What is withholding tax?

Withholding tax is income tax your employer takes out of each paycheck and sends to the IRS, and to your state if it has an income tax, on your behalf. It is a prepayment. When you file your return, the total withheld is subtracted from what you actually owe.

If too much was withheld, you get a refund. If too little, you pay the difference and sometimes a penalty. The federal amount follows your Form W-4 and the tables in IRS Publication 15-T. States use their own forms and formulas.

Social Security and Medicare are withheld too, at fixed rates, but people usually mean income tax when they talk about withholding. To check your own numbers, try the paycheck calculator or read how much federal tax should be withheld. The federal income tax withholding entry explains the method.