"in year 1, costello company performed $14,000 of services for a customer who paid immediately. it also incurred $6,000 of wage expenses but did not pay employees until year 2. if costello uses the accrual-basis of accounting, then costello will report"

Given Curtis’ situation, the answer is C. State income tax is usually a set percentage of federal income tax. With an increase in federal he will see an increase in state withholding.

Income tax is a percentage that is charged to those who live and work in their respective state. Since it is a percentage of money earned, as one’s income rises, so does their money owed in income tax, with an increase in the federal tax the income withholding tax rises as well.