GLOSSARY · TAX & ESTATE

Tax withholding

Income tax your employer holds back from each paycheck and sends to the IRS on your behalf, based on the Form W-4 you file. It is an estimate of the year's tax, settled when you file your return: too much becomes a refund, too little a balance due and possibly a penalty. Bonuses and other supplemental pay are often withheld at a flat federal rate that may differ from your actual rate.

Also called: W-4, federal withholding, supplemental withholding
COMPUTE IT WITH YOUR NUMBERS
Bonus / supplemental wage tax →How much of my bonus (or RSU vest / severance) will I keep?Quarterly estimated tax & safe harbor →How much estimated tax per quarter to avoid a penalty?
LEARN IT PROPERLY
CHAPTER · ARRIVING AND WORKING ON A VISA · FOUNDATIONSYour Paycheck: Withholding and the W-4 for NonresidentsCHAPTER · INCOME FUNDAMENTALS · FOUNDATIONSReading Your Paycheck, From Gross to Net
RELATED TERMS
Take-home payMarginal tax rate
SOURCES
All terms →The Library →