Q:

What are federal withholding tax rates?

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Quick Answer

Federal withholding tax rates are the percentages an employer uses to withhold federal income tax from an employee's payment, according to the Internal Revenue Service. The federal income tax is a pay-as-you-go tax, and employers are mandated to withhold a certain percentages from employees and pay it to the IRS.

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Full Answer

The amount of tax withheld by the employer depends on two things: the amount the employee makes and the information the employee has submitted in his Form W-4, explains the IRS. The W-4 includes three pieces of information the employer uses to calculate withholding rates. The employee states whether he is single or married, how many allowances he claims and whether he wants any additional amounts withheld.

A single taxpayer has a higher withholding rate than a married taxpayer, and the more allowances an employee claims, the smaller the amount withheld.

An employee may also want extra funds withheld and paid to the IRS so he does not owe taxes and fees on other income he may be making outside the job in which taxes are not withheld by the payer. Such nonwage income may come from rents, royalties, dividends, self-employment or other sources, and taxes on these amounts have to be estimated and paid on a quarterly basis, reports the IRS. This quarterly payment is commonly sent by the taxpayer himself on the quarterly due date.

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