Are companies required to withhold Federal/State taxes from paychecks?
Answers
The general answer to your question is "Yes", assuming for the moment we're talking about U.S.-based employees. [Non-U.S. citizens/residents providing services outside the U.S. will be treated differently.]
Of course, an employee filling out a Form W-4 can claim an exemption and/or reduced withholding due to dependents, etc. The payroll/social security/medicare taxes must be withheld.
Let me know if I have misunderstood your question.
Let's not forget "local" taxes as well; a concept not well understood outside of the States.
I think what you may be referring to is a
When you read the IRS regulations, it is clear they believe that companies that do not withhold taxes are liable for any unpaid taxes, plus penalties and interest for not withholding.
Bottom line, you will need a very deep set of pockets to fight the US Government on their requirement to withhold.