What term is used for the deductions made from an employee's earnings for tax purposes?

The term "payroll deductions" refers to the amounts withheld from an employee's earnings by the employer for various purposes, including federal and state taxes, Social Security, Medicare, and any other voluntary deductions such as health insurance premiums or retirement contributions. These deductions are taken directly from an employee's gross income, which is the total earnings before any deductions are made.

Understanding payroll deductions is crucial for both employees and employers because they affect the amount of money that employees take home (net earnings) after all taxes and other deductions have been accounted for. This term encompasses the mandatory and voluntary deductions that contribute to an employee's overall tax responsibilities.

In contrast, bonus payments refer to additional compensation an employee may receive, gross income represents total earnings before deductions, and net earnings refer to the amount an employee takes home after all deductions have been made. Each of these terms plays a distinct role in the context of paycheck calculations, but only payroll deductions specifically address the retainment from an employee's earnings for tax purposes.