Which of the following is a local tax that payroll might withhold?

• A. Local earned income taxes
• B. Federal income tax
• C. State unemployment tax
• D. Social Security tax

Answer: (A)

Local earned income taxes are the local tax that payroll might withhold. Local earned income taxes are levied by cities, counties, or school districts and are collected through payroll withholdings just like other wage taxes. Employers deduct these amounts from employees’ pay and remit them to the local tax authority, based on where the work or residence is located.

Federal income tax is a federal obligation handled by the IRS, not a local one. State unemployment tax is an employer-paid tax to fund unemployment benefits, not typically withheld from employees. Social Security tax is a federal payroll tax (FICA) shared by employee and employer, not a local tax.