1

As per the rules, every employer withholds money from your paycheck for your income tax. These taxes are only paid once a year.

What do employers do with the money they've withheld from you in the meantime? Where do they deposit it?

5
  • This might be answered better on money.stackexchange.com – adeady Apr 25 '16 at 14:17
  • This is probably a better question for Personal Finance & Money – IDrinkandIKnowThings Apr 25 '16 at 14:52
  • 3
    @teja: Why do you believes taxes are "only paid once a year"? You only need to file taxes once a year, but the tax withheld by the employer must be passed on to the IRS (almost) immediately. – sleske Apr 25 '16 at 15:05
  • 2
    Answer from Personal Finance SE – Spehro Pefhany Apr 25 '16 at 19:53
  • I'm voting to close this question as off-topic because it has nothing to do with navigating the workplace. – Masked Man Apr 26 '16 at 14:02
11

In the US, amounts withheld from income for taxes must be passed to the IRS on either a monthly or semi-weekly basis.

6

While I suppose this may vary from country to country, everywhere I know of that employers withhold tax, they send it regularly to the government. For example here in Canada, I pay my staff twice a month. Once a month I must send these "withholdings" - tax, employment insurance, government pension - to the government. (I can "kite" a little by paying someone their net pay on the 15th and not having to send the withholding to the government for a few more weeks, but that's all.)

I have other "withholdings" that are not tax, such as paying premiums on private health insurance, and I use these to pay those bills each month. I'm sure it's the same for your employer. Also, here, if I withhold $1000 from you for the government and don't send it to them, that doesn't matter to you. Once I've told them (on your T4 tax slip that summarizes your income) that I withheld it for you, you get credit for it even if I fail to ever send it in.

As a result, you don't really need o know what your employer does with it.

7
  • There are some limited situations where the taxation authorities can come after the employee. Usually it's where the employee has some control over what happens with the amounts that should be withheld. – Spehro Pefhany Apr 25 '16 at 14:30
  • Perhaps in the US. I have experience with getting VERY behind on withholdings as an employer and such a thing was never mentioned (and we employ our shareholders.) – Kate Gregory Apr 25 '16 at 14:31
  • "In addition, if the employer refuses to withhold employment taxes from these wages and the IRS is unable to collect the employment taxes from the employer, the employee still has the responsibility to pay income tax and is ultimately responsible for his/her share of the FICA tax". It happens in Canada too. They will get their 454g of flesh somewhow. – Spehro Pefhany Apr 25 '16 at 14:35
  • Oh I withheld (reduce their paycheque) I just didn't send the withheld amount to the government, because I never had it. There was no impact on my staff of that, I was just running up a debt to the feds. – Kate Gregory Apr 25 '16 at 14:49
  • 1
    Should the debt become unrecoverable, sure. But up until that point, it's no problem, and even after that point it will never be a problem for someone who literally doesn't even know what happens to the money after it's withheld. Since we did eventually pay that debt back, all was fine in our case. – Kate Gregory Apr 25 '16 at 14:57
3

In the U.S. -- they don't "deposit" it. They make payments to the IRS, either through their bank (all business banks have this facility) or by having the IRS debit their accounts. Some do this after each payroll period, and it's a very large amount of money if the company's big. A similar approach applies for the state taxes. Both IRS and the states really avoid the occurrence of employers making a lump-sum payment at the end of the year, because the employer's less likely to have the money after sitting on it for so long.

Not the answer you're looking for? Browse other questions tagged .