Withholding

Withholding refers to the practice of deducting a portion of income—most commonly from an employee’s paycheck—to pay federal, state, or local income taxes directly to the government on the taxpayer’s behalf. The withheld amount acts as a prepayment toward the employee’s annual tax liability, and the total can be adjusted based on factors like earnings, filing status, and allowances indicated on tax forms.​

If too much is withheld, the taxpayer receives a refund after filing taxes; if too little, additional payment may be required. Withholding also applies to other income sources (such as pensions or dividends) and is used to ensure taxes are paid throughout the year, not just at tax time.