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In this lecture, payroll deductions are defined as amounts withheld from an employee's gross pay, referred to as withholdings. Key examples of these deductions include federal income tax, FICA taxes (which cover Social Security and Medicare), and other benefits like retirement and insurance plans. The process begins with the gross pay, representing the employee's total earnings. Deductions are then subtracted from this amount, resulting in the net pay that the employee actually receives. Overall, the focus is on the various federal taxes that need to be withheld from the employee's wages.