What is Tax Withholding?
Definition Withholding is the money an employer or other payer takes out of your pay and sends to the IRS throughout the year as a prepayment of your tax. Employees control the amount by completing a Form W-4, which tells the employer how much to withhold. The goal is to have your total withholding roughly match your actual tax so you neither owe a large balance nor lend the government too much.
Adjusting withholding is a simple way to help clients avoid underpayment penalties or oversized refunds and keep their cash flow steady.