Question

Which of the following is true about tax withholdings from licensees' commissions if they are hired as independent contractors?

A. Federal income taxes are not withheld.
B. Only state and local taxes are
withheld.
C. All taxes are automatically withheld.
D. Federal and state taxes are withheld from commissions greater than $10,000.

Answer 1

The correct answer is A. Federal income taxes are not withheld. When independent contractors are hired, they are responsible for reporting and paying their own federal income taxes. State and local taxes may still be withheld depending on the specific tax laws in their jurisdiction.

Step-by-step explanation:

The correct answer is A. Federal income taxes are not withheld.

When independent contractors are hired, federal income taxes are not automatically withheld from their commissions. Instead, independent contractors are responsible for reporting and paying their own federal income taxes. This means that they must set aside a portion of their commissions to cover their tax liability.

On the other hand, state and local taxes may still be withheld from their commissions depending on the specific tax laws in their jurisdiction.