Question

Describe what Mandatory and voluntary deductions are?

Give two examples of each

Answer 1

Mandatory deductions are those that are required by law, and on contrary the voluntary deductions are those that are not legally bounded. Mandatory deductions may include state unemployment tax, state disability insurance, state income tax, and city and county taxes, U.S. Social Security taxes, Civil Service retirement, Foreign Service retirement, Federal Employees Health Benefits and Federal Employees’ Group Basic Life Insurance (FEGLI).

-- Social Security tax is the tax levied on both employees as well as employers for funding the Social Security program. It is mandated by FICA (also known as Federal Insurance Contributions Act) or a self employment tax mandated by the SECA (also known as Self-Employed Contributions Act)

-- Medicare taxes are 1.45% which is the mandatory payroll tax deduction. There is no wage base limit for Medicare taxes unlike Social Security taxes.

Voluntary deductions may include health, disability, accident, and life insurance; flexible spending accounts such as health care and dependent care expenses; union dues; retirement plans; parking and transit costs; deductions for pay check advances and other firm-sponsored benefits.