Definition of Federal Tax Withholding

Under federal law, all taxpayers are required to withhold tax to pay for their federal income tax. The meaning of federal tax withholding is the amount that is forwarded to the IRS from your income.

How you’re going to withhold tax depends on the way you earn your income. If you’re a worker, your employer will deduct a portion of your income and forward it to the IRS. This will happen every time you receive a paycheck. Since you’re going to withhold tax during the course of the tax year, you are likely to withhold more than what you owe at the end of the tax year. If this is the case for you, the IRS will refund the excess amount.

Adjusting Tax Withholding

Since you are not going to be the one that is doing the withholding, you must provide information about your anticipated tax return to your employer. This can only be done by using the IRS tax withholding form W-4.

This isn’t a mandatory tax form but if not filed, then your employer will have to withhold tax at the highest single rate which can result in more tax than necessary being withheld. With that being said, for an accurate withholding, make sure to file Form W-4 and submit it to your employer.

Where to find federal taxes withheld?

As an employee, your employer will issue you a Form W-2. It reports the income paid to you and the total federal tax withheld. You will then use this tax form to file your federal income tax return. Those are going to file a paper tax return must staple it on the upper left corner of the Form 1040 while electronic filers just need to import their information.

Take note that employers have until January 31st to issue Form W-2. If Form W-2 isn’t filed by this date, you can file the W-2 substitute—Form 4852—however, your priority should be to contact your employer and ask when you are likely to receive it.

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