PAYROLL GLOSSARY
Withholding
Definition: Withholding is the tax your employer subtracts from each paycheck and remits to the IRS and other tax agencies.
For W-2 workers, withholding usually includes federal income tax withholding and payroll taxes such as Social Security and Medicare. Depending on where you work, it may also include state and local income tax. The IRS explains that employers are required to withhold employment taxes from employees' pay, and that the federal income tax portion depends on payroll-period tables, wages, and Form W-4 inputs.
Withholding is not the same as final tax liability. Payroll systems estimate the correct amount per check using current information, but your final refund or balance due is settled when you file a return. That is why a paycheck calculator should be described as a withholding estimator, not a tax-return calculator.
If you think too much or too little tax is coming out, the right tools are the IRS Tax Withholding Estimator and a new Form W-4. Those change the federal income tax layer, while FICA generally stays fixed.