CPS Cheat Sheet 2026

The 30 highest-yield CPS facts, distilled from real exam questions. Print it, save it as a PDF, or study it here — free, no sign-up.

1. A payroll auditor selects a sample of terminated employees to test. What specific risk is this procedure designed to detect? → Continued wage payments to employees after separation
2. Which federal law governs the minimum wage and overtime requirements for most private-sector employees in the United States? → Fair Labor Standards Act (FLSA)
3. Which federal tax law requires employers to withhold income taxes on wages paid to nonresident alien employees at a flat 30% unless a tax treaty applies? → Chapter 3 withholding under the Internal Revenue Code
4. A payroll journal entry debiting Salaries Expense and crediting Salaries Payable reflects which accounting concept? → Accrual basis accounting
5. Which of the following is NOT a qualifying event that triggers COBRA continuation rights under federal law? → Employee reaching age 65 and enrolling in Medicare
6. Which state law concept requires employers to pay all wages due upon an employee's termination on a specific timeline that may differ from regular payday? → Final paycheck law
7. What is the maximum amount of employer-provided dependent care FSA benefits that can be excluded from an employee's income in 2024? → $5,000 ($2,500 if married filing separately)
8. Under federal law, within how many business days after the employee's payday must an employer remit withheld child support payments? → 7 business days
9. Why is documentation critical in CPS compliance? → It provides evidence of compliance and defensible records
10. Which ratio is used to measure how efficiently a company uses its labor force relative to the goods or services it produces? → Labor productivity ratio
11. What is a near-miss report in CPS practice? → Documentation of an event that could have caused harm but did not
12. What is 'dollar-cost averaging' in the context of retirement plan contributions? → Investing equal amounts at regular intervals regardless of market price
13. When an employee receives incentive stock options (ISOs), what tax event occurs at the time of exercise? → No regular income tax is owed, but AMT may apply
14. What is the primary purpose of payroll processing? → To ensure employees are paid on time and accurately
15. Which type of garnishment order generally takes priority over all other garnishments when received simultaneously? → Child support and alimony income withholding orders
16. What is the purpose of data analysis in CPS practice? → Transforming raw data into insights for informed decision-making
17. A non-exempt employee works 46 hours in a workweek and earns $18/hour. What is their gross pay for that week under FLSA? → $882.00
18. Why are tax filings an essential part of payroll administration? → To fulfill legal tax reporting requirements
19. Which tax forms can payroll systems generate? → W-2 and 1099 forms
20. What is the FUTA tax rate after the maximum allowable state unemployment tax credit? → 0.6%
21. The 'regular rate of pay' used for FLSA overtime calculations must include which of the following? → Shift differentials and non-discretionary bonuses
22. An employer issues a corrected W-2 to fix an error. What form is used to make this correction? → Form W-2c
23. Under ERISA, what is the maximum vesting period allowed for cliff vesting in a 401(k) employer match? → 3 years
24. A payroll auditor is reviewing a company's garnishment processing. Which document must the employer retain to demonstrate legal authority to withhold wages? → Court order or IRS levy notice
25. When a payroll model incorporates a 'benefit load percentage,' it is calculating: → Employer benefit costs expressed as a percentage of gross wages
26. What is the purpose of a payroll bank account reconciliation at period end? → To ensure all checks and ACH transactions cleared and outstanding items are identified
27. A non-exempt employee's regular rate of pay must include which of the following when calculating overtime? → Non-discretionary production bonuses
28. Under the FLSA, which record must employers retain for at least three years? → Payroll records including hours worked and wages paid
29. Why do employers need to file Form 941? → To report employee wages and tax withholdings
30. What does gross pay refer to in payroll calculations? → Total earnings before deductions