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11.1 Voluntary Deductions: Pre-Tax vs. Post-Tax Ordering & Limits
Certified Payroll Professional CPP
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1 Chapter 1: Worker Classification, Section 530 & FLSA Hours
1.1 Worker Status & Common Law Classification Tests 1.2 Statutory Employees, Statutory Non-Employees & Section 530 Relief 1.3 FLSA Hours Worked, Travel Time, On-Call & Waiting Time 1.4 Public Sector Payroll, Government Contract Acts & Youth Employment
2 Chapter 2: FLSA Exemptions, Pay Frequency & Wage Payments
2.1 FLSA White-Collar Exemptions & Salary Basis Test 2.2 Pay Frequency Laws, Direct Deposit & NACHA Compliance 2.3 Payroll Cards, Paycheck Delivery & Constructive Receipt
3 Chapter 3: Employment Taxes & Core Benefit Concepts
3.1 Federal Employment Taxes: FICA, FUTA & Federal Income Tax 3.2 Section 125 Cafeteria Plans, FSA & HSA Mechanics 3.3 Third-Party Sick Pay, Disability & Professional Payroll Ethics 3.4 Benefit Law Compliance: ACA, COBRA, HIPAA, FMLA, ERISA & Workers' Compensation
4 Chapter 4: Withholding Forms, I-9 Verification & Information Returns
4.1 Form W-4 Withholding Certificates & Lock-In Letters 4.2 Form I-9 Employment Eligibility, E-Verify & Nonresident Aliens 4.3 Form W-2, W-3 & 1099 Year-End Information Reporting
5 Chapter 5: Payroll Tax Returns, Deposit Schedules & Multi-State Compliance
5.1 Federal Payroll Tax Returns: Forms 941, 944, 940 & Schedule B 5.2 Federal Tax Deposit (FTD) Schedules, Lookback Periods & EFTPS 5.3 Multi-State Taxation, Nexus & SUI Localization 5.4 New Hire Reporting, Common Paymaster, Pay Agents & Multiple Worksite Reporting
6 Chapter 6: Recordkeeping, Escheatment & Statutory Penalties
6.1 Payroll Recordkeeping Requirements & Retention Schedules 6.2 Escheatment Laws & Unclaimed Property Compliance 6.3 Information Return Penalties & IRC § 6672 Trust Fund Recovery Penalty
7 Chapter 7: Global Payroll, Nonresident Aliens & International Compliance
7.1 Resident vs. Nonresident Alien Status, Visas & Treaty Withholding 7.2 Expatriate Payroll: Tax Equalization, Hypothetical Tax, Shadow Payroll & Currency 7.3 Totalization Agreements, GDPR & Global Payroll Governance
8 Chapter 8: Regular Rate of Pay & FLSA Overtime Calculations
8.1 Regular Rate of Pay Determination & Statutory Exclusions 8.2 Weighted-Average Overtime for Multiple Pay Rates 8.3 Special FLSA Overtime Methods: Fluctuating Workweek & 8/80 Rule 8.4 Tipped Employees: Tip Credit, Tip Pooling, Overtime & Form 8027
9 Chapter 9: Supplemental Wages, Fringe Benefits & Vehicle Valuation
9.1 Supplemental Wage Withholding: Flat vs. Aggregate Methods 9.2 Employer-Provided Vehicles & Fringe Benefit Valuation 9.3 Group-Term Life Insurance & Section 79 Imputed Income
10 Chapter 10: Involuntary Deductions & Garnishment Administration
10.1 Child Support Withholding & CCPA Maximum Limits 10.2 Federal Tax Levies & Form 668-W Calculations 10.3 Creditor Garnishments, Student Loans & Order Priority
11 Chapter 11: Pre/Post-Tax Deductions, Gross-Up & Special Payments
11.1 Voluntary Deductions: Pre-Tax vs. Post-Tax Ordering & Limits 11.2 Gross-Up Calculations for Net Pay Guarantees 11.3 Final Pay, PTO Payouts & Deceased Employee Wage Processing
12 Chapter 12: Master File Architecture, Processing Controls & Timekeeping
12.1 Employee Master File Setup, Maintenance & Data Integrity 12.2 End-to-End Payroll Processing Cycle & Pre/Post Controls 12.3 Time and Attendance Systems, Rounding & Exception Management
13 Chapter 13: ACH Direct Deposit, Software Migration & Systems Security
13.1 Direct Deposit Operations: ACH Files, Returns & Reversals 13.2 Payroll System Selection, Implementation & Data Migration 13.3 Business Continuity Planning & Disaster Recovery
14 Chapter 14: Policies, Procedures, Department Design & Management
