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In this lecture, payroll deductions are defined as amounts withheld from an employee's gross pay, also known as withholdings. The main focus is on payroll taxes, which include federal income tax and FICA taxes (Social Security and Medicare). Additional deductions may arise from benefits such as retirement and insurance plans. The process involves taking the employee's gross pay and subtracting these deductions, resulting in the actual amount received by the employee. Key deductions include FICA taxes and federal income tax, which are critical components of payroll calculations.