What is tax withholding?
Tax withholding is the amount of money that an employer withholds from an employee's paycheck to pay federal, state, and local taxes.
The amount of tax withheld depends on the employee's income, filing status, and the number of allowances claimed on their W-4 form.
How does tax withholding work?
When an employee starts a new job, they fill out a W-4 form that indicates their filing status, number of allowances, and any additional withholding they want to request.
The employer then uses this information to calculate the amount of federal income tax to withhold from the employee's paycheck.
The withheld taxes are then paid to the IRS on the employee's behalf.
What happens if too much tax is withheld?
If too much tax is withheld, the employee will receive a refund when they file their tax return.
However, this means that the employee has essentially given the government an interest-free loan for the year.
What happens if too little tax is withheld?
If too little tax is withheld, the employee may owe additional taxes when they file their tax return.
In some cases, the employee may also be subject to penalties for underpayment of taxes.
Nick Simpson
Founder @ WorkMade
I started working for myself at 9. My first tax bill showed up at 14. I didn’t understand it, and nobody around me could really explain it. If you’ve been there, you get it. Twenty years later, after creative directing for brands in New York and buying and selling a few companies, I kept seeing the same thing: smart, talented people losing money to a system that wasn’t built for how they work. That’s why I built WorkMade. Not to make taxes “easier to understand” but to make them disappear into the background, so you can get on with your life.