14.1 Standard Operating Procedures (SOPs), Policies & Compliance Governance 14.2 Payroll Department Structure, Staffing & Capacity Planning 14.3 Change Management, M&A Harmonization & Employee Communication
15 Chapter 15: Customer Service, Cross-Functional Alignment & Vendor Governance
15.1 Payroll Customer Service Delivery, SLAs & Inquiry Resolution 15.2 Cross-Functional Alignment: HR, Benefits, Finance & IT 15.3 Third-Party Vendor Management & Payroll KPI Benchmarking
16 Chapter 16: Internal Controls, Fraud Detection & Operational Audits
16.1 Internal Control Frameworks, Segregation of Duties & Governance 16.2 Payroll Fraud Schemes, Detection Techniques & Forensic Auditing
17 Chapter 17: Regulatory Audits, SOX 404 & SOC 1 Reports
17.1 Regulatory Audits: IRS, DOL, State Agencies & Penalty Defense 17.2 SOX 404 Internal Controls & SOC 1 Type II Report Governance
18 Chapter 18: Payroll Accounting Basics, Journal Entries & Accruals
18.1 Double-Entry Payroll Accounting: Gross Wages, Deductions & Taxes 18.2 Employer Payroll Tax Liabilities, FUTA/SUTA & Benefit Costs 18.3 Month-End Wage Accruals & ASC 710 Vacation/PTO Accounting
19 Chapter 19: Reconciliations, Clearing Accounts & Variance Resolution
19.1 Payroll Clearing Accounts, Zero-Balance Accounts & Bank Tie-Outs 19.2 General Ledger to Form 941/W-2 Reconciliations & Variances
11.1 Voluntary Deductions: Pre-Tax vs. Post-Tax Ordering & Limits
Key Takeaways Explain This Topic AI
Pre-tax salary reductions under IRC § 125 (cafeteria plans) and IRC § 132(f) (qualified transportation) are exempt from FITW, FICA (OASDI and Medicare), and FUTA, whereas qualified retirement contributions under IRC § 401(k), 403(b), and 457(b) are exempt from FITW only and remain subject to FICA and FUTA.
Under IRC § 402(g), elective deferrals to 401(k) and 403(b) plans are subject to an annual inflation-adjusted limit ($24,500 for 2026), with an additional age 50+ catch-up contribution ($8,000) and an enhanced SECURE 2.0 catch-up for ages 60–63 ($11,250).
Designated Roth contributions under IRC § 402A are made with after-tax dollars (subject to FITW, FICA, and FUTA at the time of deferral) and share the single unified § 402(g) elective deferral limit with traditional pre-tax contributions.
Under the SECURE 2.0 Act, catch-up contributions made by employees whose prior-year FICA wages exceeded $145,000 (indexed) must be designated as after-tax Roth contributions rather than pre-tax deferrals.
Payroll deduction priority mandates that pre-tax statutory reductions be subtracted first, followed by mandatory statutory taxes, involuntary garnishments, and finally voluntary post-tax deductions (such as Roth deferrals, union dues, and charitable gifts).
Last updated: August 2026
Voluntary Deductions: Pre-Tax vs. Post-Tax Ordering & Limits
Voluntary deductions represent wage withholdings authorized by an employee to fund retirement savings, health and welfare benefits, union memberships, charitable donations, or other personal financial obligations. Unlike involuntary deductions (such as child support or tax levies), voluntary deductions require explicit, written (or legally compliant electronic) employee authorization under state wage payment laws and federal regulations.
For payroll professionals, the critical compliance challenge lies in distinguishing pre-tax salary reductions from post-tax deductions , applying statutory contribution limits, and executing the correct deduction priority hierarchy when an employee's disposable earnings are insufficient to satisfy all requested withholdings.
1. Statutory Framework: Pre-Tax vs. Post-Tax Taxability
Not all "pre-tax" deductions receive identical tax treatment. Federal tax law establishes two distinct categories of pre-tax deductions:
Deductions exempt from all federal payroll taxes: Exempt from Federal Income Tax Withholding ( FITW ), Social Security ( OASDI ), Medicare ( HI ), and Federal Unemployment Tax ( FUTA ).
