Withholding is the amount of income tax a person who receives income chooses to have withheld and paid to the government.  Income tax can be withheld for federal, state, and local income.  In most cases, the person who receives the income is the one who chooses to have income tax withheld.  This means that in general, employers do not decide whether to withhold taxes from a worker’s wages or how much to withhold.  Employers, banks, or other firms that issue retirement checks also do not decide whether to withhold taxes from the retirement pay.  Taxes may be withheld from certain types of income such as gambling winnings, stock sales, interest on bonds, and other types of income.

The amount of tax withheld for each type of tax accumulates each time income is paid and can be seen by reviewing the earning statement provided with the income, such as the pay stub.  If the earnings statement does not show an amount was withheld for federal, state, and/or local income tax, this means that no taxes were withheld.

The tax withheld during the year represent a credit against expected tax due when a tax return is filed.  The total tax withheld during the year (or this credit) is used to compute the refund a worker will receive if a tax return is filed the following year, usually January through April 15.  The less withholding that was withheld during the year, the less withholding (or credit) that will be available to apply to the tax liability that is used to compute the refund or tax due.  The more withholding that was withheld during the year, the more withholding (or credit) that will available to apply to the tax liability that is used to compute the refund or tax due.  If no taxes were withheld, there will be no withholding available to apply to the tax liability that is used to compute the refund or tax due.

Estimated Tax Payments

If no taxes were withheld from a source or multiple sources of income received during the year, estimated tax payments can be made.  Estimated tax payments are also used to reduce the tax liability that is used to determine whether a refund will be received or whether a person will owe taxes.  An estimated tax payment can be made at any time, but if income is consistently received during the year estimated tax payments should be made quarterly beginning in April.

Forms

The following is a list of forms that employees, retirees, and other persons who receive income during the year may want to become familiar with to make decisions about income.

Form W-4, Employee’s Withholding Allowance Certificate

SSA-1099, Social Security and Railroad Retirement Benefits

W-4P, Withholding Certificate for Pension or Annuity Payments

W-2, Wage and Tax Statement

W-2G, Certain Gambling Winnings

1099-B, Proceeds from Broker and Barter Exchange Transactions

1099-G, Certain Government Payments

1099-MISC, Miscellaneous Income

1099-R, Distribution from Pension