PF1 Exam Dumps - National Payroll Institute Payroll Fundamentals Questions and Answers

Employer-provided parking is often a taxable benefit, generally valued at the fair market value of the parking spot. However, the CRA provides a specific exception for employees with disabilities. CRA guidance on employer-provided parking states that if your employee has a disability, the parking benefit is generally not taxable, including situations involving a severe and prolonged mobility impairment or blindness.

In Steve’s case, the fact pattern explicitly says he is physically disabled and the employer pays for his parking. Under CRA’s general rule for disability-related parking, this would generally not be included in income as a taxable benefit, meaning it is not a taxable allowance and not a taxable benefit (cash or non-cash) for payroll purposes.

Payroll should still document why the parking is being treated as non-taxable (for example, disability-related need) and ensure the treatment aligns with CRA guidance if questioned. If the facts were different (non-disability parking or preferential parking provided to employees generally), the taxable benefit rules would usually apply.

Service Canada’s ROE guidance states that an employer must issue an ROE each time an employee experiences an interruption of earnings and when Service Canada requests one. This makes option A true.

For paper ROEs, the ROE guide is explicit about deadlines: you must issue a paper ROE within 5 calendar days of (1) the first day of an interruption of earnings, or (2) the day the employer becomes aware that an interruption of earnings has occurred. This confirms option B.

An interruption of earnings generally occurs under the 7-day rule—when an employee has had or is anticipated to have 7 consecutive calendar days with no work and no insurable earnings from the employer. That’s why option C is also true: once the employer becomes aware the 7-day threshold is met (or will be met), the ROE requirement is triggered, and the paper ROE must be issued within the time limit above.

Payroll deductions are typically applied in a priority order to ensure the employer meets mandatory legal obligations first and avoids creating liability. Standard Canadian payroll training materials commonly present five categories withheld in this order: (1) statutory deductions, (2) legal deductions, (3) union deductions, (4) company-compulsory deductions, and (5) voluntary deductions.

Statutory deductions (CPP/QPP, EI, income tax, and where applicable NWT/Nunavut payroll tax) have top priority because employers are legally required to deduct and remit them.

Legal deductions (such as CRA requirements to pay/garnishments) are next because they are enforced by law and can create employer liability if not followed.

Union deductions follow where required by a collective agreement.

Company-compulsory deductions (for example, required benefit premiums) come after those.

Voluntary deductions (charity, savings plans, etc.) are last and only taken if funds remain.

Therefore, option D is the correct order.

Taxable gross for the period = $1,600.00 + $30.00 = $1,630.00 (a taxable allowance is included in income for tax withholding).

Using CRA T4032-AB (Biweekly, 26 pay periods) with claim code 2:

Federal tax at pay $1,630 falls in the $1,619–$1,635 range → CC2 = $107.35.

Alberta provincial tax at pay $1,630 falls in the $1,628–$1,644 range → CC2 = $46.55.

Subtotal tax from the tables = $107.35 + $46.55 = $153.90.

CRA notes these tax tables build in the tax credits for CPP/EI, so when CPP is not deducted (because annual max already reached), you must increase tax withholding accordingly.

CPP that would have been deducted this pay (using CRA rates/YBE):

Pensionable = $1,630 − ($3,500/26 = $134.62) = $1,495.38; CPP (4.95% + 1.00% = 5.95%) = $88.98.

Add back missing credits: Federal 14% × 88.98 = $12.46; Alberta 8% × 88.98 = $7.12 → total $19.58.

Final total tax = $153.90 + $19.58 = $173.48.

The CRA sets out that the “eligible” portion of a retiring allowance that may be transferred directly to an RRSP/RPP under special rules is based on years of service before 1996 (and potentially an additional amount for certain pre-1989 years if specific pension/DPSP conditions are met). The CRA explains the eligible part is $2,000 for each year (or part-year) of service before 1996, plus you may be able to transfer an additional $1,500 for each year (or part-year) of service before 1989 where no employer pension/DPSP benefit was vested (or previously paid) for those years.

This is why the correct basis in the answer choices is the employee’s years of service prior to 1996, not wages, age, or average earnings. Payroll needs this service history (including related employers where applicable) to correctly identify the eligible/non-eligible split and apply the right withholding and transfer reporting.