Deductions exempt from FITW only: Exempt from federal income tax withholding but fully subject to Social Security, Medicare, and FUTA taxes. +-----------------------------------------------------------------------------+
- | TAXABILITY MATRIX OF PAYROLL DEDUCTIONS |
- | |
- | DEDUCTION TYPE FITW OASDI MEDICARE FUTA |
- | -------------------------------- -------- -------- -------- ---- |
- | Section 125 Major Medical/Dental EXEMPT EXEMPT EXEMPT EXEMPT|
- | Section 125 Healthcare FSA EXEMPT EXEMPT EXEMPT EXEMPT|
- | Section 125 Dependent Care (DCAP) EXEMPT EXEMPT EXEMPT EXEMPT|
- | Section 125 HSA Salary Reduction EXEMPT EXEMPT EXEMPT EXEMPT|
- | Section 132(f) Commuter Transit EXEMPT EXEMPT EXEMPT EXEMPT|
- | Section 137 Adoption Assistance EXEMPT TAXABLE TAXABLE TAXABLE|
- | -------------------------------- -------- -------- -------- ---- |
- | Traditional 401(k) / 403(b) EXEMPT TAXABLE TAXABLE TAXABLE|
- | Traditional 457(b) (Gov/Non-Prof) EXEMPT TAXABLE TAXABLE TAXABLE|
- | SIMPLE IRA / 401(k) EXEMPT TAXABLE TAXABLE TAXABLE|
- | -------------------------------- -------- -------- -------- ---- |
- | Designated Roth 401(k) / 403(b) TAXABLE TAXABLE TAXABLE TAXABLE|
- | Post-Tax After-Tax 401(k) TAXABLE TAXABLE TAXABLE TAXABLE|
- | Union Dues TAXABLE TAXABLE TAXABLE TAXABLE|
- | Charitable Payroll Deductions TAXABLE TAXABLE TAXABLE TAXABLE|
- | Supplemental Life Insurance TAXABLE TAXABLE TAXABLE TAXABLE|
- | Payroll Loan Repayments / Uniforms TAXABLE TAXABLE TAXABLE TAXABLE|
- +-----------------------------------------------------------------------------+
- 2. Section 125 Cafeteria Plans & Qualified Pre-Tax Benefits
Under IRC § 125 , an employer may establish a cafeteria plan that allows employees to choose between receiving taxable cash compensation or electing qualified non-taxable fringe benefits through pre-tax salary reductions.
Core Qualified Section 125 Benefits
Accident and Health Plans (IRC § 105 / § 106): Employee contributions for major medical, dental, and vision insurance premiums are exempt from FITW, FICA (OASDI and Medicare), and FUTA.
Health Flexible Spending Arrangements (Healthcare FSA): Employees may contribute pre-tax salary to reimburse qualifying out-of-pocket medical expenses under IRC § 213(d). The statutory contribution cap is adjusted annually for inflation ($3,400 for 2026 under Rev. Proc. 2025-32). Plans may allow either a carryover of unused funds into the next plan year (up to $680 for plan years beginning in 2026) or a 2.5-month grace period, but cannot offer both .
Dependent Care Assistance Programs (DCAP - IRC § 129): Employees may contribute up to $7,500 per year ($3,750 if married filing separately) on a pre-tax basis for 2026 -- the One Big Beautiful Bill Act raised the long-standing $5,000/$2,500 DCAP exclusion effective January 1, 2026, and the new figure is not indexed to pay for qualifying child care or elder care expenses. DCAP reductions are exempt from FITW, FICA, and FUTA.
Health Savings Account (HSA - IRC § 223) Contributions: When an employee contributes to an HSA via salary reduction through a Section 125 cafeteria plan, the contribution is exempt from FITW, FICA, and FUTA. Statutory annual contribution caps (indexed for inflation) are $4,400 for individual coverage and $8,750 for family coverage in 2026 (plus a $1,000 catch-up for individuals age 55 or older).
Adoption Assistance (IRC § 137): Employer adoption assistance provided through a cafeteria plan is exempt from FITW , but is fully taxable for FICA and FUTA .
Important
Section 132(f) Qualified Transportation Fringe Benefits: Qualified transportation benefits (transit passes, vanpooling, and qualified parking, each capped at $340 per month for 2026) are authorized under IRC § 132(f) , not Section 125. However, like cafeteria plan deductions, Section 132(f) salary reductions are exempt from FITW, FICA, and FUTA .
