following Wednesday, while wages paid Saturday through Tuesday are deposited by the following Friday. The day the paychecks are dated and handed out, not the pay period, drives the mapping.
Source: Treasury Regulation 31.6302-1; IRS Publication 15 (Circular E), Depositing TaxesReport a problem with this question
6. A semiweekly schedule depositor pays wages on a Friday, and the Wednesday that would normally be the deposit day is a legal holiday. When is the deposit due?
- A.Friday, moving it into the next deposit period
- B.Wednesday of the next week, a full week later
- C.Tuesday, the last banking day before the holiday
- D.Thursday, because the holiday adds one banking day✓ Answer
A deposit due date that falls on a Saturday, Sunday, or legal holiday moves forward to the next banking day, and a semiweekly depositor is additionally guaranteed at least three banking days after the close of the period. Each intervening holiday buys one more banking day, not another week.
Source: Treasury Regulation 31.6302-1; IRS Publication 15 (Circular E), Depositing TaxesReport a problem with this question
7. A pay period ends on September 30, but the paychecks for it are dated and handed out on October 3. For deposit purposes, which month's liability is this?
- A.October, because liability arises when wages are paid✓ Answer
- B.September, because that is when the wages were earned
- C.Split between the two months in proportion to days worked
- D.September, because the payroll was processed by month end
Employment tax liability attaches on the date wages are actually paid, not when they are earned, accrued, or processed. Items that give a pay period end date and a separate check date are testing exactly this distinction, so the October check date controls.
Source: IRS Publication 15 (Circular E), Depositing Taxes; Treasury Regulation 31.6302-1Report a problem with this question
8. A monthly schedule depositor accumulates $100,000 of employment tax liability on a single day. Apart from depositing by the next banking day, what else results?
- A.Its deposit schedule is unchanged once the next-day deposit is made
- B.It deposits semiweekly for the rest of this year and all of next year✓ Answer
- C.It must switch from a quarterly to an annual employment tax return
- D.It deposits semiweekly only through the end of the current quarter
Reaching $100,000 of accumulated liability on any day triggers the next-banking-day deposit and also converts a monthly depositor into a semiweekly depositor immediately, for the remainder of that calendar year and for the whole following calendar year. The rule overrides both the ordinary schedule and the small-liability exception that lets tax be paid with the return.
Source: Treasury Regulation 31.6302-1; IRS Publication 15 (Circular E), Depositing TaxesReport a problem with this question
9. An employer's total employment tax liability for the quarter is under $2,500, and it was also under $2,500 for the preceding quarter. What is the employer permitted to do?
- A.Switch to an annual return because the liability stays under $50,000
- B.Deposit only after the cumulative undeposited balance passes $500
- C.Deposit monthly anyway, since the $2,500 test covers unemployment tax
- D.Pay the amount in full with a timely filed quarterly return✓ Answer
The under-$2,500 test looks at total liability for the quarter, and when it is met the tax may simply be remitted with a timely filed quarterly return. The $500 figure is the federal unemployment deposit trigger and the $50,000 figure sets depositor status, so neither answers this question.
Source: IRS Publication 15 (Circular E), Depositing Taxes; Instructions for Form 941Report a problem with this question
10. An employer's federal unemployment tax liability for the first quarter is $380, and no deposit is made for that quarter. What is the correct treatment?
- A.Deposit it by the last day of the month after the quarter regardless
- B.Report and remit it with the quarterly employment tax return instead
- C.Start again at zero next quarter, since the test is quarter by quarter
- D.Carry it forward and deposit once the running balance exceeds $500✓ Answer
Federal unemployment tax is deposited only when the cumulative undeposited liability exceeds $500; $500 or less carries forward and keeps accumulating rather than resetting at the start of each quarter. Any balance of $500 or less still outstanding at year end may be paid with the annual unemployment return.
Source: IRS Publication 15 (Circular E), Federal Unemployment (FUTA) Tax; Instructions for Form 940Report a problem with this question
11. How must an employer transmit its federal employment tax deposits to the IRS?
- A.Through the state revenue agency, which forwards them
- B.By check or money order taken to a local IRS office
- C.By check mailed in with the employment tax return
- D.Electronically, by federal electronic funds transfer✓ Answer
Federal tax deposits must be made by electronic funds transfer, and the transfer generally has to be initiated the day before the due date to settle on time. Sending the money any other way, such as a check with the return, is treated as a failure to deposit even though the government has the funds.
Source: IRS Publication 15 (Circular E), How To Deposit; Treasury Regulation 31.6302-1Report a problem with this question
12. How do the reporting and depositing requirements for federal unemployment tax fit together?
- A.Reported once a year, but deposited quarterly when the threshold is met✓ Answer
- B.Reported and deposited quarterly on the same employment tax return
- C.Reported once a year and also paid once a year with that same return
- D.Reported once a year, but deposited on the withheld-tax schedule
Federal unemployment tax is reported on a single annual return, yet the money moves quarterly whenever the cumulative undeposited liability exceeds the deposit threshold. Reporting frequency and deposit frequency are separate questions, which is also why quarterly employment tax returns pair with monthly or semiweekly deposits.
Source: Instructions for Form 940; IRS Publication 15 (Circular E), Federal Unemployment (FUTA) TaxReport a problem with this question
13. An employer that regularly files quarterly employment tax returns pays no wages at all during one quarter. What must the employer do for that quarter?
- A.File the quarterly return anyway, unless a final return was already filed✓ Answer
- B.File the annual unemployment return in place of the quarterly return
- C.Send the IRS a letter explaining the quarter instead of filing a return
- D.Skip the filing, because a return is required only when wages are paid
Once an employer is on the quarterly filing cycle it must file every quarter, including quarters with no wages, until it files a final return marking the business closed or is treated as a seasonal filer. Skipping a zero quarter generates a delinquency notice rather than closing the account.
Source: Instructions for Form 941Report a problem with this question
