Income Tax Withholding

Income tax withholdings are tax payments you make throughout the year. By not withholding enough money to cover your year-end tax bill, you could face a huge tax burden and even be assessed tax penalties.

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Income tax withholdings: what are they?

Federal income tax is paid in installments all year long.

The IRS assesses penalties if at the end of the year you still owe more than 10% of your taxes.

Income tax withholdings: paying them

Form W-4, the "Employee's Withholding Allowances" estimates your tax for the entire year and then withholds a portion of the amount from your paycheck each pay period.

If you're self employed, you need to fill out Form 1040-ES "Estimated Tax". You can download it here: federal tax forms. Once your estimated tax is determined, make periodic equal contributions on June 15, September 15, January 15, and April 15. Send payments in with your IRS provided voucher or your 1040-ES form.

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Income tax withholdings: underpayments

Under-payment results in a penalties. If you think you've underpaid, fill out Form 2210 "Under-payment of Estimated Tax".

Related IRS publications

Get more information about tax withholding and estimated tax from Publication 505.

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