Multiple Choice
When Payroll Tax Expense is debited, which of the following accounts are typically credited?
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9. Current Liabilities
Payroll and Payroll Taxes
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Why is it important to pay attention to the amount of taxes withheld from each paycheck?
A
Because it affects the calculation of overtime pay rates.
B
To ensure the correct amount of tax is paid throughout the year and avoid owing a large sum or receiving a large refund at tax time.
C
Because the amount withheld determines the total gross salary earned.
D
To increase eligibility for employer-provided benefits.
Verified step by step guidance1
Understand that taxes withheld from each paycheck are prepayments of your annual tax liability to the government.
Recognize that withholding too little tax can result in owing a large sum at the end of the year, while withholding too much can lead to an overpayment and a large refund.
Learn that the goal of proper tax withholding is to closely match your actual tax liability, ensuring you neither owe a significant amount nor receive an unnecessarily large refund.
Review your Form W-4 with your employer to adjust your withholding allowances based on your financial situation, dependents, and other income sources.
Monitor your pay stubs regularly to ensure the correct amount of taxes is being withheld, and make adjustments if your financial circumstances change during the year.
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