A:

It depends. An individual who receives commissions can be treated in the same manner as an individual who receives straight salary. In that case, the employer would withhold taxes from the individual's compensation and remit the amount to the tax authorities on the individual's behalf. The withholding would be based on the elections the employee makes on Form W-4P. Alternatively, the individual can be treated as a self-employed independent contractor, who would be responsible for remitting the taxes to the tax authorities. Special rules apply to tax withholding, including requirements to avoid excise taxes that apply to underpayment of estimated taxes.

See IRS Publications 505 for more information.

As you may know, each taxpayer ultimately is responsible for paying his or her income taxes to the IRS and state tax authorities.

This question was answered by Denise Appleby
(Contact Denise)

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