1 Bender's Payroll Tax Guide § 1.20

Summary

Income tax withholding is a “pay-as-you-go” method of collecting the estimated tax due from employees on wages paid to them. If withholding is required, the employer or whoever has control over the payment of wages to his employees has the burden of deducting the proper amount of withholding from the employee’s paycheck and then paying it to the government. When the employee files his individual return for the year, the amount collected is treated as a credit against his tax liability. Consequently, if the amount withheld exceeds the employee’s actual tax liability, the employee may claim the excess as a refund when he files his tax return.

The tax withholding provisions serve three basic purposes. First, they simplify the government’s burden of collecting taxes. Second, they assure the Treasury a steady and continuous inflow of tax revenue. Third, the withholding provisions protect the shortsighted taxpayer from disposing of all his income before he must satisfy his tax liability in a ...