What do withholdings mean

In both cases your employer holds back a portion of your paycheck, sending it directly to the government instead of ever giving it to you. The chief difference is that withholding is not actually a tax. As discussed, it is a means of collecting the federal income tax.

The payroll tax, on the other hand, is an independent tax dedicated to Medicare and Social Security. While withholding rates can vary without ever affecting your final bill, the sum total of your payroll tax is deducted from each paycheck. This is true, again, for all W-2 employees. Workers such as business owners and the self-employed must pay their own payroll taxes. Receive full access to our market insights, commentary, newsletters, breaking news alerts, and more.

I agree to TheMaven's Terms and Policy. To understand why first you need to understand tax withholding. What Is Withholding? Withholding is applied, chiefly, to ensure that the government receives its money. TheStreet Recommends. By Rob Lenihan. By Vidhi Choudhary. By Tony Owusu. How to Figure Your Withholding Amount. It depends on: The amount of income you earn. Three types of information you give to your employer on Form W—4, Employee's Withholding Allowance Certificate : Your filing status : If you withhold at the single rate or at the lower married rate.

How many withholding allowances you claim : Each allowance you claim reduces the amount withheld. If you withhold an additional amount : You can request an additional amount withheld from each paycheck. Page Last Reviewed or Updated: Jun Test Your Vocabulary. Can you spell these 10 commonly misspelled words? Love words? Need even more definitions? Just between us: it's complicated. Ask the Editors 'Everyday' vs. What Is 'Semantic Bleaching'? How 'literally' can mean "figuratively".

Literally How to use a word that literally drives some pe Understanding withholding tax. Your income. How to check and change your withholding tax. Withholding tax vs. On a similar note Dive even deeper in Taxes. Explore Taxes. Get more smart money moves — straight to your inbox.