Which compensation type is not subject to Social Security taxes?

Unlock all questions

This demo includes only 20 questions. Upgrade to access hundreds of questions, flashcards, exam simulations, and disable ads.

Full question bankExam simulationsFlashcards
From $24.99Unlock all

Prepare for the CPP Exam with engaging tests! Use flashcards and multiple-choice questions, complete with hints and explanations. Ace your exam!

Multiple Choice

Which compensation type is not subject to Social Security taxes?

Explanation:
Workers' compensation benefits are not considered wages for payroll tax purposes. They’re insurance payments designed to replace lost earnings after a job-related injury, not compensation for services you’ve performed. Because they aren’t wages, they aren’t subject to Social Security taxes. Other common forms of compensation—earned tips, deferred bonuses, and third-party sick pay—are treated as taxable wages for payroll tax purposes, so they do incur Social Security taxes.

Workers' compensation benefits are not considered wages for payroll tax purposes. They’re insurance payments designed to replace lost earnings after a job-related injury, not compensation for services you’ve performed. Because they aren’t wages, they aren’t subject to Social Security taxes. Other common forms of compensation—earned tips, deferred bonuses, and third-party sick pay—are treated as taxable wages for payroll tax purposes, so they do incur Social Security taxes.

More Multiple Choice Questions
Subscribe

Get the latest from Examzify

You can unsubscribe at any time. Read our privacy policy