Page 242 - Essentials of Payroll: Management and Accounting

Payr oll Deductions
more frequent reviews and recalculations of employee deduction levels.
In this case, employees should be warned of upcoming changes to the
rates they are paying.
Example. The Doughboy Donut Company pays for 90 percent of

its employees’ medical insurance, 25 percent of the additional medical
insurance for the families of employees,and 90 percent of employee life
insurance. It also makes short- and long-term disability and dental
insurance available to its employees, who must pay in full for these ben-
efits. Emily Swankart is a single parent who has subscribed to all of
these types of insurance. Here’s how the total amount of deductions for
her would be calculated:

Type of Insurance Total Cost Deduction % Deduction $
Medical insurance $225 90% $23
Medical insurance, dependent 200 25% 150
Life insurance 35 90% 32
Short-term disability insurance 42 0% 42
Long-term disability insurance 15 0% 15
Dental insurance 28 0% 28
Total $290

As is commonly the case under this type of deduction plan, note
that the largest portion of the expense to be paid by the employee is
the medical insurance for the dependent.

Garnishments for Unpaid Taxes

If an employee does not pay his or her federal or local income taxes,
the employer may receive a notification from the IRS to garnish that
person’s wages in order to repay the taxes. The garnishment will cover
not only the original amount of unpaid taxes, but also any penalties and
interest expenses added by the government.

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