I've been looking around for 30 minutes and I can't figure out how Federal Income Tax Witholding works. Some amount ($1,210, on a $160k salary paid biweekly) gets taken out of your paycheck, I understand that, but...then what? Is that the exact amount you end up owing? Do you end up having to pay more at the end of the year? Does part of it get returned?
God damn do I feel ignorant.
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- mr. wednesday
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You fill out a little worksheet on your W4 to determine approximately how much should be withheld. It's an approximation of how much you should owe for the year, so when you file your taxes, you'll either owe some, get a refund, or neither, depending on how close the approximation is.
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It's basically in escrow with the government until your taxes are done. If the amount you owe is equal to what was withheld, you're good. If the amount you owe is less than what was withheld, you get the difference back. If the amount you owe is more than what was withheld, pay or go to PMITA prison.
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