3. Qualified Retirement Plans: Deferral Limits & Catch-Up Rules
Pre-tax contributions to qualified retirement plans allow employees to accumulate retirement savings on a tax-deferred basis. Under IRC § 402(g) , pre-tax contributions reduce the employee's taxable compensation for federal income tax withholding purposes, but they do not reduce taxable wages for Social Security (OASDI), Medicare (HI), or federal unemployment (FUTA) taxes. +-----------------------------------------------------------------------------+
- | QUALIFIED RETIREMENT PLAN STATUTORY LIMITS |
- | |
- | PLAN TYPE IRC SECTION ELECTIVE LIMIT AGE 50+ CATCH-UP |
- | ---------------------- ----------- -------------- ---------------- |
- | 401(k) Profit Sharing § 401(k) $24,500 $8,000 |
- | 403(b) Tax-Sheltered § 403(b) $24,500 $8,000 |
- | 457(b) Deferred Comp § 457(b) $24,500 $8,000 |
- | SIMPLE 401(k) / IRA § 408(p) $17,000 $4,000 |
- | § 415(c) Overall Limit § 415(c) $72,000 N/A |
- | (2026 amounts per IRS Notice 2025-67. Employees who reach age 60-63 |
- | during 2026 may substitute an $11,250 SECURE 2.0 "super catch-up".) |
- +-----------------------------------------------------------------------------+
- Key Retirement Deferral Mechanics
The IRC § 402(g) Elective Deferral Limit: An individual employee cannot defer more than $24,500 (2026) across all 401(k) and 403(b) plans in a single calendar year. If an employee participates in both a 401(k) plan with Employer A and a 403(b) plan with Employer B, the single $24,500 limit applies across both plans combined.
The IRC § 457(b) Coordination Exception: Eligible deferred compensation plans of state/local governments and tax-exempt organizations under IRC § 457(b) are governed by a separate, distinct limit . An employee working for a public university or hospital may defer up to $24,500 into a 403(b) plan AND an additional $24,500 into a 457(b) plan in the same calendar year (for a combined pre-tax deferral of $49,000).
Age 50+ Catch-Up Contributions (IRC § 414(v)): Employees who reach age 50 by the end of the calendar year may contribute an additional $8,000 (2026) above the standard § 402(g) limit.
SECURE 2.0 Enhanced Catch-Up for Ages 60–63: Effective for tax years beginning after 2024, participants who attain age 60, 61, 62, or 63 during the calendar year are eligible for an increased catch-up limit equal to the greater of $10,000 or 150% of the regular age 50 catch-up limit ($11,250).
IRC § 415(c) Annual Additions Ceiling: The total combined contributions made to an employee's defined contribution account (including employee pre-tax deferrals, employee Roth deferrals, employee after-tax contributions, employer matching, and employer profit-sharing allocations) cannot exceed the lesser of 100% of compensation or $70,000 (excluding catch-up contributions).
USERRA Make-Up Contributions
The Uniformed Services Employment and Reemployment Rights Act (USERRA) treats a reemployed servicemember as if they had never left for retirement plan purposes. On reemployment the employee may make up the elective deferrals they could have made during the period of military service, and the employer must make the matching and nonelective contributions attributable to those make-up deferrals.
USERRA Rule Detail
Make-up period The lesser of three times the length of the service period or five years , beginning on the date of reemployment
Limit applied The make-up deferral counts against the IRC § 402(g) limit for the year to which it relates , not the year in which it is actually contributed
Compensation used The compensation the employee would have received during service, or, if not reasonably certain, the average from the 12 months before service
Earnings The employer is not required to credit investment earnings for the make-up period
Loan repayments Plan loan repayments may be suspended during military service without the suspension counting toward the five-year repayment limit
Vesting The service period counts for vesting and eligibility as though the employee had remained employed
Payroll's role is to code the make-up deferral to the correct plan year so it does not consume the current year's § 402(g) limit, and to keep the differential-pay and reemployment dates in the master file so the make-up window can be computed. Note that differential wage payments made to an employee on active duty are treated as wages subject to FITW and are reported on Form W-2, and are treated as compensation for retirement plan purposes.
