Definition of withholding

portion of an employee's wages retained by the employer for the purpose of paying for various taxes, insurance plans, pension plans, union dues, and other deductions.

Securities: violation of the rules of fair practice of the National Association of Securities Dealers whereby a participant in a public offering fails to make a bona fide public offering at the public offering price-for example, by withholding shares for his or her own account or selling shares to a family member, an employee of the dealer firm, or another broker-dealer-in order to profit from the higher market price of a hot issue. see also immediate family ; investment history.

Taxes:

1. deduction from salary payments and other compensation to provide for an individual's tax liability. Federal income taxes and Social Security contributions are withheld from paychecks and are deposited in a Treasury tax and loan account with a bank. The yearly amount of withholding is reported on an income statement (form W-2), which must be submitted with the federal, state, and local tax returns. Liability not provided for by withholding must be paid in four estimated tax payments.
2. withholding by corporations and financial institutions of a flat 10% of interest and dividend payments due securities holders, as required under the Tax Equity and Fiscal Responsibility Act of 1982. The purpose was to levy a tax on people whose earnings escaped tracking by the Internal Revenue Service. The 10% withholding requirement was repealed in 1983. As a compromise, "backup withholding" was instituted, whereby, using Social Security numbers, payments can be reported to the IRS and matched against the actual income reported.
3. withholdings from pension and annuity distributions, sick pay, tips, and sizeable gambling winnings, as stipulated by law.
4. 30% withholding requirement on income from U.S. securities owned by foreigners-repealed by the tax reform act of 1984.