Question

Employers are required to compute and report payroll taxes on a calendar-year basis, even if a different fiscal year is used for financial reporting and income tax purposes.

A. True
B. False

Answer 1

Answer:

A) True

Explanation:

As stated by the IRS, employees' income taxes must be computed on the basis of of a tax year. In this specific case the tax year is the same as a the calendar year, i.e. begins January 1 and lasts 12 consecutive months until December 31. This is known as a required tax year, since the IRS's tax regulations require it to be that way.

This also applies to sole proprietors, partners and shareholders in an S corporation.