4. Traditional Pre-Tax vs. Designated Roth vs. After-Tax Deductions
Under IRC § 402A , retirement plans may permit participants to designate all or a portion of their elective deferrals as Designated Roth Contributions . +-----------------------------------------------------------------------------+
- | RETIREMENT CONTRIBUTION MECHANICS COMPARISON |
- | |
- | FEATURE TRADITIONAL PRE-TAX DESIGNATED ROTH AFTER-TAX |
- | -------------------- ------------------- --------------- --------- |
- | FITW Tax Status Exempt at Deferral Taxable at Def. Taxable |
- | FICA / FUTA Status Taxable at Deferral Taxable at Def. Taxable |
- | Counts to § 402(g)? Yes ($24,500 limit) Yes (Shared) No |
- | Counts to § 415(c)? Yes Yes Yes ($72k) |
- | Qualified Payout Tax Fully Taxable 100% Tax-Free Tax on Gains|
- +-----------------------------------------------------------------------------+
- SECURE 2.0 Mandatory Roth Catch-Up Rule
Under Section 603 of the SECURE 2.0 Act, any catch-up contribution made by an eligible employee whose wages subject to Social Security tax (FICA wages from Form W-2 Box 3/5) from the sponsoring employer in the preceding calendar year exceeded $145,000 (indexed for inflation) MUST be made as a designated Roth contribution on an after-tax basis. If the plan does not offer a Roth feature, no catch-up contributions are permitted for those high-earning participants.
Non-Retirement Post-Tax Voluntary Deductions
Post-tax deductions are subtracted from an employee's pay after all federal, state, and local income taxes and FICA taxes have been computed and withheld. Common post-tax deductions include:
Union Dues & Initiation Fees: Deducted under a valid collective bargaining agreement (CBA) and voluntary written check-off authorization.
Charitable Payroll Deductions: Contributions to campaigns such as United Way, deducted post-tax and substantiated on Form W-2 Box 14 or pay statements.
Supplemental Life & Disability Insurance: Voluntary supplemental life insurance premiums or employee-paid short/long-term disability premiums (paying disability premiums with post-tax dollars ensures that any future disability benefit payouts are received income-tax-free under IRC § 104).
Voluntary Wage Advances & Loan Repayments: Employee repayments of company loans, tuition advances, or payroll overpayments.
5. Paycheck Deduction Priority Ordering
When an employee's total gross earnings are insufficient to cover all mandatory taxes, court-ordered garnishments, and voluntary elections, payroll systems must process deductions according to a strict legal priority hierarchy. +-----------------------------------------------------------------------------+
- | THE 6-TIER PAYCHECK DEDUCTION HIERARCHY |
- | |
- | TIER 1: GROSS EARNINGS (Regular, Overtime, Bonuses, Shift Premiums) |
- | |
- | TIER 2: STATUTORY PRE-TAX REDUCTIONS (Exempt from All Payroll Taxes) |
- | - Section 125 Medical, Dental, Vision Premiums |
- | - Section 125 Healthcare FSA & Dependent Care FSA (DCAP) |
- | - Section 125 HSA Salary Reductions |
- | - Section 132(f) Qualified Transportation / Commuter Benefits |
- | |
- | TIER 3: STATUTORY PRE-TAX REDUCTIONS (Exempt from FITW Only) |
- | - Traditional 401(k), 403(b), 457(b), and SIMPLE Deferrals |
- | |
- | TIER 4: MANDATORY STATUTORY TAXES (Required by Law) |
- | - Social Security Tax (OASDI - 6.2%) |
- | - Medicare Tax (HI - 1.45% + 0.9% Additional Medicare) |
- | - Federal Income Tax Withholding (FITW) |
- | - State Income Tax Withholding (SITW) |
- | - Local / Municipal Income Taxes |
- | - Mandatory State Disability / Unemployment Taxes (SDI / SUI) |
- | |
- | TIER 5: INVOLUNTARY STATUTORY GARNISHMENTS & LEVIES |
- | - 1. Child Support Withholding Orders (IWO / NMSN) |
- | - 2. Bankruptcy Court Orders (Chapter 13) |
- | - 3. Federal Administrative / Tax Levies (IRS Form 668-W) |
- | - 4. Federal Student Loan Garnishments (AWG) |
- | - 5. State Tax Levies & State Agency Garnishments |
- | - 6. Commercial Creditor Garnishments |
- | |
- | TIER 6: VOLUNTARY POST-TAX DEDUCTIONS |
- | - 1. Designated Roth 401(k) / 403(b) Deferrals |
- | - 2. Union Dues (Check-off) |
- | - 3. Supplemental Post-Tax Benefits (Life, Disability, Pet) |
- | - 4. Charitable Payroll Contributions |
- | - 5. Employee Purchases, Uniforms, Loan Repayments |
- +-----------------------------------------------------------------------------+
Caution
Under-Deduction and Arrears Processing: If net pay in Tier 6 is insufficient to satisfy a voluntary post-tax deduction (such as a $100 union due or $200 loan repayment), payroll systems must either take a partial deduction (if plan rules permit) or zero out the deduction and record the balance in an arrears bucket for deduction from subsequent payrolls. Employers cannot reduce an employee's pay below FLSA statutory minimum wage for employer-benefiting deductions like cash register shortages or tool purchases.
