Question

which of the following describes why withholding tax is necessary? the federal government charges more income taxes when it is paid annually rather than monthly. many individuals will spend their paychecks without setting aside enough money to pay taxes. it will increase both the gross and net pay that an employee will receive.

Explanation:

• For the first option: The federal government’s tax calculation is based on annual income, and withholding tax is not about charging more for annual vs. monthly payment. So this is incorrect.
• For the second option: Withholding tax is deducted from paychecks to ensure taxpayers have funds for tax liability, as people might overspend and not save for taxes. This is correct.
• For the third option: Withholding tax reduces net pay (gross pay - deductions), so it doesn’t increase gross or net pay. This is incorrect.

Answer:

B. Many individuals will spend their paychecks without setting aside enough money to pay taxes.