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Tax withholding in the United States information


Three key types of withholding tax are imposed at various levels in the United States:

  • Wage withholding taxes,[1]
  • Withholding tax on payments to foreign persons, and
  • Backup withholding on dividends and interest.

The amount of tax withheld is based on the amount of payment subject to tax. Withholding of tax on wages includes income tax, social security and medicare, and a few taxes in some states. Certain minimum amounts of wage income are not subject to income tax withholding. Wage withholding is based on wages actually paid and employee declarations on federal and state Forms W-4. Social Security tax withholding terminates when payments from one employer exceed the maximum wage base during the year.

Amounts withheld by payers (employers or others) must be remitted to the relevant government promptly. Amounts subject to withholding and taxes withheld are reported to payees and the government annually.

  1. ^ See U.S. Internal Revenue Service (IRS) Publication 15, which includes withholding tables for income tax. State requirements vary by state; for an example, see the New York state portal for withholding tax.

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