6. Comprehensive Worked Payroll Calculation
Employee Profile:
- Pay Frequency: Biweekly
- Gross Regular Wages: $4,000.00
- Section 125 Medical Insurance Premium: $200.00
- Section 125 Healthcare FSA Contribution: $100.00
- Section 132(f) Commuter Transit Benefit: $100.00
- Traditional 401(k) Pre-Tax Deferral: $300.00
- Designated Roth 401(k) Deferral: $200.00
- Post-Tax Union Dues: $50.00
- Post-Tax Charitable Contribution: $25.00
- Form W-4: Single, Standard Withholding (assumed FITW = $340.00 based on taxable wages)
- State Income Tax (SITW): Assumed $140.00
Prior YTD Wages: $50,000.00 (OASDI wage base not reached) +-----------------------------------------------------------------------------+
- | GROSS-TO-NET PAYROLL CALCULATION BRIDGE |
- | |
- | LINE ITEM AMOUNT BALANCE |
- | ----------------------------------------------- ----------- ---------- |
- | 1. Gross Regular Wages $4,000.00 |
- | |
- | 2. LESS: Section 125 & 132(f) Pre-Tax Benefits: |
- | - Medical Insurance Premium -$200.00 |
- | - Healthcare FSA -$100.00 |
- | - Section 132(f) Commuter Transit -$100.00 |
- | Total Tier 2 Reductions -$400.00 |
- | |
- | 3. FICA TAXABLE WAGES ($4,000.00 - $400.00) $3,600.00 |
- | |
- | 4. LESS: Traditional 401(k) Pre-Tax Deferral -$300.00 |
- | |
- | 5. FEDERAL INCOME TAX (FITW) TAXABLE WAGES $3,300.00 |
- | ($3,600.00 - $300.00) |
- | |
- | 6. MANDATORY STATUTORY TAXES: |
- | - Social Security Tax (OASDI: $3,600 x 6.2%) -$223.20 |
- | - Medicare Tax (HI: $3,600 x 1.45%) -$52.20 |
- | - Federal Income Tax Withholding (FITW) -$340.00 |
- | - State Income Tax Withholding (SITW) -$140.00 |
- | Total Mandatory Statutory Taxes -$755.40 |
- | |
- | 7. POST-TAX TAKE-HOME PAY (Before Post-Tax Deds) $2,544.60 |
- | |
- | 8. LESS: POST-TAX VOLUNTARY DEDUCTIONS: |
- | - Designated Roth 401(k) Contribution -$200.00 |
- | - Union Dues (Check-off) -$50.00 |
- | - Charitable Contribution -$25.00 |
- | Total Post-Tax Voluntary Deductions -$275.00 |
- | |
- | 9. FINAL NET DISBURSEMENT (Direct Deposit / Check) $2,269.60 |
- +-----------------------------------------------------------------------------+
Detailed Mathematical Audit:
FICA Tax Base Determination: Gross wages ($4,000.00) minus Section 125 medical ($200.00), FSA ($100.00), and Section 132(f) commuter transit ($100.00) = $3,600.00 . FICA taxes equal $3,600.00 × 6.2% = $223.20 (OASDI) and $3,600.00 × 1.45% = $52.20 (Medicare).
FITW Tax Base Determination: FICA taxable base ($3,600.00) minus Traditional 401(k) pre-tax contribution ($300.00) = $3,300.00 .
Post-Tax Treatment of Roth: The $200.00 Roth deferral does not reduce either FICA wages or FITW wages; it is subtracted in Tier 6 directly from net pay.
Final Net Pay: $4,000.00 - $400.00 - $300.00 - $755.40 - $275.00 = $2,269.60.