All You Need to Learn About Payroll Deductions and Paychecks

Learn About Payroll Deductions


   By John Wolf

Deductions Can Be Voluntary or Involuntary

Do you wonder about the pay-stubs figures? Or how the payroll department calculate your paycheck? Maybe you are a small business and have to make your paycheck and the pay-stub for your small group of employees. Here we will review the deductions that you must withhold and those you may want to make voluntarily.

IRS Employers guide

Payroll deduction is divided into obligatory, those that are required by the law and voluntary like Grace Ferguson from Chron describes at his article Mandatory vs. Voluntary Payroll Deductions Voluntary Deductions

Voluntary deductions are those that you offer and your employees accept. Such deductions may include health, accident, disability and life insurance; retirement plans; flexible spending accounts such as dependent care and health care expenses; parking and transit costs; union dues; and deductions for paycheck advances and other company-sponsored benefits. Although you are not required by law to offer them, the federal and state government may have policies that affect these deductions. For instance, you must typically establish a written policy and obtain the employee’s written authorization to deduct for health insurance and retirement plan benefits. Also, for paycheck advances, the state may have policies on whether they should be withheld from final wages.

Your salary is made of the pay for your work and the taxes and Social security and health insurance payments. You may ask your HR department for an explanation of all deductions and at the same time ask them to deduct what you what as voluntary deductions.

 Mandatory Payroll Deductions 


Employers are required by the law to withhold the “payroll taxes from the employee’s gross pay before they can make the paycheck, you will be able to see it on the paystub issued together with the paycheck. The employer will send the withheld money to the Federal a States Treasury and the Social security according to the government regulations.

Social Security Wage Base for 2019 Announced

Employers who do not follow the law on mandatory deduction can suffer the consequences like lawsuits, fines or closing their business. The employees should understand what is paid and make sure they have the benefits related to those deductions.

Here are the mandatory payroll deductions for taxes:

  • Federal income tax
  • State taxes

  • Local (city, county) This withholding can include school district taxes, community college taxes, state disability and more, it depends on each local habits.

    FICA (Federal Insurance Contribution Act) taxes include:

  • Social security taxes and
  • Medicare tax withholding.

Federal tax rates are the same for all USA for all taxpayers.

Voluntary Payroll Deductions

Most employees and employers use some of the voluntary deduction possible; Deductions can include charitable contribution like (United Way) and Employer-provided health care, or vision insurance.

Also, it can include:

Some of the retirement deductions can be paid through the employee paycheck. This includes several common employer-sponsored 401(k) plans. It can be with or without the employer match, that is paid before tax (Per-Tax) and a Roth 401(k) after-tax paid.

Life insurance is one important voluntary withhold as the insurance is made by the employer and the insurance company all changes like adding family members that the employee want to add to the policy the employer will pay for it withholding the employee’s money from the gross payment.

The base for the calculation of withholding is the gross payment Gross Pay According to the Business Dictionary

The total of an employee’s regular remuneration including allowances, overtime pay, commissions, and bonuses, and any other amounts, before any deductions are made. If you are paid a monthly salary of $4000 before deduction of any kind this is your gross pay.

The Net pay will be what is left after the mandatory and voluntary withholding were deducted from the gross pay; this is what you will see on the paycheck. On your pay stub, you will see the gross pay of your $4000 and the withholdings details and the total net paycheck.

Tax laws can be very confusing to someone that is not a specialist; mistakes can cause painful penalties, Employers should have to consult with the state Department of Labor and a lawyer that is expert in labor laws when they are contracting new employees. It will save having issues with employees with the paying and deduction system. Your accounting firm will need to guide your payroll-deductions.

The voluntary deduction like paying insurance is very important to use, the deals you can have for your employees from the insurance companies will be better then what they can get as individuals. The insurance company will consider bigger groups of insured employees as an advantage and will be giving a better price for bigger or better coverage for health and life insurance policies.

As an individual, you have to know about what you are paying with the deductions. It is as you are buying something, you must check the policies insurance conditions. You should know what are the taxes you must pay and make sure your employer is nor wrong in the tax calculations. You should know where the money goes. team thanks you for a visit and reading this blog




Disclaimer: John Wolf and are making a total effort to offer accurate, good, ethical HR management, employer, and workplace advice.  We do not use the words of an attorney and the content on the site is not given as legal advice. The website has readers from all US states which all have different laws on these topics. The reader should look for legal advice before taking any action.  The information presented on this website is offered as a general guide only and never as legal advice.

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