What You Must Know About Withholding Employee Wages

Employers are legally allowed to withhold employee wages when state, local, or Federal law requires them to do so. The Federal law of the United States actually requires employers to withhold wages to satisfy payroll tax requirements administered through the Internal Revenue Service.

The payroll tax requirements are used to fund Federal income tax, Medicare tax, and Social Security tax. If an employer did not withhold employee wages, there would be no way to fund such programs or levies. In addition, if local law requires it, the employer is also required to withhold wages for state taxation.

As a result of the tax responsibilities, all employers withhold a certain percentage of an employee's wages. That being said, employers are not allowed to withhold wages for any circumstance that is not aligned with taxation or funding company programs or benefits. Withholding wages without reason is illegal under United States employment law.

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