Question

What are the common deductions taken from employee and employer payroll? Describe two of these deductions in detail. What voluntary deductions are/or have been taken from your paycheck?

Answer 1

Common or mandatory deductions taken from employee and employer payroll are-

1. Federal income tax withholding
2. Social security and medicare taxes known as FICA taxes
3. State income tax withholding
4. Local tax withholding such as sate or country taxes
5. Court ordered child support payments

Federal income tax - federal income tax is calculated as a percentage of your own income. So here this tax is deeucted by employer and ypu have to file a W-4 form which describes your investment details and declaration of your tax deduction by thw employer.

Social security and medicare taxes (FICA) it requires that one makes contributions to social security and medicare out of every paycheck. The social security tax rate for employees is 6.2% on income upto $117,000 and the medicare tax rate is fixed @1.45% at all income levels.

Voluntary deductions taken from my paycheck are -

1. Retirement or 401(k) plan contributions
2. Life insurance premiums
3. Short term disability plans
4. Interoffice purchases
5. Uniform or tool
6. Contribution to a pre tax health savings plan