Chapter 9, Problem 1MCQ

To determine

Concept Introduction:

Withholding Method: Under the withholding method employers are required to withhold taxes from the paid amount to employees for wages, salary, commission, and retirement pay. To withhold income taxes at the prescribed amount employers need some information, provided by the employees by complete the Form W-4.

To indicate:Theamount that is not subject to withholding

Answer to Problem 1MCQ

The answer is option “D”

Explanation of Solution

Explanation for correct option:

Under the withholding method employers are eligible to withhold taxes from the paid amount to employees for wages, salary, commission, and retirement pay.

Therefore, the option “D” reimbursement of expenses under a non-accountable plan is not subject to the withholding.

Explanation for incorrect option:

a.

Option A includes the salary, which is allowed to withhold. Therefore, this is incorrect option.

b.

In option B, bonus is an amount paid to employee that is withhold by employer.Therefore, this is incorrect option.

c.

Commission is the amount paid to employee, from which employers are allowed to withhold. Therefore, this is incorrect option.

e.

Reimbursement of expenses under a non-accountable plan is not allowed to be withhold by the employer. Therefore, this is incorrect option.