Basic Tax Math – Part 4 – Why Do They Tax $X Out of My Check?

The short answer is ………. you told them too!
Now don’t get the bright idea that you can tell them to withhold nothing (called declaring exempt) and wait till the end of the year and pay it at once either. That amount they take out – the “withholding” that we discussed in the earlier posts – is an estimated tax payment based on your income. Remember, it is not the TAX, it is your ESTIMATED payment.
You cannot change withholding for SS and Medicare as that is a flat rate and technically not an income tax – it is an employment tax. However, the Federal and state withholding is yours to determine. Remember that W4 for you had to fill out declaring your marital status and the number of exemptions you are claiming? That document determines your Federal withholding AND most of the states use it.
Some states like CA and AZ have their own form. AZ doesn’t go by marriage and exemptions –  it wants you to tell them the percentage of your gross to withhold. CA follows the Federal marriage and exemption format but with its own twist and there are a few others that require their own form.
In the next post we will discuss how to fill the form out.
Tax Headache