Tax Analysts provides news, analysis, and commentary on tax-related topics, including the latest developments under employment tax withholding. Employers typically withhold income taxes on wages paid to employees. Amounts withheld are paid by the employer to the IRS in the name of the employee.
Employers determine the proper withholding amount for an employee using the employee’s wages and information provided by the employee on Form W-4, “Employee’s Withholding Allowance Certificate.” Form W-4 provides information to employers on the individual’s withholding rate, the withholding allowances, and whether the individual requests an additional amount withheld.
Withholding tables provided by the IRS in Publication 15 (Circular E), Employer’s Tax Guide and Publication 15-A, Employer’s Supplemental Tax Guide assist employers in determining the proper amount to withhold.
Employees that do not pay tax through withholding, or underpay tax through withholding, may be required to pay estimated taxes. In 2015, individuals must pay estimated taxes using Form 1040-ES, “2015 Estimated Tax,” if they expect to owe $1,000 in tax for 2015 and the individual’s withholding and refundable credits are less than the smaller of 90 percent of the tax on the 2015 federal income tax return or 100 percent of the tax shown on the 2014 federal income tax return.
Individuals may be subject to a penalty for underpayment of estimated tax if they are required to pay estimated taxes when tax withholding is insufficient. The IRS may waive the penalty in certain situations.
Tax Notes Federal and Tax Notes Today Federal subscribers have free access to James M. Peaslee and David Z. Nirenberg, Federal Income Taxation of Securitization Transactions and Related Topics (Fifth Edition). Chapter 12 discusses the treatment of foreign investors, focusing on chapter 3 withholding (the 30 percent tax on FDAP income) and chapter 4 withholding (FATCA). Chapter 5, Part C.7.a, discusses withholding by partnerships.