Employee's payroll deductions into their 401(K) plans are generally made on a pretax basis and reduce the amount of gross pay that is subject to federal income tax withholding.

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Employee contributions to a traditional 401(k) plan are made with pre-tax dollars, which means they are deducted from the employee's gross pay before federal income taxes are withheld. This reduces the amount of taxable income, resulting in lower taxes owed.

Employee's Payroll Deductions into Their 401(K) Plans Are Generally Made