Contractor License Practice Exam

Investment Income Tax is not typically withheld from employee wages because it is a tax applied to income generated from investments, such as dividends, interest, and capital gains. This type of income is usually reported on tax returns and taxed independently of wages. Employees do not receive regular wage payments from investments; thus, there is no payroll framework to facilitate withholding this tax like there is for Social Security Tax, Federal Income Tax, and State Income Tax. These latter taxes are directly deducted from employees' paychecks based on their earnings, with established regulations governing the withholding process to ensure compliance with tax laws.