Rock the 2025 FPC Exam – Master Payroll Fundamentals with Confidence!

Improper payroll tax withholding can lead to significant consequences for employers, making the potential penalty for the employer the correct outcome. Employers are responsible for accurately withholding taxes from employee paychecks. If they fail to do this correctly, they may face penalties from the Internal Revenue Service (IRS) or state tax authorities. These penalties can include fines and interest on the amounts that should have been withheld, increasing the financial liability for the business.

Additionally, while employees ultimately bear the responsibility for ensuring that their individual tax obligations are met, the employer is tasked with correctly withholding and remitting those taxes. Therefore, if there are errors in the withholding process, the employer is held accountable, reinforcing the importance of compliance in payroll practices.

In contrast, other outcomes such as increased employee satisfaction or productivity are indirect and not directly connected to the consequences of improper withholding. Thus, they do not accurately reflect the ramifications faced by employers in this context.