Tax withholding in the United States

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In the United States income tax system, employers are required to withhold a portion of each employee's income and pay it directly to the U.S. Internal Revenue Service. This withholding acts as a prepayment of tax they will owe at the end of the year, as well as a direct payment of certain other taxes.

In the History of the U.S Tax System, the U.S. Department of Treasury describes tax withholding.

This greatly eased the collection of the tax for both the taxpayer and the Bureau of Internal Revenue. However, it also greatly reduced the taxpayer's awareness of the amount of tax being collected, i.e. it reduced the transparency of the tax, which made it easier to raise taxes in the future.^[1]

The amount of a person's federal income tax withholding depends on several factors such as:

• the taxpayer's marital status.
• the number of children or dependents the taxpayer has.
• whether or not the taxpayer is an employee IRC 3401.
• if the taxpayer wants to claim child tax credits.
• if the taxpayer holds two or more jobs.
• if the taxpayer plans to itemize.
• any tax exemptions from withholding that the taxpayer wants to claim.
• any additional amount the taxpayer wants to withhold.

A taxpayer will get a tax refund if the withholding for the year was greater than the income tax actually owed.

[edit] See also

• Form W-2
• Payroll tax
• United States
• PAYE
• Withholding tax
• Dividend tax
• Internal Revenue Code 3401
• Taxation in the United States
• US State NonResident Withholding Tax

[edit] References

1. ^ History of the U.S. Tax System. U.S. Department of Treasury. Retrieved on 2006-10-31.