Intuit Academy Tax Practice Exam 2025 – 400 Free Practice Questions to Pass the Exam

Withholding refers specifically to the process whereby an employer deducts a portion of an employee's earnings to cover federal, state, and sometimes local taxes before the employee receives their paycheck. This practice ensures that tax liabilities are met throughout the year, rather than all at once during tax season. By withholding taxes upfront, employees contribute towards their anticipated tax liability, which helps to prevent them from owing a significant amount at the end of the tax year.

The other options involve different aspects of the tax process. Refunds for excess taxes pertain to when a taxpayer has overpaid and is reimbursed by the government. Claiming deductions is part of filing a tax return and can reduce taxable income, but it does not relate to the act of withholding itself. Reporting income is a requirement for taxpayers but is separate from the concept of withholding since it deals with the income declaration rather than the preemptive deduction of taxes from earnings.