Withholding and Estimated Tax

Withholding and estimated tax terms explain how taxpayers prepay income tax during the year instead of waiting until the return is filed. This section is especially useful when a refund or balance due seems surprising.

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• Withholding
• Federal Income Tax Withholding
• Backup Withholding
• Estimated Tax
• Underpayment Penalty

What This Section Covers

• How employee withholding works through payroll.
• How nonwage payments can also involve withholding when reporting problems exist.
• When people outside standard wage withholding often need estimated tax payments.
• Why timing matters even before the final return is filed.

Related Sections

• Tax Forms and Filing
• Payroll Tax
• Penalties and Compliance

In this section

• Backup Withholding
  Backup withholding is tax withheld from certain nonwage payments when tax identification or certification issues make ordinary reporting unreliable.
• Estimated Tax
  Estimated tax is tax paid directly during the year in periodic installments when withholding alone is not expected to cover enough tax.
• Federal Income Tax Withholding
  Federal income tax withholding is the portion of tax withheld from paychecks or other payments and sent toward the taxpayer's federal income tax bill.
• Underpayment Penalty
  The underpayment penalty is a penalty that can apply when a taxpayer does not prepay enough tax during the year through withholding, estimated payments, or both.
• Withholding
  Withholding is the tax collected during the year from income payments, most commonly from wages through payroll.