Deductions Definition

Term Definition
The law requires employers to deduct taxes from employee wages. Employers can also deduct wages voluntarily for health insurance plans, retirement plans, etc.

Extended Definition
Any business with employees is required by law to withhold taxes from employee paychecks. Payroll withholdings must be paid towards federal, state, and local taxes. Federal tax withholding rules are administered by the IRS, while state revenue agencies are responsible for overseeing state tax withholding. Employers may also make voluntary payroll deductions in agreement with employees. Employers can deduct wages either pre-tax or post-tax. The deductions are reported and filed using different IRS forms. For more information, please consult theIRS.

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