14. A business pays $4,000 during the year to an unincorporated independent contractor for services performed. On which document is that payment reported?
- A.The quarterly employment tax return, as wages subject to withholding
- B.The information return for nonemployee compensation, not a wage statement✓ Answer
- C.Nowhere, because no taxes were withheld from the contractor's payment
- D.The annual wage statement filed with the Social Security Administration
Payments for services to a nonemployee are reported on the information return for nonemployee compensation, while the annual wage statement is reserved for employees. Reporting does not depend on whether tax was withheld, and contractor payments never appear as wages on the employment tax return.
Source: Instructions for Forms 1099-MISC and 1099-NECReport a problem with this question
15. Before filing, an employer finds that its annual wage statement totals do not agree with the sum of its four quarterly employment tax returns. What does that mean?
- A.The wage statement totals automatically supersede the quarterly returns already filed
- B.Nothing, since the two filings go to different agencies and are never compared
- C.The employer should wait and expect the IRS to refund the difference on its own
- D.The difference must be found and corrected, because the agencies match the filings✓ Answer
The Social Security Administration and the IRS compare the annual wage data against the four quarterly employment tax returns, so a difference the employer does not resolve becomes a reconciliation notice it will have to answer. Year-end totals should be tied to the quarterly returns and to the payroll records before anything is filed.
Source: SSA Employer W-2 Filing Instructions and Information; General Instructions for Forms W-2 and W-3Report a problem with this question
16. An employer finds an error on a wage statement already given to an employee, but the copy for the Social Security Administration has not been filed yet. What should it do?
- A.Leave it alone and adjust the amounts on next year's wage statement
- B.Wait and file the correction form after the original has been processed
- C.Issue a corrected wage statement to the employee and file the corrected figures✓ Answer
- D.File the correction form, since any error found after distribution requires it
The correction form exists to fix a wage statement that has already been filed with the Social Security Administration. If the agency copy has not gone out yet, the employer simply prepares a corrected statement for the employee and files the right figures the first time.
Source: General Instructions for Forms W-2 and W-3Report a problem with this question
17. In March an employer discovers that last year's social security and Medicare wages were understated for one employee. What filings does the correction require?
- A.A corrected wage statement and a correction to the employment tax return✓ Answer
- B.Only a correction to the employment tax return for the affected quarter
- C.Only a corrected wage statement, since it is the employee's record that changed
- D.Neither, because prior-year wage figures can no longer be changed at all
Two different filings carry two different sets of numbers: the return reports the employer's tax to the IRS and the wage statement reports the employee's earnings to the Social Security Administration. A prior-year understatement of social security or Medicare wages misstates both, so both must be corrected.
Source: General Instructions for Forms W-2 and W-3; Instructions for Form 941-XReport a problem with this question
18. How does an employer correct a previously filed annual federal unemployment tax return?
- A.File the same correction form used for quarterly employment returns
- B.Fold the difference into the following year's unemployment return
- C.File another return for that year with the amended box checked✓ Answer
- D.File a separate correction form issued only for unemployment tax
There is no separate correction form for the annual unemployment return: the employer files that same return for the year being corrected and checks the amended box. The dedicated correction form belongs to the quarterly employment tax return, which is a different filing.
Source: Instructions for Form 940Report a problem with this question
19. An employee copy of the annual wage statement comes back to the employer as undeliverable. What should the employer do with it?
- A.Send it to the Social Security Administration to be forwarded
- B.Keep the undeliverable copy on file for at least four years✓ Answer
- C.Turn it over to the state as unclaimed property for the employee
- D.Destroy it once a second attempt at delivery has also failed
An undeliverable employee copy is retained by the employer, and employment tax records generally must be kept at least four years after the tax becomes due or is paid, whichever is later. Retaining the returned statement shows the employer made the required attempt to furnish it.
Source: General Instructions for Forms W-2 and W-3; IRS Publication 15 (Circular E), recordkeeping requirementsReport a problem with this question
20. A business is acquired and its operations continue under a newly formed corporate entity. What is true of the employer identification number used for payroll filings?
- A.It identifies one specific entity and does not simply pass to the new one✓ Answer
- B.It transfers automatically along with the assets of the acquired business
- C.It is replaced by the owner's social security number after an acquisition
- D.It is reissued each year when the employment tax returns are filed
The employer identification number is tied to a particular legal entity and is used on that entity's employment tax returns and wage statements; a newly formed corporation needs its own number rather than inheriting the predecessor's. Successor rules may let the new employer count wages the predecessor already paid toward the annual wage bases, but that is separate from the identification number.
Source: IRS Publication 15 (Circular E), Employer Identification Number; IRS Publication 1635, Understanding Your EINReport a problem with this question
21. An employer deposits its withheld employment taxes several days after the deposit was due. What kind of penalty exposure does that create?
- A.A failure-to-deposit penalty that rises with the number of days late✓ Answer
- B.A penalty only if the employment tax return is also filed after its date
- C.Interest charges only, because deposits themselves carry no penalty
- D.A flat penalty identical to the one charged for filing the return late
Late deposits draw a failure-to-deposit penalty whose rate is tiered by how many calendar days late the deposit is, and the tiers do not stack because the higher rate replaces the lower one. It is a separate exposure from the failure-to-file penalty on the return and from penalties for incorrect information returns.
Source: Internal Revenue Code section 6656; IRS Publication 15 (Circular E), Deposit PenaltiesReport a problem with this question

