Quiz 10: Payroll Taxes

Business

Income tax is the tax paid by individuals, household and business entities to the government on the earnings that they have. Payroll taxes are those portions of salary which is withheld by employer when paying salaries to employees and then this portion is submitted to government by employer on behalf of the employee.When payment is given to employee by the employer then they include many things in this payment like salaries, incentives, bones, commission, payment against fringe benefits which are taxable, etc. Employer is liable to withhold a portion of compensation for all such payments which are mentioned above.

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Income tax is the tax paid by individuals, household and business entities to the government on the earnings that they have. Payroll taxes are those portion of salary which is withheld by employer when paying salaries to employees and then this portion is submitted to government by employer on behalf of the employee.When payment is given to employee by the employer then they include many things in this payment like salaries, incentives, bones, commission, payment against fringe benefits which are taxable, etc. Employer is liable to withhold a portion of compensation for all such payments which are mentioned above.There is a form W-4 which has to be filled and provided by employee to the employer. This form has to be provided by the employee when job starts. This form provides details of the filing status of the employee who is the taxpayer. Employee provides the information about his withholding allowances to the employer which helps employer calculate the correct amount of salary to withhold. When the numbers of withholding allowances are high then the amount of salary withheld by employer will be less.