Payroll 101: post-tax deductions

Tags: General, Payroll, Tax

Overview

A post-tax deduction (or payroll deduction) is an amount subtracted from an employee's gross pay after taxes have been calculated and withheld. Post-tax deductions are a way for money to flow from the employee to the employer that affects net pay and does not affect taxes. These deductions can be mandatory or voluntary, and they fall into several categories.

⚠️ Post-tax deductions can only be set up at the employee level; there are no company-level post-tax deduction setup options.

Post-tax deductions

Post-tax deductions may be related to specific circumstances or agreements:

• Wage Garnishments: Court-ordered deductions from an employee’s wages to satisfy legal obligations such as child support, alimony, or outstanding loans.
• Union Dues: Deductions for union membership and associated benefits. These dues are typically used to support union activities, such as collective bargaining and member representation.
• Repayment of Advances or Loans: Deductions for repaying salary advances or employee loans provided by the employer.
• Miscellaneous Deductions: Other deductions that do not fit into the categories above (i.e. Uniforms and Equipment Costs, Parking Fees, Union Initiation Fees)
• Wage Attachments: Similar to garnishments but may include deductions for government debts like unpaid taxes or student loans.
• Charitable Contributions: Voluntary deductions designated by the employee for donations to charities or non-profit organizations

Impact on paychecks

These post-tax deductions are distinct from benefits and tax withholdings and often relate to legal obligations, personal choices, or employer-specific arrangements. Since they are deducted after taxes have been calculated, they do not reduce taxable income but do affect the final take-home pay.

💡 Understanding the types of payroll post-tax deductions is essential for both employers and employees to ensure accurate payroll processing and compliance with applicable laws.