Withholding: What Does It Mean?

Withholding is the amount of money your employer automatically deducts from each paycheck to cover your estimated federal and state tax liability for the year. It includes federal income tax, state income tax (where applicable), and payroll taxes for Social Security and Medicare. The amount withheld is based on the information you provide on your W-4 form, including your filing status and any additional withholding preferences. At the end of the year, if too much was withheld, you'll receive a refund; if too little was withheld, you'll owe the difference when you file your tax return.