Rock the 2025 FPC Exam – Master Payroll Fundamentals with Confidence!

Federal taxes are a required deduction from an employee's earnings because they are mandated by law. The Internal Revenue Service (IRS) requires employers to withhold federal income taxes from employees' wages based on their earnings and the information provided on their Form W-4. This withholding is used to prepay an employee's federal tax liability, ensuring that individuals contribute to federal funding for services and programs.

In contrast, while retirement contributions, life insurance premiums, and health club memberships may be deducted from an employee's paycheck, they are generally considered optional or voluntary deductions. Employees can usually choose whether or not to participate in retirement plans, and life insurance premiums may depend on an employee's selection of benefits. Health club memberships are typically not mandated and would only be deducted if the employee has opted into such a benefit program. Thus, federal taxes stand out as the only required deduction due to legal obligations.