If prior to the last weekly payroll period of the calendar year, the cumulative earnings for an employee are $75,200, earnings subject to social security tax are $106,800, and the tax rate is 7.5%, the employer's social security tax on the $800 gross earnings paid on the last day of the year is $60.

Question

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The employer's social security tax rate is 7.5% and applies to earnings up to the annual cap of $106,800. The employee's cumulative earnings for the year are $75,200, which means that the employer has already paid social security tax on $75,200 of the employee's earnings for the year. Therefore, the $800 gross earnings paid on the last day of the year are subject to social security tax.

The social security tax on $800 at a rate of 7.5% is $60. Therefore, the answer is A) True.

If Prior to the Last Weekly Payroll Period of the Calendar