Withholding Tax

If you work for someone...fancily named, "an employer"...the money that actually ends up in your bank account is less than your wage/salary/what-have-you. The reason you’re literally short-changed is because of the withholding tax, which is where your employer withholds some of your hard-earned cash in order to pay it to the government for taxes. This is the government's way of treating you like a small child, unable to manage your own money or be disciplined enough to save for April 15.

While this may sound like a bummer, working for yourself feels like even more of a bummer. When you’re self-employed, there’s nobody withholding money for taxes every paycheck. Which means you have to withhold it yourself. When tax season rolls around, you'd better have enough money in the bank to pay your taxes.

The withholding tax is actually the reason you can get money back on your tax return. That’s why it’s called a tax return—they’re giving you some of that withheld tax back, because you overpaid. Silver lining in taxes, if there ever was one.