Multiple Choice
What is the primary importance of maintaining payroll registers in an organization?
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9. Current Liabilities
Payroll and Payroll Taxes
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Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
Which of the following taxes and withholdings typically reduce an employee's paycheck the most in the United States?
A
Federal income tax and Social Security tax
B
State unemployment tax and Medicare tax
C
Only FICA (Medicare) tax
D
Only local income tax
Verified step by step guidance1
Understand the components of payroll taxes and withholdings in the United States. These typically include federal income tax, Social Security tax, Medicare tax, state income tax, and sometimes local income tax.
Federal income tax is typically the largest deduction from an employee's paycheck. It is calculated based on the employee's earnings, filing status, and allowances claimed on their W-4 form.
Social Security tax is another significant deduction. It is calculated as a percentage of the employee's gross wages, up to a certain annual wage limit. The current rate is 6.2% for employees.
Medicare tax is also deducted from an employee's paycheck, but it is smaller compared to Social Security tax. The rate is 1.45% of gross wages, with no wage limit.
State unemployment tax and local income tax are generally smaller deductions compared to federal income tax and Social Security tax. These vary by state and locality, and not all states impose these taxes.
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