Exempt.

Glossary \ Payroll Terms

Published On: Thursday July 23, 2020 04:29 AM

Amounts that are not considered part of the taxable compensation. These amounts would be subtracted from the gross pay (total compensation) before the calculations of each applicable tax are completed. Example: Employee contributions to a 401(k) plan are considered exempt from federal income tax. The contribution amount for that paycheck is subtracted out before the calculation of the Federal Income Tax (FIT) is done.

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