When are federal income tax and FICA taxes withheld from employee wages?

Federal income tax and FICA (Federal Insurance Contributions Act) taxes are withheld from employee wages when the wages are constructively received. Constructive receipt occurs when an employee has income made available to them without any substantial restrictions. This means that the employee has the ability to determine when they claim their earned income, which is a key factor in determining tax liability.

For example, if an employer pays wages through direct deposit, the employee technically receives the money at the moment it is deposited into their account, even if they do not physically access it immediately. Thus, payroll taxes are calculated and withheld based on the time the employee earns the wages and when they are constructively received, not solely when they are physically paid or reported by the employer.

This concept also underscores the importance of timing in tax withholding, as employers must ensure that they correctly withhold taxes at the point of constructive receipt to comply with federal tax laws.