APA Certified Payroll Professional (CPP) Practice Exam

The correct choice highlights that tipped employees are not exempt from FUTA (Federal Unemployment Tax Act). Generally, tipped employees fall under standard employment classifications and are subject to the same unemployment tax rules as other employees. Employers are required to report the wages and tips received by these employees, and thus, they contribute to FUTA.

In contrast, life insurance agents who receive only commissions (option A) are considered statutory nonemployees and are typically exempt from FUTA taxes. Work performed by statutory nonemployees refers to individuals who generally work without being classified as traditional employees, such as certain independent contractors. Additionally, work on a foreign ship outside the U.S. does not typically fall under the jurisdiction of U.S. labor laws, making it exempt as well. Thus, understanding the classifications and conditions under which employee types are exempt helps clarify why tipped employees are indeed not among those exemptions.