The percentage method of determining an employee's federal income tax deductions __________________.
A) Is used to promote complexity in payroll practices
B) Allows payroll accountants to determine federal income tax for the firm itself
C) Is used primarily for high wage earners and computerized payroll programs
D) Is less accurate than the results gained from using the wage-bracket method

Question

Quizplus · Accepted Answer

The percentage method is a formula-based system that is mainly used for computerized payroll programs and high wage earners. It calculates federal income tax deductions using a percentage of the employee's gross income rather than a specific dollar amount based on the employee's income bracket. It is not used to promote complexity in payroll practices and may be more accurate than the wage-bracket method in some cases. It does not determine federal income tax for the firm itself.

The Percentage Method of Determining an Employee's Federal Income Tax