Last update : July 12, 2023

What is Withholding?

Withholding refers to payments subtracted by an employer to an employee that are withheld from an employee’s paycheck or salary.

Withholding is a form of compensation, and employers may withhold compensation from employees via the federal income tax withholding system.

Employers withhold a fixed portion of the gross wages paid to employees, which is then paid to the government, The amount of withholding depends on the number of exemptions the employee claims on his or her taxes.

The employee is responsible for ensuring that the correct amount of withholding is collected.

Withholding is commonly applied to salaries and wages, Employers typically have the responsibility to withhold the correct amount of tax from their employee’s paychecks. The withholding system was established by Congress in 1913.

Why are withholding taxes important?

Withholding taxes are important in order to ensure that taxpayers pay their fair share of taxes. Without withholding taxes, many taxpayers would simply choose not to pay their taxes, and the government would not be able to function.

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