Income tax withholding vs. FICA withholding
| Type | What it covers |
|---|---|
| Federal income tax | Based on your W-4 elections and pay frequency |
| Social Security | 6.2%, up to the $184,500 wage base for 2026 |
| Medicare | 1.45%, plus 0.9% Additional Medicare Tax above income thresholds |
| Supplemental wages (bonuses) | Flat 22% federal withholding rate when employers use the IRS flat-rate method |
| Backup withholding | 24%, for certain reportable payments |
Source: Internal Revenue Service (1, 2)
Your employer matches your Social Security and Medicare contributions dollar for dollar. If you’re self-employed, there’s no employer match. Instead, you pay both halves yourself, for a combined 15.3% self-employment tax rate.
How employers calculate your withholding
Employers combine your W-4 information with your pay frequency and IRS Publication 15-T withholding tables to figure the amount taken from each paycheck. Payroll software automatically applies the IRS withholding tables, including special rules for employees who still have an older pre-2020 Form W-4 on file.
What happens if you’re over- or under-withheld
| Scenario | Result at filing | How to fix |
|---|---|---|
| Under-withheld | You owe taxes, possibly with a penalty | Update your W-4 or make estimated payments |
| Over-withheld | Larger refund, but smaller paychecks all year | Reduce withholding via a new W-4 |
The IRS Tax Withholding Estimator can help you estimate the right withholding amount to avoid a large bill or refund at filing.
When to update your W-4 withholding
You may want to file a new Form W-4 if:
- You get a new job
- You get married or divorced
- You have a new dependent
- You have new side income
- A refund or bill surprised you
You can use the IRS Tax Withholding Estimator to determine how much you should withhold based on your circumstances.
Withholding for Spousal Income, Multiple Sources of Income
Your employer will assume the income from the current job is your only income for the year. If you work multiple jobs, have other sources of income, or have a spouse who also makes income, you need to estimate the income you made/will make from these other sources on your W-4; otherwise, your employer may not withhold enough.
Withholding tax for self-employed workers and side gigs
Self-employed workers have no employer to withhold taxes, so they generally make quarterly estimated tax payments to cover both income tax and self-employment tax. If you have a side gig on top of a W-2 job, you can often cover the extra income by increasing withholding on your paycheck—using the “extra withholding” line on your W-4—instead of filing separate estimated payments.
