Definition, Meaning & Synonyms
withholding tax
noun
/wɪðˈhoʊldɪŋ tæks/
Definition
A withholding tax is an amount withheld from an employee’s wages and paid directly to the government by the employer. This tax serves as a prepayment on the employee’s income tax liability.
Examples
- The company deducted withholding tax from all employee salaries before issuing paychecks.
- He was surprised to see a significant withholding tax on his bonus payment.
Meaning
Withholding tax is designed to ensure that income tax is collected on certain types of income, including wages and interest, before the taxpayer files their annual tax return.
Synonyms
- Tax deduction
- Income tax withholding
- Payroll tax
