Payroll deductions authorized by the employee beyond legally required withholdings. Common voluntary deductions include retirement plan contributions, health insurance premiums, HSA contributions, and additional federal income tax.
Why Voluntary Withholding matters for employers
Voluntary deductions require written authorization from the employee, typically completed during benefits enrollment or onboarding. Employers must process voluntary deductions accurately each pay period and update them promptly when employees make changes during open enrollment or qualifying life events. Some voluntary deductions (Section 125 pre-tax benefits) reduce taxable wages before FICA, while others (Roth 401(k) after-tax contributions) are deducted after FICA.
State laws govern whether certain deductions are permissible and whether the employee can change or revoke them mid-period. Payroll systems must track the tax treatment of each voluntary deduction type to ensure correct W-2 reporting at year-end, including Box 12 codes for retirement contributions and Box 14 for other deductions.
How BEG handles Voluntary Withholding for clients
BEG Managed Payroll handles Voluntary Withholding as part of a fully managed payroll service at $25-$45 per employee per month. Clients do not need to track compliance rules, filing deadlines, or calculation methods related to Voluntary Withholding on their own. Everything is included. Learn about BEG Managed Payroll.
Frequently asked questions
Do employers have to manage Voluntary Withholding themselves?
No. A managed payroll provider handles Voluntary Withholding as part of full-service payroll. BEG manages this for clients at $25-$45 PEPM with no system migration required.
What happens if Voluntary Withholding is handled incorrectly?
Errors related to Voluntary Withholding can trigger IRS penalties, state agency assessments, or employee disputes. Catching and correcting errors before filing is far less costly than after-the-fact corrections.
How does BEG handle Voluntary Withholding for managed payroll clients?
BEG tracks, calculates, and remits everything related to Voluntary Withholding as part of fully managed payroll. Clients do not need to monitor compliance -- that is included in the service at $25-$45 PEPM.
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About the author
Anthony Moretti is VP of Sales at Business Executive Group, where he builds BEG's managed payroll and HR service verticals for employers across Dallas-Fort Worth and nationwide. He writes the BEG Payroll Glossary to give employers plain-English answers on payroll and compliance.
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