Withholding Agent

Withholding Agent: A withholding agent is an individual or entity responsible for deducting and remitting tax from payments made to non-residents or employees. This includes salaries, wages, dividends, interest, and other forms of income subject to tax withholding.

The withholding agent ensures compliance with tax laws by calculating the appropriate amount of tax to withhold based on applicable rates and regulations. For example, an employer acts as a withholding agent by withholding federal income tax from an employee’s paycheck and remitting it to the Internal Revenue Service (IRS). Failure to properly act as a withholding agent can result in penalties for both the agent and the recipient of the payment.