What is withholding tax?

The portion of your pay that your employer sends straight to a tax authority instead of paying it to you. The US tax system is pay-as-you-go: rather than presenting one bill at the end of the year, the government collects through the year as you earn, and withholding is the mechanism. On a $65,000 salary in a state with income tax, roughly $11,664 a year is withheld across all the lines, leaving $53,336. It is a prepayment, not a final figure — your return settles the difference either way.

"Withholding tax" describes the mechanism — money held back at source. "Payroll tax" usually means one specific pair, Social Security and Medicare, together called FICA and totalling 7.65% from you with the same again matched by your employer. Federal income tax is withheld too but is not usually called a payroll tax, because it funds general government rather than the two programmes. In everyday use the terms blur, which is why a "payroll tax calculator" and a "paycheck calculator" return the same thing.

Payroll tax is the tax charged on wages to fund Social Security and Medicare — 6.2% and 1.45% withheld from you, together 7.65%, with your employer matching the same amount so 15.3% of your wages goes into the two programmes. Collectively they are called FICA, after the Federal Insurance Contributions Act. People often use "payroll tax" loosely to mean everything withheld from a paycheck, including federal and state income tax, which is why a payroll tax calculator and a paycheck calculator return the same figures. Strictly, income tax funds general government while payroll tax funds two named programmes.

The federal income tax line, usually printed as FIT, FED, or FWT. Your employer works it out from the Form W-4 you filed and the IRS Publication 15-T tables, using your wages for the period, your filing status and any dependents or adjustments you entered. Unlike Social Security and Medicare, it is graduated and personal — two people on identical pay can have very different federal withholding because their W-4s differ. On $65,000 it comes to about $5,620 a year for a single filer.

Four kinds, in this order on most stubs. Federal income tax, set by your W-4. Social Security at 6.2% on wages up to $184,500 in 2026. Medicare at 1.45% with no cap. And state income tax, which nine states do not levy at all. Some states add a mandatory disability or paid-leave contribution, and around a dozen cities levy a local wage tax on top.

You do, within limits. Your employer applies a formula set by the IRS, but the inputs to that formula come from the Form W-4 you filed — filing status, dependents, other income, deductions and any extra amount you ask for. That is why withholding is adjustable and FICA is not: no form changes the 7.65%, but the federal income tax line moves whenever you refile a W-4. If you consistently get a large refund or a large bill, the W-4 is the thing to change.

No, and this is the distinction that causes the most confusion. Withholding is an estimate collected in advance. Your actual liability is worked out on your return, against your whole year's income, deductions and credits. If withholding exceeded the liability you get a refund; if it fell short you owe the difference, and potentially an underpayment penalty. A large refund is not a bonus — it means you lent the government money interest-free all year.

If you are an employee, yes: employers are required by law to withhold employment taxes, and it is not optional for either side. The one narrow exception is claiming exempt on a W-4, which stops federal income tax withholding only, and requires that you had no tax liability last year and expect none this year. Social Security and Medicare keep coming out regardless. Self-employed people have nothing withheld and pay quarterly estimated tax instead.

Several things move it on their own. New tax tables take effect each January, so the first check of the year differs from December's. A raise, a bonus or an overtime week raises the pay the formula is applied to. Crossing the $184,500 Social Security wage base mid-year makes that line vanish and the check jump. And a benefit election change alters the wages the tax is calculated on. If none of those fit, compare two stubs line by line.