Basics of Payroll Deductions

Bankruptcy

A legal status of a person or other entity who cannot repay debts to creditors. In most jurisdictions, this is imposed by a court order, often initiated by the debtor.

Child Support

The law allows employers to garnish up to 50 percent to 65 percent of an employee's disposable income for payments. The amount of garnished wages varies, but it's mostly dependent on whether a spouse is supporting another spouse/child.

Garnishments

The process of deducting money from an employee's monetary compensation (including salary), usually as a result of a court order. This may continue until the entire debt is paid or arrangements are made to pay off the debt.

QSEHRA

The small-business HRA, created in December 2016 as part of the 21st Century Cures Act, allows small employers to set aside a fixed amount of money each month that employees can use to purchase individual health insurance or use on medical expenses, tax-free.

Tax Levy

When the IRS takes property or assets to cover an outstanding tax bill. It only happens in cases where you have failed to pay your tax debt and set up some agreement with the IRS.

Roth 403b

A plan that has some similarities to its traditional cousin. However, contributions to Roth accounts are made after taxes are paid.

Post-Tax Deductions

A post-tax deduction is money that is taken out of your employee's paycheck after all applicable taxes have been withheld.

Pre-tax Deductions

A pretax deduction is money that is taken out of your employee's gross pay before any taxes are withheld from their paycheck

401k

A qualified retirement plan that allows eligible employees of a company to save and invest for their own retirement on a tax deferred basis. Qualified plans can be divided two different ways: they can be either defined-contribution or defined - benefit (pension) plans.

403b

A retirement plan established for the benefit of employees of public schools and certain tax-exempt organizations. These plans accept payroll-deducted contributions for participant-directed investing and are intended to help the employees meet long-term objectives, such as generating retirement income.

Voluntary Deductions

Amounts paid for items such as 401(k) plans, insurance plans and sometimes union and uniform dues.

Payroll Deductions

Amounts withheld from an employee's payroll check, and these amounts are withheld by their employer. Among these deductions are insurance pension contributions, wage assignments, child support payments, taxes and union and uniform dues. Deductions that are mandated are government taxes; however, all other deducted amounts are voluntary.

FSA

An employer-sponsored benefits program that enables employees to deduct pre-tax dollars from their paychecks to pay for qualified medical expenses for themselves, their spouses, and their dependents. At the beginning of each plan year, employees can elect to have a certain portion of their pre-tax income contributed to this.

401k Roth

An employer-sponsored investment savings account that is funded with after-tax dollars up to the plan's contribution limit. The current contribution limit for the 2019 fiscal year is $19,000.

SIMPLE IRA

An employer-sponsored retirement plan offered within small businesses that have 100 or fewer employees.

HSA

Health savings account is a tax-advantaged medical savings account available to taxpayers in the United States who are enrolled in a high-deductible health plan. The funds contributed to an account are not subject to federal income tax at the time ofdeposit.

IRA

Individual Retirement Account - a tax-advantaged account. For 2019, the IRS limit on annual contributions to an IRA has been raised to $6,000, while the catch-up contribution limit for individuals aged 50 and over remains at $1,000.

Government - mandated Payroll Taxes

Medicare taxes, Social Security taxes (FICA) and federal/state income taxes