Federal Income Tax (FIT)

What is Federal Income Tax (FIT)?

Federal Income Tax is a progressive tax imposed by the US government on wages, salaries, investments, and other forms of income earned during the tax year. Tax rates increase as taxable income rises, with different brackets determining the percentage owed at each level.

Why Federal Income Tax (FIT) Matters

For payroll purposes, employers are responsible for withholding the estimated federal income tax from each employee’s pay and remitting it to the IRS. The amount withheld depends on the employee’s W-4 form elections, income level, and filing status. Employees reconcile their total tax liability when they file their annual return, which may result in a refund or additional amount owed.