Federal Income Tax (FIT) Overview

Federal Income Tax (FIT) is a tax collected by the Internal Revenue Service (IRS) on the annual earnings of employees, businesses, and other entities. For employees, FIT is withheld from each paycheck and sent to the IRS on their behalf.

FIT applies to most types of income, including wages, salaries, bonuses, commissions, and tips. The amount withheld from each paycheck depends on information provided on the employee’s W-4 form, such as their filing status and withholding elections.

All W-2 employees, including both full-time and part-time workers, are subject to federal income tax withholding. Employers are responsible for deducting the appropriate amount of tax from employee paychecks and remitting it to the IRS.

The amount of FIT withheld is based on:

  • The employee’s total taxable income

  • Their filing status (single, married, head of household, etc.)

  • Withholding elections indicated on the employee’s W-4 form

  • The pay frequency (weekly, bi-weekly, semi-monthly, etc.)

Employers can refer to IRS Publication 505 for detailed guidance on federal income tax withholding and estimated taxes.

Employees seeking help with their W-4 selections should contact a tax advisor or CPA for personalized advice.

If an employee’s pay stub shows no federal income tax withheld, it typically means their wages did not meet the required threshold for withholding based on their W-4 elections and pay period.

This can happen when:

  • The employee claims a higher number of dependents or exemptions.

  • Their taxable income for that pay period is below the IRS withholding threshold.

  • They are in a pay group with less frequent or smaller pay runs.

Employers should verify that the employee’s W-4 form is up to date and that their payroll settings reflect the correct information.