Question

Which of the following is a tax imposed only on the employer based on the employee's gross wages?

A. Medicare tax

B. Federal unemployment tax

C. Social security tax

D. State income tax

Answer 1

Medicare tax, Federal unemployment tax, and Social security tax are payroll taxes also known as withholding tax. These taxes are paid based on employees wages. A fixed proportion of wages amount is withhold by employer from employees wages as contribution for such taxes, and a fixed proportion of wages is also required to be contributed by employer. However, in accounting record employer consider amount paid for wages and such contributions as wages expense.

State income tax is levied on income of individual tax payer, however employer has to withhold state income tax on behalf of employee but it is not based on wages of taxpayer (employee) it is based on AGI (adjusted gross income) of employee.