Withholding tax refers to the portion of an employee’s earnings that an employer is legally obligated to retain and submit to tax authorities. This amount serves as a prepayment toward the employee’s total income tax liability for the year, covering federal income tax and usually state income tax, along with required contributions to Social Security and Medicare.
A Deeper Look at Withholding Taxes
While it’s the employer’s responsibility to calculate, withhold, and send payroll taxes to the appropriate agencies, the financial burden is primarily borne by employees, taken directly from their wages. These withholdings are regularly forwarded to the IRS and relevant state or local tax departments.
For employers operating across multiple states or managing remote teams, tax compliance can become more complex. Navigating varying tax laws and determining the correct withholding for employees who live or work in different jurisdictions can be challenging.
Beyond helps streamline multi-state payroll processing and ensures that all necessary withholdings and tax filings are handled accurately and on time.