FIT stands for Federal Income Tax, which is a tax that is withheld from an employees earnings each payroll. FIT tax is calculated based on an employees Form W-4, and employers withhold FIT using either a percentage method, bracket method, or alternative method. The percentage method is based on the graduated federal tax rates for individuals. FIT taxable wages include bonuses, salaries, tips, prizes and awards given to employees, and other taxable compensation and benefits. FIT is withheld from an employees paycheck based on the amount of their federal taxable wages. The amount an employee pays for FIT tax depends on their FIT taxable wages. FIT taxable wages are different than FICA taxable wages. FITW stands for "Federal Income Tax Withheld," and is the amount of money deducted from an employees paycheck for federal income taxes. FITW is reported on an employees Form W-2 in box 2. The authorities use FIT taxes to pay for federal expenses such as defense, transportation, education, and Medicare programs.