Federal withholding refers to the amount of federal income tax that an employer deducts from an employee's paycheck and pays directly to the U.S. government on the employee's behalf. This withholding tax is credited against the total income taxes the employee owes for the year. Employers calculate the amount to withhold based on factors such as the employee’s income, filing status, and the information from the employee’s Form W-4, which includes marital status and any withholding allowances claimed. Withheld amounts include federal income tax as well as Social Security and Medicare taxes. This system, called a pay-as-you-go tax system, ensures that the government collects income tax throughout the year instead of all at once at tax filing time. If too much tax is withheld, the employee receives a refund when they file their tax return. If too little is withheld, the employee may owe additional tax to the IRS. Federal withholding is a key part of the US income tax system to help taxpayers meet their tax obligations gradually and avoid penalties.