Why Do Employers Withhold Income Taxes?
Most states have a law that requires employers to withhold income taxes from their employees. This withholding is commonly referred to as the withholding tax and it comes out of the weekly, biweekly, or monthly wages that an employee earns.
Since employers are required by law to withhold income taxes from their employees, there are a large number of individuals who are losing valuable money each week. Federal and state governments require that employers withhold income taxes for a number of reasons; however, many taxpayers do not understand why.
When tax season arrives individuals are required to file a federal and state tax return. The tax return is used to determine if a taxpayer paid too much money in government taxes or if they paid too little. Taxpayers who were not fully taxed based on the guidelines of each state or the federal government are required to pay additional taxes. On the other hand there are a large number of taxpayers who may receive a tax refund. This tax refund basically means that a taxpayer paid more money to the government than was required of them. Many taxpayers are left wondering why they are charged a weekly, biweekly, or monthly income tax fee on each paycheck if they are just going to receive a tax refund later on.
Some sates allow employers the option of deducting income taxes from an employee’s paycheck. The final decision of how much tax is paid is often left up to the employee. Individuals who are interested in receiving a large weekly, biweekly, or monthly paycheck can ask their employer to stop withholding income taxes from their check. However, it is important that taxpayers understand that just because the tax is no longer being charged does not mean that it is no longer owed. Taxpayers who opt for a larger paycheck without federal or state income tax withholdings are often required to pay a large amount of money during the tax season.
By law an employee is an individual who performs a service for a business. These employees are subject to federal and state income tax withholdings. Taxpayers that live in a state where it is legal to stop the collection of federal or state withholdings should think long-term. Although it may have been nice to receive the extra money during the year, there are taxes due on that money and it still needs to be paid to the state or federal government. Also, taxes such as Medicare and social security are required by the federal government whether they are paid throughout the year or once at the end. These taxes are used to fund government-run programs that many taxpayers will likely end up using in their future.