Final answer:
A business is indeed required by law to withhold certain payroll taxes from employee salaries, such as income tax and contributions to social security and Medicare. Payroll taxes are split between the employee and employer, with the possibility that the employer’s share affects the employee’s net wages. Independent contractors must pay both portions of these taxes.
Step-by-step explanation:
It is true that a business is required by law to withhold certain payroll taxes from employee salaries. These withholdings include taxes for federal and state income tax, as well as social security and Medicare, which are part of the Federal Insurance Contributions Act (FICA). Furthermore, businesses pay additional payroll taxes that are based on the employee's wages, such as the employer's share of social security and Medicare taxes.
An employee typically sees a deduction of 6.2% for Social Security and 1.45% for Medicare from their payroll. However, it is believed that the employer's contribution may indirectly affect the employee's net income through potentially lower wages. For those who receive a 1099 tax statement as independent contractors, such as members of the gig economy, they must cover both the employee and employer portions of these taxes.