401(k) plan deductions
If you have a 401(k) plan or other qualified retirement plan, employee paycheck deductions are not subject to federal income tax, although they are subject to Social Security, Medicare, and federal unemployment taxes. State laws vary as to whether such deductions are subject to state income tax, state unemployment tax, or other state taxes. QuickBooks Online Payroll takes the law of your state into account when calculating retirement plan deductions.
Cafeteria plan deductions
If you have a cafeteria plan (also knows as a Section 125 Plan), your employees can pay medical, dental and vision insurance premiums with pretax paycheck deductions. The amounts deducted are exempt from federal income tax, Social Security, Medicare, and federal unemployment taxes. State laws vary as to whether deductions for a cafeteria plan are subject to state income tax, state unemployment tax, or other state taxes. QuickBooks Online Payroll takes the law of your state into account when calculating retirement plan deductions.
Section 125 plan (cafeteria plan) deferrals are subject to New Jersey income tax withholding, except in these situations:
In these cases, cafeteria plans are not subject to New Jersey income tax withholding.
Health savings account deductions
For a Health Savings Account (HSA), employee pre-tax deductions can be part of a Section 125 cafeteria plan. However, to correctly handle taxes, set up the pre-tax HSA deductions separately from the cafeteria plan. Pre-tax deductions are exempt from federal taxes but taxable in some states and local jurisdictions.
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