A New Year, a new day, a new way...”Tax Reform”. Make sure you’re paid in at the end of 2018.
The federal income tax is a pay-as-you-go tax. There are two ways to pay as you go.
If you are an employee, your employer probably withholds income tax from your pay. Tax may also be withheld from certain other income — including pensions, bonuses, commissions, and gambling winnings. In each case, the amount withheld is paid to the IRS in your name.
If you do not pay your tax through withholding, or do not pay enough tax that way, you might have to pay estimated tax. People who are in business for themselves generally will have to pay their tax this way. You may have to pay estimated tax if you receive income such as dividends, interest, capital gains, rent, and royalties. Estimated tax is used to pay not only income tax, but self-employment tax and alternative minimum tax as well.
Salaries and Wages
Income tax is withheld from the pay of most employees. Your pay includes your regular pay, bonuses, commissions, and vacation allowances. It also includes reimbursements and other expense allowances paid under a non-accountable plan. See Supplemental Wages, later, for more information about reimbursements and allowances paid under a non-accountable plan.
• Publication 525, Taxable and Nontaxable Income
• Publication 531, Reporting Tip Income
Determining Amount of Tax Withheld Using Form W–4
The amount of income tax your employer withholds from your regular pay depends on two things.
• The amount you earn.
• The information you give your employer on Form W–4.
• Form W–4 includes three types of information that your employer will use to figure your withholding.
◦ Whether to withhold at the single rate or at the lower married rate.
◦ How many withholding allowances you claim. (Each allowance reduces the amount withheld.)
◦ Whether you want an additional amount withheld.
Note: You must specify a filing status and a number of withholding allowances on Form W–4. You cannot specify only a dollar amount of withholding.
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