Withholding Taxes – Recouping Taxes for Liabilities
One way to fight against tax evasion or discipline recipients who have been delinquent in terms of filing their tax returns is through withholding or retention tax. It is basically a government requirement that obligates deduction from the payer of a certain income item.
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Withholding Taxes - An Overview of the Concept
Most withholding taxes are treated as a means of payment on credit of the final tax liability of the recipient. It can be refunded if found out through the tax return that the person’s government tax liability is lesser than the tax that has been withheld. Additional tax can also be due if it has been discovered that the person’s government tax liability is greater than the tax to withhold. Moreover, the amount of withholding taxes
in terms of employment income are usually based on the estimate of the final tax liability of the employee which is either determined by the person himself or perhaps by the government, while the amount of tax to withhold on other kinds of income payments is typically based on fixed percentages.
Withholding Allowance - A Brief Term Definition
The withholding allowance is a statement found on the W-4 form declaring that a certain employee need to have less money withheld from his or her pay check. This implies that the greater allowances that a person declares, the lesser amount of money is withheld for the reason that he or she is likely owing lesser in the income tax. Usually, the number of allowance entitled to the person is determined through the data encoded in the Form W-4, which generally include the total income amount as well as the person’s marital status. Here, the individual may declare a single withholding allowance
one for him or herself, each for the spouse, each of the children as well as other dependents.
Withholding Tax Calculator - Tips and Guidelines
A very useful program that helps an employee to determine the data needed in completing a W-4 form is through the use of the withholding tax calculator. This system generally benefits employees who desire in changing their withholdings, those who are in situations that approximate the worksheet, and even those workers with non-wage incomes who prefer having their taxes deducted from their paychecks instead of paying them in separate periods. In the case of using the withholding tax calculator program, it is necessary that you obtain your latest pay stub first as well as your latest income tax return. Perform value estimation if needed, at the same time bearing in mind that the results could only be as accurate as to the inputs provided.