Statutory deductions are deductions mandated by statute, or law. The law requires employers to withhold these deductions from employee paychecks. While you can opt out of voluntary deductions, such as a contribution to a retirement account or a flexible spending account, you can't decline to participate in statutory deductions. Statutory deductions guarantee you pay what you owe, whether you want to or not.
A statutory deduction is a mandatory deduction your employer has to take out of your paychecks. Examples include court-ordered payments along with federal, state, Medicare and Social Security taxes.
Federal and state income taxes are two of the most common statutory deductions you'll see on your paychecks. Your employer figures the amount of your deduction based on your gross pay and the number of allowances you claim. The higher your pay, and the fewer allowances you claim, the greater the tax deduction. You provide your employer with a W-4 showing the number of allowances you want to claim. Changing your W-4 increases or decreases the amount withheld from your paycheck. The more allowances you claim, the more pay you take home every paycheck. But, if you don't allow enough withholding, you'll end up owing taxes at the end of the year. If the IRS determines that you're claiming too many allowances, or not having enough withheld from your check, it can order your employer to withhold a specific amount of taxes from each check.
Medicare and Social Security Taxes
Employers must also withhold the employee portion of Medicare and Social Security taxes from paychecks. Employees pay portions of 6.2 percent for Social Security and 1.45 percent for Medicare. You must pay Medicare tax on all wages and Social Security tax on wages up to $128,700 for the 2018 tax year.
If you owe back taxes or child support, the courts may order your employer to garnish your wages. Your employer may withhold up to 60 percent of your wages for child support – or 50 percent if you are supporting another child and spouse. If you owe state or federal taxes, or money as the result of a bankruptcy action, the court may order withholding of 25 percent of your disposable earnings, or the amount of your earnings that exceed 30 times the minimum wage, whichever is less.
Check Your Pay Stub
Your pay stub will show each statutory deduction for that check, along with a cumulative deduction for the year to date. This allows you to keep track of deductions for tax purposes and to show you've completed a court-ordered payment plan. An employer who fails to comply with requirements for statutory deductions could be fined or even subject to criminal charges for breaking the law.