- Withholding reduces the amount of taxes paid by employees at the end of the year.
- Form W-4 requires information such as marital status and number of dependents so that employers can determine the amount of the withholding.
- If employers don’t withhold enough taxes, the employee could be in debt at the end of the year.
- Social Security and Medicare taxes are automatically withheld from the employee’s payroll.
- State retention rates vary by state.