Utah Contractor Practice Exam

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Which payroll tax does not have a limit?

FUTA
FIT
FICA
SDI

The correct answer is: FIT

The Federal Income Tax (FIT) does not have an income limit because it is based on an individual's taxable income rather than a specific wage base. This means that all income earned, regardless of amount, is subject to this tax, and individuals will pay the same percentage of tax on every dollar earned within the applicable income brackets. In contrast, other payroll taxes do have limits; for example, the Federal Unemployment Tax Act (FUTA) has a wage base limit, Social Security taxes (part of FICA) are capped at a certain income level, and State Disability Insurance (SDI) also typically has a wage base limit determined by each state. Therefore, due to the nature of FIT being applied to all earned income without a cap, it is the correct choice in this context.