Withholding Tax
TaxGlossary term
Definition
The portion of an employee's wages that an employer sends directly to the government as a prepayment of income tax. The amount withheld depends on income, filing status, and the W-4 form submitted to the employer.
Related terms
- W-4 FormAn IRS form filled out by employees to tell their employer how much federal income tax to withhold from their paycheck. Adjustments should be made after major life events like marriage, having a child, or starting a second job.
- W-2 FormA tax form employers send to employees and the IRS reporting annual wages and tax withholdings. Required to file income taxes and verify employment income.
- Payroll TaxTaxes withheld from employee paychecks and paid by employers to fund Social Security and Medicare. Employees and employers each pay 7.65% of wages, split between Social Security (6.2%) and Medicare (1.45%).
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