Withholding
The act of holding back something. In finance, a portion of an employee's wages or salary deducted by the employer and paid directly to the government as a partial payment of income tax.
Tax withholding is a pay-as-you-go system, designed to ensure taxpayers meet their obligations throughout the year rather than facing a large bill at tax time. It also applies to other deductions like health insurance premiums.
Word relationships
- Deduction: A broader term for any amount subtracted; withholding is a specific type of deduction for taxes.
- Retention: The continued possession, use, or control of something.
- Set-aside: An amount of money or land reserved for a particular purpose.
- Payment: The action or process of paying someone or something, or of being paid.
- Disbursement: The payment of money from a fund.
Commonly confused with
- Gross Pay: 'Withholding' is the amount taken out of gross pay before you receive net pay. Gross pay is the total before any deductions.
Word family
- withhold (verb): To hold back or refuse to give something.
Collocations
- tax withholding
- income withholding
- payroll withholding
- adjust withholding
Example sentences
- "Employees can adjust their tax withholding by filling out a W-4 form, which impacts how much tax is deducted from each paycheck." Payroll processing.
- "Her pay stub showed significant withholding for federal and state income taxes, as well as social security." Understanding a pay stub.
Memory hook
WITHHOLDING is when your employer 'WITH-HOLDs' part of your pay for taxes. WITHHOLDING = HOLD BACK
When not to use
While 'withholding' can mean holding back information or emotions, in a financial context, it almost exclusively refers to the deduction of taxes or other payments from wages. Be clear about the context.
Fun facts
- The modern system of income tax withholding in the United States was largely implemented during World War II to fund the war effort more efficiently.
Explore more words
withdrawal, salary, withdraw, forbearing, reimbursement, insurance
Also appears in
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