Chapter 7

independent contractor

is a natural person, business, or corporation that provides goods or services to another entity under terms specified in a contract or within a verbal agreement.

employee's individual earnings record

is a record for each payroll for each employee. The employee earnings record include the following information for each paycheck: Gross pay Federal, state, and local income tax withheld FICA tax deductions (social security and Medicare) Other voluntary deductions Net pay after withholding and deductions

FICA taxes

Federal Insurance Contributions Act (FICA) tax /ˈfaɪkə/ is a United States federal payroll (or employment) tax imposed on both employees and employers to fund Social Security and Medicare—federal programs that provide benefits for retirees, the disabled, and children of deceased workers.

employee's withholding allowance certificate W-4

Form W-4 tells you as the employer, the marital status, the number of withholding allowances, and any additional amount to use when you deduct federal income tax from the employee's pay.

current tax payment act

re-introduced the requirement to withhold income tax in the United States.

fair labor standards act

A United States law which sets out various labor regulations regarding interstate commerce employment, including minimum wages, requirements for overtime pay and limitations on child labor.

workers' compensation laws

A system whereby an employer must pay, or provide insurance to pay, the lost wages and medical expenses of an employee who is injured on the job. Workers' compensation law is governed by statutes in every state.

withholding allowance

Employee-claimed exemptions on the tax form employers use to determine how much of an employee's pay to subtract from his or her paycheck to remit to the tax authorities. The more allowances you claim, the less income tax will be withheld from your paycheck.

social security act of 1935

Social Security Act' A law enacted by President Franklin D. Roosevelt in 1935 to create a system of transfer payments in which younger, working people support older, retired people.

medicare taxes

This payroll tax is withheld from employees' payroll checks and is also matched by the employer. The employee and the employer each pay the Medicare tax of 1.45% of all wages and salaries. As a result, the employer must remit to the federal government 2.9% of its employees' wages and salaries.

employee

a person employed for wages or salary, especially at nonexecutive level.

pre-tax deductions

are qualified deductions that lower your employees' taxable wages. You subtract their contributions from their gross wages before figuring their tax withholding. Some pretax deductions reduce taxable wages for income tax; others reduce taxable wages for Social Security and Medicare taxes.

wage- bracket tax tables

displaying the amount of tax due based on income received. The tax rate may be shown as a discrete amount, a percentage rate, or a combination of both. Tax tables are used by individuals, companies and estates for both standard income and capital gains.

payroll register

is a hard copy or electronic spreadsheet listing important employee payroll information for specific payroll periods. Extended Definition.

payroll bank account

is a separate checking account that businesses use exclusively to pay employees their payroll checks. Payroll is such a large component of some businesses that it's easier and more secure to use a separate checking account for payroll instead of the main operating account.

taxable earnings

is the amount of income that is used to calculate an individual's or a company's income tax due. Taxable income is generally described as gross income or adjusted gross income minus any deductions, exemptions or other adjustments that are allowable in that tax year.

net pay

is the amount of wages that employees actually take home. In other words, net pay is the amount of money on each employee paycheck. Employers deduct many different amounts from employee wages every pay period.

social security taxes

is the tax levied on both employers and employees used to fund the Social Security program. Social Security tax is usually collected in the form of payroll tax or self-employment tax.

gross pay

is the term used to describe all of the money you've made while working at your job, figured before any deductions are taken for state and federal taxes, Social Security and health insurance.

calendar year

the period of 365 days (or 366 days in leap years) starting from the first of January, used for reckoning time in ordinary affairs.

exemption

the process of freeing or state of being free from an obligation or liability imposed on others.