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Finance Dictionary and Glossary of Investment Terms
withholding
Definition 1.
An amount of an employee's income that an employer sends directly to the federal, state, or local tax authority as partial payment of that individual's tax liability for the year. When a person starts a new job, he/she is required to fill out a W-4 form on which he/she can indicate his/her filing status and the number of allowances he/she is claiming.
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Definition 2.
Used in the context of securities, the illegal practice of a public offering participant keeping some shares in a private account or with a family member, employee, or dealer to profit from the higher market price of a hot issue.Used in the context of taxes, the withholding by an employer of a certain amount of an employee's income in order to cover the employee's tax liability. Also used to refer to the withholding by corporations and financial institutions of a flat 10% of interest and dividend payments due to security holders.
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Definition 3.
Any tax that is taken directly out of an individual's wages or other income before he or she receives the funds.
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