Utah Contractor Practice Exam

Which statement is true regarding payroll taxes?

1. All wages are subject to taxation

2. Bartered goods are not subject to taxes

3. Bonuses are not subject to taxes

4. Payroll taxes must be paid only once a year

The correct answer is: All wages are subject to taxation

The statement that all wages are subject to taxation is accurate because, under both federal and state tax laws, wages earned by employees are considered taxable income. This includes not only standard wages or salary but also other forms of compensation such as bonuses, overtime pay, and commissions. Various payroll taxes, such as Social Security, Medicare, and unemployment taxes, are applied to these earnings, ensuring that the government receives funding for social programs and public services. Bartered goods, bonuses, and the frequency of tax payments involve different nuances in tax law. Bartered goods can indeed be subject to taxation under certain conditions, suggesting that compensation methods other than cash may still incur tax liabilities. Bonuses, contrary to the choice suggesting otherwise, are treated as part of taxable income and thus subject to payroll taxes as well. Moreover, payroll taxes are typically remitted quarterly rather than annually, emphasizing the importance of regular compliance throughout the year.