Multiple Choice
Which of the following is required to be withheld from an employee's gross pay?
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9. Current Liabilities
Payroll and Payroll Taxes
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Which of the following are typically withheld from an employee's salary?
A
Interest on company loans
B
Federal income tax
C
Dividends paid to shareholders
D
Employer's portion of Social Security tax
Verified step by step guidance1
Understand the concept of payroll deductions: Payroll deductions are amounts withheld from an employee's salary by the employer to cover taxes, benefits, and other obligations. These deductions are typically mandated by law or agreed upon by the employee and employer.
Identify mandatory deductions: Federal income tax is a mandatory deduction that employers are required to withhold from an employee's salary. This tax is based on the employee's earnings and the information provided on their W-4 form.
Differentiate between employee and employer obligations: The employer's portion of Social Security tax is not withheld from the employee's salary. Instead, it is paid directly by the employer as part of their payroll tax obligations.
Exclude non-salary-related items: Interest on company loans and dividends paid to shareholders are not related to payroll deductions. Interest on loans is typically a financial obligation of the employee, while dividends are payments to shareholders and not part of salary withholding.
Conclude with the correct answer: Federal income tax is the only item listed that is typically withheld from an employee's salary. Ensure clarity by understanding the distinction between mandatory payroll deductions and other financial transactions.
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