withholding tax

Definition

An amount of an employee's income that an employer sends directly to the federal, state, or local tax authority as partial payment of that individual's tax liability for the year. When a person starts a new job, he/she is required to fill out a W-4 form on which he/she can indicate his/her filing status and the number of allowances he/she is claiming. also called withholding.

Use withholding tax in a sentence

When I moved across the country for a new job, I was shocked to learn that my new state would require the company to hold back a higher percentage of my paycheck as withholding tax.

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The state withholding tax was higher than expected for the young person who was working their first job out of college.

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As a self-employed person, there's no one taking out withholding tax for you, so it falls on your shoulders to pay what would be the employer's portion, yourself.

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