Which term describes the deductions taken from an employee’s paycheck for taxes and benefits?

The term that describes the deductions taken from an employee’s paycheck for taxes and benefits is withholding. Withholding refers specifically to the amounts that an employer deducts from an employee's gross wages for federal and state income taxes, Social Security, Medicare, and sometimes contributions toward benefits such as health insurance and retirement plans.

This process is essential because it ensures compliance with tax laws and helps employees manage their tax obligations throughout the year, rather than facing a large tax bill at the end of the tax season. The amounts withheld are usually itemized on the employee’s pay stub, allowing them to see how much is deducted for each category, contributing to overall financial planning.

Understanding withholding is crucial for both employees and employers, as it directly affects take-home pay and ensures that the correct amounts are remitted to government agencies and benefit providers on behalf of the employee.