When a firm records its payroll, the amount of federal income tax withheld from employees is entered as a liability.

Name: When a firm records its payroll, the amount of federal income tax withheld from employees is entered as a liability.
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When a firm withholds federal income tax from its employees' paychecks, it is liable to remit that tax to the government. Therefore, the amount of federal income tax withheld from employees is recorded as a liability until it is paid to the government.

When a Firm Records Its Payroll, the Amount of Federal