Which statement correctly defines "Tax Deferred" wages and "Tax Exempt" wages?

The correct statement defines "Tax Deferred" wages as those on which taxes are postponed to a later date. This means that although taxes are not paid at the time the income is earned, they will eventually be assessed, usually upon withdrawal or distribution of the funds, such as with certain retirement plans.

In contrast, "Tax Exempt" wages refer to income that is not subject to taxation at any point. Certain types of payments or benefits, such as some forms of healthcare or educational assistance, can qualify as tax-exempt, meaning that taxpayers will not owe taxes on them at any time.

This distinction is crucial for individuals and organizations managing payroll since it affects the overall tax liability for employees and employers. Understanding these definitions can help in making informed decisions about compensation, benefits, and retirement planning. The other options misrepresent the definitions, either by incorrectly asserting that "Tax Deferred" means taxes will never be due or by implying that "Tax Exempt" wages will eventually incur taxes.