Underwithholding

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Underwithholding

When a taxpayer has withheld too little tax from salary and will therefore owe tax when filing a return.

Underwithholding

A situation in which an employer withholds too little from an employee's paycheck; that is, the employer gives too little of the employee's wages or salary to the tax agency. This occurs when the employee makes enough to qualify for a higher tax bracket that the one used for the paycheck. Underwithholding results in the employee owing taxes at the end of the year.
References in periodicals archive ?
Schepanski and Shearer (1995) suggested that prospect theory can explain the phenomenon that individuals who underwithhold income taxes are more likely to engage in noncompliance than those who overwithhold.
Therefore, when employees underreport their tips, restaurants underwithhold the employee share due under IRC section 3101 and also underpay the employer share due under IRC section 3111.
If it determines that an employee underwithholds, it will ask the employer to increase that person's withholding; see Temp.