In payroll, deductions are applied in a priority order so employers satisfy mandatory legal obligations first. CRA collection tools such as a Requirement to Pay (RTP) and a Demand on a Third Party (DTP) are legal/garnishment-type deductions. CRA explains that a Requirement to Pay directs a third party (often the employer) to send amounts otherwise payable to the employee to the CRA, and the employer must comply.

Company pension contributions (where participation is required as a condition of employment or under a plan/collective agreement) are generally company-compulsory deductions—important, but they come after statutory and legal deductions. Voluntary insurance coverage is a classic voluntary deduction (the employee chooses it; it is not legally required). Voluntary deductions are normally taken last because they must not interfere with statutory/legal withholding obligations.

So among the options, voluntary insurance coverage is the one that would be withheld last in the order of priority.

An expense reimbursement is a repayment to an employee for business costs they already paid personally (for example, meals, mileage, supplies), typically supported by receipts or an expense report. CRA’s guidance explains that a reimbursement is a payment made to repay amounts the employee spent while conducting the employer’s business, and that a reasonable reimbursement is generally not included in the employee’s income.

That’s why reimbursements are generally not part of “earnings” for payroll calculations—they are not compensation for work performed; they are repayment of a business expense. This differs from an allowance, which is usually a fixed amount paid without requiring receipts; allowances are often taxable unless a specific CRA exception applies.

So the correct term for “dollar amounts paid to cover job expenses incurred, but not considered earnings” is expense reimbursements (option D). Payroll best practice is to ensure reimbursements are properly documented and reasonable to support non-taxable treatment.

Bonuses and incentives are treated as taxable remuneration, so they are generally subject to the same core statutory deductions as regular earnings: CPP/QPP, EI, and income tax (and in Quebec, QPIP also applies when the remuneration is subject to EI). The CRA specifically notes that you must deduct EI premiums from bonuses/retroactive pay (up to the annual maximum), and the CRA’s guidance for bonuses/irregular amounts uses tools (PDOC/formulas) that calculate CPP contributions, EI premiums, and income tax on these payments.

In Quebec payroll, remuneration that is subject to EI premiums is generally also subject to QPIP premiums, so bonuses/incentives that are EI-insurable are typically QPIP-insurable as well.

In the Northwest Territories and Nunavut, there is also a statutory territorial payroll tax that employers must withhold/remit where applicable, and the NWT guidance explicitly lists bonuses as part of employment income subject to payroll tax.

This is a benefit because the employer is providing access to an automobile (leased by the employer) that the employee can use for personal driving as well as business. The CRA explains that when an employer-owned or employer-leased automobile is made available for personal use, the employee receives a taxable automobile benefit, generally made up of a standby charge (availability of the vehicle) and potentially an operating expense benefit (if the employer pays operating costs and the employee has personal kilometres).

It is not an allowance (which is typically a cash amount given to the employee), and it is not an expense reimbursement (repayment of employee-incurred business expenses). It is also not an earning (pay for work performed). Payroll’s role is to track availability days/months, business vs personal kilometres, any employee reimbursements, apply the CRA calculation methods, and report the taxable benefit on the employee’s information slip with the correct taxable benefit treatment.

Regular earnings for an hourly employee are calculated as hourly rate × hours worked. Because “bi-weekly” means two weeks of work paid together, you calculate one week’s regular earnings and then multiply by two (assuming the hours are the same each week and there is no overtime premium indicated).

Step 1: Weekly regular earnings:

$10.10 × 37.5 hours = $10.10 × 37 + $10.10 × 0.5

= $373.70 + $5.05

= $378.75.

Step 2: Bi-weekly regular earnings (2 weeks):

$378.75 × 2 = $757.50.

So Matt’s regular bi-weekly earnings are $757.50.

In payroll documentation, “regular earnings” are the employee’s base wages before statutory deductions (CPP/QPP, EI, income tax) and before other deductions, and they exclude any separately calculated earnings like overtime premiums or taxable benefits unless stated. This approach (rate × hours, then adjust for pay period) is the standard method used to compute gross/regular pay for hourly employees before moving on to deductions and net pay.