If an employee is paid by commission, who is responsible for withholding taxes?

By Denise Appleby AAA
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)

RELATED FAQS

  1. How do real estate agents market themselves?

    Find an agent by checking popular real estate circulars featuring desirable neighborhoods and call the agent to ask questions ...
  2. How do real estate agents get listings?

    Learn about how real estate agents get listings in top real estate markets, as well as in smaller areas, through utilizing ...
  3. How much money do real estate agents make?

    Learn about the salaries of top earners in the real estate industry and how factors, such as location, can raise or lower ...
  4. How do real estate agents get paid?

    Know that real estate agents are not always treated fairly by brokers and must take a broker to court if they are not paid ...
RELATED TERMS
  1. Adverse Domination

    A legal doctrine that allows regulators to bring litigation against ...
  2. Entitlement Offer

    An offer to purchase a security or other asset that cannot be ...
  3. Employer's Liability Insurance

    A product for employers that protects them from major financial ...
  4. Deferred Tax Asset

    A deferred tax asset is an asset on a company's balance sheet ...
  5. Variable Annuitization

    An annuity option in which the amount of income payments received ...
  6. Strategic Management

    The management of an organization’s resources in order to achieve ...
comments powered by Disqus
Related Articles
  1. Federal Tax Brackets
    Taxes

    Federal Tax Brackets

  2. Examples Of Using SWOT Analysis To Get ...
    Investing Basics

    Examples Of Using SWOT Analysis To Get ...

  3. Benefits Of Doing A SWOT Analysis
    Investing Basics

    Benefits Of Doing A SWOT Analysis

  4. How Does Goodwill Affect Financial Statements?
    Investing Basics

    How Does Goodwill Affect Financial Statements?

  5. Goodwill vs Other Intangible Assets: ...
    Investing Basics

    Goodwill vs Other Intangible Assets: ...

Trading Center