Final answer:
Income taxes on commissions vary based on taxable income, adjusted gross income, deductions, exemptions, and eligibility for tax credits. Commissions are part of overall income and are taxed accordingly, with rates differing based on income levels.
Step-by-step explanation:
The method for calculating income taxes on commissions varies according to several factors, including taxable income, adjusted gross income, and eligibility for tax credits and deductions. Taxable income is determined by subtracting the standard deductions and exemptions from the adjusted gross income. This income includes not just wages, but also other sources such as interest and unemployment compensation. Additionally, as an individual's income increases, they not only pay more in tax but also a larger fraction of their additional income in tax. There are different tax rates for different levels of taxable income, further complicating the calculation. For those with simple financial situations, the 1040EZ form may be used, but for those with more complex finances, a more detailed form must be filed, often with supplementary information.