Payroll Deductions in 2025: What Can and Cannot be Deducted from an Employee’s Wages

Credit(s)

IRS CPE Credits: 1 Tax hour

From Fringe Benefits to Final Paychecks: Handling Payroll Deductions with Confidence

Payroll processing involves much more than just calculating gross wages and ensuring employees are paid through approved methods. The real challenge lies in managing the deductions between gross and net income while staying compliant with federal and state laws. Are you confident your payroll practices follow all the rules, especially when it comes to deductions?

Many complex decisions employers have to make relate to what they should deduct, what is allowed to be deducted, and what cannot be deducted. Processing an employee's final paycheck just makes all of these decisions even trickier because added rules come into play in this area. Errors in handling deductions can result in significant penalties, whether from the IRS, state labor departments, or federal audits. Even an apparently minor error, such as a deduction for an overpayment or fringe benefit, can be costly, as the rules of different states often vary.

This webinar by payroll expert speaker Vicki M. Lambert, CPP, will explore the key questions payroll professionals must answer: Which taxes are mandatory? Which deductions are optional? How much control does the employee have over voluntary deductions? We’ll also address more complex scenarios, such as handling garnishments, processing deductions for payday loans, and complying with medical support orders.

Fringe benefits, such as health insurance and life insurance, are a regular part of payroll, but they can present challenges. How should payroll handle deductions for voluntary benefits versus those required by court orders? What happens if an employee owes back taxes, and payroll is directed to collect them? These and other questions will be clarified during this session.

Beyond benefits and taxes, employers also face questions about deductions for uniforms, cash shortages, breakage, or even meals and lodging provided as part of a work agreement. Can these costs be deducted under federal or state laws, and if so, how? The webinar will also address the tricky subject of wage overpayments—can employers deduct overpaid amounts from future paychecks, and do employees need to consent in writing? We’ll explain how to navigate conflicting federal and state laws in these situations.

For employers offering loans, wage advances, or vacation hours in advance, this webinar will clarify how such amounts can be recovered, particularly when an employee resigns or is terminated.

Join us for this information-packed webinar where Vicki will provide practical guidance on what deductions are permissible, what should be avoided, and how to confidently handle final paychecks. Mistakes in payroll deductions can lead to costly penalties and interest, but with the right knowledge, you can ensure compliance and protect your business.

Webinar Highlights

• Taxes—which are mandatory, which are a courtesy, and which ones the employee controls
• Child support—the limits but not beyond
• Tax levies—federal and state
• Creditor garnishments—how many can you honor and how often
• Voluntary wage assignments for “payday loans”—when are they required to be honored
• Handling fringe benefits such as health insurance or group term life
• Uniforms—when the employer pays for it and when the employee furnishes it
• Meals—when they become part of the employee’s wages
• Lodging—when it is part of the employee’s wages and when is it a perk
• Shortages—the employee came up short, so they must cover that right?
• Breakage—you broke it, so you have to pay for it, legal or not?
• Overpayments—the employee was overpaid so you can just take the money back, or can you?
• Advanced vacation pay—the employee knows the vacation hours were advanced so we can take them back when the employee quits can’t we?
• Loans to employees: what terms can be set while the employee is still active and what can be taken when the employee terminates
• Employee purchases—active employees and terminated employees
• Anti-wage theft laws and the states

Who Should Attend

• Payroll Executives/Managers/Administrators/Professionals/Practitioners/Entry Level Personnel
• Human Resources Executives/Managers/Administrators
• Accounting Personnel
• Business Owners/Executive Officers/Operations and Departmental Managers
• Lawmakers
• Attorneys/Legal Professionals
• Any individual or entity that must deal with the complexities and requirements of paying employees