Wage withholding is a payroll deduction that funds income taxes, Social Security, and unemployment insurance. It can be either voluntary or involuntary. Voluntary deductions are made by employees who agree to pay taxes before receiving their paycheck. Automatic deductions include state and federal income tax and state unemployment insurance deductions. These withholdings come out of the paycheck before the employee gets it, and the employer must remit the withheld amount directly to the IRS or other taxing agency.