Tax withholding in the United States

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Three key types of tax deductions are enforced at various levels in the United States:

• Withholding tax,
• Withholding taxes on payments to strangers, and
• Cutbacks on dividends and interest.

The amount of withholding tax is based on the amount of taxable payments. Tax deductions on wages include income tax, social security and medicare, and some taxes in some states. Certain minimum amount of wage income is not subject to income tax withholding. Wage pay is based on paid wages and employee declarations on the Federal and State Forms of W-4. The termination of Social Security taxes ends when payments from one company exceed the maximum wage base throughout the year.

The amounts held by the payer (employer or other person) must be immediately sent to the relevant government. Amounts to be withheld and withholding taxes reported to payees and government every year.

Video Tax withholding in the United States

Histori

During World War II, Congress introduced payroll deductions and quarterly tax payments by vote from the Current Tax Payments Act of 1943:

In History of the U.S. Tax System, the US Treasury explained the tax cuts.

This greatly reduces tax collection for taxpayers and the Internal Revenue Bureau. However, it also greatly reduces taxpayer awareness about the amount of tax collected, ie reducing tax transparency, which makes it easier to raise taxes in the future.

Maps Tax withholding in the United States

Wage deduction

In the US, detaining by employers taxes on wages is required by federal, largely state, and some local governments. Detained taxes include federal income tax, Social Security and Medicare Taxes, state income taxes, and certain other levies by some states.

Withholding tax based on wages is based on the amount of wages minus the amount of deductible allowances (often called exceptions). The amount of withholding tax is determined by the employer. Tax rates and cutting tables apply separately at the federal, state, and local levels. The amount to be deducted is based on both the amount of wages paid on each payment check and the period covered by the salary. Federal and some number of state cuts are at the graduation rate, so higher wages have a higher percentage of deductions. Withholding tax on income is treated by the employee as payment of taxes due for the year, which is determined on the annual tax return filed after the end of the year (Form 1040 federal, and the appropriate state form). Withholding taxes that exceed the specified amount of taxes will be refunded.

Under the Internal Revenue Code 3402 (f) (2) and associated US Treasury regulations, an employee must provide the company with a Federal Form W-4, "Certificate of Suspended Employee Detention." Most countries will accept the W4 form, but some have similar forms, especially if the employee filed different information at the state level rather than in the federal (employees may pay different amounts in holding or claiming different exceptions at the state level rather than federal level). The form provides the employer with a Social Security number. Also, on the form, the employee declares the amount of deduction of benefits they believe to be entitled. Benefits are generally based on the number of personal exclusions plus the amount for the withholding, loss or credit itemized. Employers are entitled to rely on employee statements on Form W-4 unless they know they are wrong.

Social Security Tax is deducted from wages at a flat rate of 6.2% (4.2% for 2011 and 2012). Wages paid above the fixed amount annually by one of the employees are not subject to Social Security tax. For 2015, this maximum wage is $ 118,500. Medicare tax of 1.45% is deducted from wages, without a maximum. Employers are required to pay the same amount of additional Medicare taxes, and the Social Security tax rate is 6.2%.

Some countries also impose additional taxes withheld from wages.

Wages are defined somewhat differently for different tax deduction purposes. Thus, the federal income tax wage may differ from the Social Security wage which may differ from the wages of the state.

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Cutting payments to strangers

Companies and individuals who make certain types of payments to foreigners must withhold Federal income tax on such payments. Foreigners include non-resident aliens, foreign companies, and foreign partnerships. Payments subject to deductions include compensation for services, interest, dividends, rent, royalties, annuities, and certain other payments. The tax is held at 30% of the gross amount of the payment. This rate of deductions may be deducted based on the tax agreement. This withholding tax is usually regarded as the final determination and payment of tax, which requires no further action or tax refund by a foreigner.

In addition, partnerships are required to make tax payments (referred to as withholding) on ​​behalf of foreign partners. This payment is required regardless of whether the revenue is actually shared with the partner. Payments are also required every three months or at the end of the year for business income or other non-distributed revenue. Partnership payments for business earnings are treated like taxpayer estimates, and foreigners must still file a US tax return reporting business income.

US real estate buyers must withhold 10% of the sale price from payments to foreign sellers. This amount may be deducted into the anticipated Federal income tax due, at the time of the advance application on Form 8288-B to the Internal Revenue Service. This payment is treated like an estimated tax payment, and a foreigner must still file a US tax refund reporting any gain or loss.

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Backing up hold

Mandatory pay, dividends, and certain other goods must withhold a 28% Federal income tax on such payments in limited circumstances. Generally, this only applies if the recipient is a US person, and also

• the person failed to provide the tax identification number on Form W-9 to the payer, or
• The Internal Revenue Service (IRS) has notified the payer that the payer must withhold.

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Payment of withheld tax

Withholding taxes must be paid to the appropriate government as soon as possible. Rules vary by jurisdiction and based on the total balance of payments due. Federal federal labor tax payments are either monthly or semi-weekly. Federal tax payments must be made either with deposits to a national bank or by electronic funds transfer. If the Federal tax payment balance exceeds $ 100,000, it must be paid within 1 banking day. From 1 January 2011, payments can be made only by electronic funds transfer. The rules of the country vary widely, and generally allow a little more time to keep the withholding tax.

src: static.irs.com

Reporting tax withheld

Employers must file quarterly aggregate tax withholding statements, Form 941, with the Internal Revenue Service. This report covers total revenue, Social Security, and Medicare for this quarter. Partnerships that make payments to partners must file Form 8813 every three months. Country requirements vary.

All persons withholding taxes must file Federal and state annual statements of withheld taxes and amounts to be withheld. Copies must be provided to employees or other payees. The relevant forms are as follows:

• The W-2 series form for wages (Federal report is also used for states), due to employees on January 31. Summary submitted on Form W-3.
• Form 1042-S for payment to foreigners, due to the payee by March 15th. Summary submitted on Form 1042.
• Form 8805 for partnership payments, because at the same time as the partnership returns. Summary filed on Form 8804.
• Form 1099 series for backup backup

Federal filings must be made electronically if more than 250 forms are required. Countries generally do not require separate submissions in addition to partnerships, rather than relying on information provided by the IRS.

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Penalty

Failure to pay withstanding Federal tax may result in a penalty of 100% of the amount not paid. This can be judged against whoever is responsible for the funds from which the withholding tax payment can be made.

Paying for a Federal tax cut late may result in a penalty of up to 10%, plus interest, on the overdue balance payable. State punishment varies. Failure to complete tax collection forms in a timely manner can result in penalties of up to $ 50 per form not submitted.

Deliberate failure may result in criminal penalties.

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See also

• Income tax in the United States
• IRS penalty
• Medicare (United States)
• Social Security (United States)
• United States v. Gotcher

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References

Source of the article : Wikipedia