Encyclopedia > Tax withholding in the United States
In the United States income tax system, employers are required to withhold a portion of each employee's income and pay it directly to the U.S. Internal Revenue Service. This withholding acts as a prepayment of tax they will owe at the end of the year, as well as a direct payment of certain other taxes. This article is a brief overview of some aspects of US taxes. ... The Internal Revenue Service (IRS) is the United States government agency that collects taxes and enforces the tax laws. ...
The amount of a person's federal income tax withholding depends on several factors such as:
the taxpayer's marital status.
the number of children or dependents the taxpayer has.
any tax exemptions from withholding that the taxpayer wants to claim.
any additional amount the taxpayer wants to withhold.
A taxpayer will get a tax refund if his or her withholding for the year was greater than the income tax he actually owed. This article or section should be merged with tax credit Tax credits are credits on tax payable given by the government for specific reasons. ... Individual taxpayers in the United States are faced with a choice when preparing their tax returns. ... A tax exemption is an exemption to the tax law of a state or nation in which part of the taxes that would normally be collected from an individual or an organization are instead forgone. ... In the United States, taxpayers will get a tax refund, a refund on their U.S. income tax, if the tax they owe is less than the sum of: The total amount of refundable tax credits that they claim. ...
These taxes are called direct taxes because they are a recurring tax paid directly by the taxpayer to the government based on the value of the item that is the basis for the tax.
Even before the UnitedStates entered the Second World War, increasing defense spending and the need for monies to support the opponents of Axis aggression led to the passage in 1940 of two tax laws that increased individual and corporate taxes, which were followed by another tax hike in 1941.
Tax cuts following the war reduced the Federal tax burden as a share of GDP from its wartime high of 20.9 percent in 1944 to 14.4 percent in 1950.
The principle of a withholdingtax is that it is withheld (retained) by the payer and given directly to the taxation authorities.
The country where the dividend is paid may withholdtax and simply retain it, or it may permit payment gross but inform the tax authorities in the country of residence (though not in the case of tax havens).
In the United Kingdom, this is not explicit: tax is withheld at source unless the saver submits an R85 form to claim exemption.
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