Which of the Following Statements Correctly Describes the Withholding of Federal

question 76

Multiple Choice

Which of the following statements correctly describes the withholding of federal income taxes and social security taxes on tips?

• A) Tips amounting to $10 or more in a calendar month must be reported by tipped employees to their employers.
• B) The withholding of federal income taxes on employees' reported tip income is made from the amount of tips reported by employees.
• C) When employees report taxable tips in connection with employment in which they also receive regular wages, the amount of tax to be withheld on the tips is computed as if the tips were a supplemental wage payment.
• D) Employers do not withhold FICA taxes on the tipped employees' reported tip income.
• E) None of the above statements is correct.

---

Definitions:

Social Security Taxes

Taxes collected to fund the Social Security program, which provides retirement, disability, and survivorship benefits to qualifying individuals.

Tax Rate

The percentage at which an individual or corporation is taxed, which can vary based on income level, type of good, or transaction being taxed.

Marginal Tax Rate

The rate of tax applied to the last dollar of income, reflecting the tax bracket into which the incremental income falls.

Average Tax Rate

The Average Tax Rate is the proportion of the total taxable income paid as taxes, calculated by dividing the total amount of taxes paid by the total income.