The U.S. government uses tax withholding to uphold its pay-as-you-go (or pay-as-you-earn) income tax structure. This entails taxing people when they make money rather than attempting to collect income tax after salaries are earned.
Every time an employee is paid, their company deducts a specific amount from their check as income tax. The Internal Revenue Service then receives this payment from the employer (IRS). The amount deducted is shown on the paystub of the employee, and Form W-2: Wage and Tax Statement contains the annual total of deductions. Every year, employers provide W-2 forms to employees so they can submit their yearly income tax returns.
The Internal Revenue Service (IRS) uses both U.S. resident and non-resident withholding taxes to make sure that the appropriate amount of tax is withheld in certain circumstances.
Every employer in the US is required to withhold the first and most frequently mentioned withholding tax, which is on the personal income of US citizens. The withholding tax is now collected by employers, who then pay it directly to the government. Employees are then responsible for paying the balance when they file their annual tax returns in April.
A tax refund occurs when too much tax is withheld. However, if insufficient tax was withheld, the person would be in debt to the IRS.
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