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 ?

DECISION PROCESSES 174, 183-84 (1995) (describing the "withholding phenomenon" and that evidence "indicates that underwithholding has a greater effect on detracting from taxpayer compliance than overwithholding does on enhancing it"); see also Otto H.

TAXING THE GIG ECONOMY

"Americans should monitor their tax situation closely this year as the withholding tables are changing and could result in underwithholding of taxes.

Personal Financial Satisfaction Hits 24-Year High: AICPA

If clients are over- or underwithholding taxes, you can help them adjust these amounts.

Mining tax clients for new business opportunities

DISCLOSURE OF PRIOR YEARS' UNDERWITHHOLDING OR UNDERREPORTING.

More carrots, fewer sticks: why employers should be offered in payroll tax and executive compensation audits all the protections of Rev. Proc. 64-22

Overwithholding is perceived as a gain, and underwithholding is perceived as a loss.

Consumer economics and family economics: the charge, the response

H3: Taxpayers possibly subject to an underwithholding penalty are more likely to participate in an IRA.

The impact of the source of changes in marginal tax rates on participation in individual retirement accounts

Don't get hit by penalties for underwithholding. Project your income and expenses for the rest of the year.

Income Tax Planning Under the New Law

The excess payments primarily resulted from increases in withholding rates that were designed to eliminate widespread underwithholding. The new withholding tables effective for wages paid after January 15, 1972, resulted in overwithholding for wage earners unless they claimed one or more additional withholding allowances to offset the higher rates.(8) However, many wage earners did not claim the additional withholding allowances, so payments greatly exceeded liabilities.

Federal Personal Income Tax Liabilities and Payments, 1959-97

They also report a withholding phenomenon, namely that behavior differs, depending on a person's tax balance and respective underwithholding with additional payment or overwithholding with returns.

Reactance to taxation: employers' attitudes towards taxes

Table 1: 1994 Underwithholding of Federal Income Tax-- Unmarried Taxpayer Claiming Two Withholding Allowances Salary/Wages Underwithholding $50,000 $180 45,000 180 40,000 180 35,000 180 30,000 180 25,000 190 20,000 190 10,000 190 5,000 0 Table 2: 1994 Underwithholding of Federal Income Tax-- Married Couple; One Income, Three Withholding Allowances Salary/Wages Underwithholding $50,000 $370 45,000 370 40,000 370 35,000 370 30,000 370 25,000 370 20,000 370 15,000 370 10,000 0 5,000 0

Beware the withholding tax trap

92-85 does not specify under what circumstances the IRS would so apply that rationale, there may be some degree of exposure to an underwithholding challenge by the IRS in situations where taxpayers do not withhold on the full amount paid pursuant to such a transaction.

Consequences of international restructuring

But Democrats argue that new tables could actually enforce "underwithholding," resulting in Americans getting hit with "whopping" tax bills next year.

IRS Releases Tax Withholding Tables for 2018

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