I have an employee who passed away in 2010 and is owed wages in 2010. I am aware that federal and state income tax should not be deducted but should PA SUI be deducted as well as medical and 401K deductions?

If you are talking about wages, yes, these deductions apply.

I don't understand why Federal and State taxes wouldn't be deducted - this is income earned.

I will be interested in what an expert has to say - when my husband died his final paycheck was payable to him all standard deductions were taken and that includes SS, health insurance, state taxes, 401K. I was told that that was the procedure because the check represented salary which is taxable.

I don't understand how wages paid to a legal rep are not taxable because they are wages.

Waiting for an expert -

EDIT: I find two conflicting sites. One says that wages paid to a rep are gross; the other says that the "usual" deductions are taken. I don't know which site is correct and cannot find the IRS Law/rule.