Practice questions based on the PayrollOrg Fundamental Payroll Certification content outline and on federal payroll authorities including IRS Publication 15 (Circular E), Publication 15-A, Publication 15-B, the Fair Labor Standards Act, and the Consumer Credit Protection Act. FPC and CPP are marks of PayrollOrg; this site is not affiliated with or endorsed by PayrollOrg. Amounts that are adjusted each year — wage bases, contribution limits, the minimum wage, mileage and per-diem rates — are given inside the question rather than tested from memory, and state-specific rules are out of scope. Confirm the current content outline and the current-year figures from the official sources before testing. About the FPC exam →

1. An employer that files a quarterly federal employment tax return must set its deposit schedule from a lookback period. Which period is the lookback period?

2. An employer reported a total employment tax liability of $61,000 during its lookback period. Which deposit schedule applies for the current calendar year?

3. A newly formed business hires its first employees and has no prior employment tax history at all. Which deposit schedule applies during its first calendar year?

4. A monthly schedule depositor pays wages on four separate paydays during the month of May. When must the resulting employment tax liability be deposited?

5. A semiweekly schedule depositor dates and distributes its paychecks on a Thursday. By when is the deposit of the resulting liability due?

6. A semiweekly schedule depositor pays wages on a Friday, and the Wednesday that would normally be the deposit day is a legal holiday. When is the deposit due?

7. A pay period ends on September 30, but the paychecks for it are dated and handed out on October 3. For deposit purposes, which month's liability is this?

8. A monthly schedule depositor accumulates $100,000 of employment tax liability on a single day. Apart from depositing by the next banking day, what else results?

9. An employer's total employment tax liability for the quarter is under $2,500, and it was also under $2,500 for the preceding quarter. What is the employer permitted to do?

10. An employer's federal unemployment tax liability for the first quarter is $380, and no deposit is made for that quarter. What is the correct treatment?

11. How must an employer transmit its federal employment tax deposits to the IRS?

12. How do the reporting and depositing requirements for federal unemployment tax fit together?

13. An employer that regularly files quarterly employment tax returns pays no wages at all during one quarter. What must the employer do for that quarter?

14. A business pays $4,000 during the year to an unincorporated independent contractor for services performed. On which document is that payment reported?

15. Before filing, an employer finds that its annual wage statement totals do not agree with the sum of its four quarterly employment tax returns. What does that mean?

16. An employer finds an error on a wage statement already given to an employee, but the copy for the Social Security Administration has not been filed yet. What should it do?

17. In March an employer discovers that last year's social security and Medicare wages were understated for one employee. What filings does the correction require?

18. How does an employer correct a previously filed annual federal unemployment tax return?

19. An employee copy of the annual wage statement comes back to the employer as undeliverable. What should the employer do with it?

20. A business is acquired and its operations continue under a newly formed corporate entity. What is true of the employer identification number used for payroll filings?

21. An employer deposits its withheld employment taxes several days after the deposit was due. What kind of penalty exposure does that create?