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Federal Income Tax Withheld

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An employer is responsible for withholding and remitting to the IRS the amount of income tax that an employee needs to pay for his/her wages. This is one of the three employment taxes that an employer needs to pay (Other two being Federal Social Security Tax and Federal Unemployment Tax). Besides federal income tax, state and local income taxes may also need to be withheld from the wages of an employee.

Who Is An "Employer" For The Purposes Of Federal Income Tax Withholding?

An employer for the purposes of federal income tax withholding is someone who has:

  • The right to control and to direct the way his/her employees work, both as to the final results and as to the details of when, where, and how the work should be done; and
  • Has actual control of the payment of taxable wages for services performed by the employee.

Is A General Contractor An Employer Of The Workers Of A Subcontractor For Federal Income Tax Withholding Purposes?

Usually no. The general contractor will not be considered the employer of the subcontractor¿s workers if it does not actually control the payment of wages to them. Factors that determine whether the general contractor has control over payment include:

  • Responsibility for setting up payroll,
  • Determining which employee gets paid; and
  • Designating how much each employee gets paid.

Even if the general contractor is the person who supplies the funds to the subcontractor so that wages may be paid out, that is generally not enough to make general contractor into an employer for federal income tax withholding purposes.

Is A Trustee or An Executor Liable For Federal Income Tax Withholding For Employees Of A Trust or An Estate?

Generally no. If a trust or an estate runs a business and pays wages to its employees, the trustee or the executor who manages the trust or the estate is usually not responsible for any federal income tax withholding. It is the trust or the estate itself that is responsible for the tax withholding.

Are Nonprofit Organizations Exempt From Federal Income Tax Withholding?

No. Charitable and religious organizations, educational institutions, labor unions, and political organizations can all be employers subject to federal income tax withholding rules.

How Much Withholding Is Required?

The withholding amount varies by employees because it is supposed to be the amount of income tax a particular employee needs to pay from each of his/her wage payment. Several factors help determine the proper amount to withhold:

  • The employer's payroll period;
  • The method of withholding used;
  • The number of exemptions and allowances the employee claims on Form W-4; and
  • Additional withholding agreements that the employer may have with the employee.

Do I Need an Attorney to Help Me with My Tax Problems?

Tax laws are complex and ever-changing. Although there are various tax preparation softwares on the market that may help you with your tax problems, they cannot provide the same level of service that an experienced and knowledgeable tax attorney can. If you are unsure about what your payroll taxes or you need someone to represent you before the IRS, a tax attorney can help you.

Photo of page author Ken LaMance

, LegalMatch Law Library Managing Editor and Attorney at Law

Last Modified: 06-01-2015 01:28 PM PDT

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