Withholding is a term used to describe the amount withheld by an employer from an employee’s earnings. It’s the money that employers withhold from employees’ paychecks. This money is deposited for the government. (It will be credited against the employees’ tax liability when they file their returns.) Employers withhold money for federal income taxes, Social Security taxes, and state and local income taxes in some states and localities.

Some examples are: Federal Income Tax (withholding), Social Security, Medicare, State Taxes, Other Deductions (Health Insurance, Retirement Plan, etc.)

For savings bonds, the withholding rate is the percentage of interest that we send to the IRS on behalf of the account holder. In some situations, the IRS requires a certain withholding rate. In other situations, you may voluntarily ask that we withhold a certain amount for taxes. (This is similar to withholding taxes on your paycheck.) The issuer may withhold all or part of that amount and pay it to the IRS on your behalf.