Payroll Accounting terms for final study guide acct 2513

nondiscretionary bonus

a bonus normally based on hours worked, units produced, production efficiency, or work quality.

discretionary bonus

a bonus not agreed on, announced, or promised before payment.

personal allowance

a deduction allowed in computing taxable income; also known as a personal exemption.

defined contribution plan

a retirement plan that provides future benefits based solely on the amount paid by each employee and employer into the account, plus investment gains.

wage theft

a term that refers to situations when employers do not pay employees in accordance with statutory or contract requirements.

supplemental wage payments

additional compensation such as vacation pay, bonuses, and commissions paid to employees.

reciprocal arrangements

agreements between states to provide unemployment insurance coverage and payment of benefits to interstate workers.

special withholding allowance

allowance claimed by employees so that wages which are below the level subject to the income tax will not be subject to withholding.

backup withholding

amount of income tax withheld by payers of taxable interest, dividends, and certain other payments made to payees who have failed to furnish the payers with correct identification numbers.

dismissal payments

amounts paid by employers to workers who have been separated from employment; also known as payments in lieu of notice, separation pay, or terminal leave pay.

standard deduction

an amount of money used to reduce an individual's adjusted gross income in computing taxable income.

Person

an entity defined by law as an individual, a trust or estate, a partnership, or a corporation.

interstate employee

an individual who works in more than one state.

Employee

any individual performing services for an employer in the legal relationship of employer and employee.

sick pay

any payment made to individuals because of their personal injury or sickness that does not constitute wages.

Employer

any person or organization who employs one or more individuals for the performance of services, unless such services or employment are specifically excepted by law.

de minimis fringe benefit

any property or service the value of which is so small that accounting for it would be unreasonable or impractical.

Employment

any service performed by employees for their employer, regardless of the citizenship or residence of either.

employee history record

continuous record of the relationship between the employer and the employee.

business expense

cost of operating a business that is deductible by the employer for federal income tax purposes.

Workweek

fixed and regularly recurring period of 168 hours—7 consecutive 24-hour periods.

time card

form on which employee's time worked is recorded manually by the worker or automatically by a time clock.

time sheet

form that indicates an employee's time of arrival and time of departure.

hiring notice

form that is sent to the Payroll Department so that new employees are properly added to the payroll.

partial unemployment notices

forms completed by the employer and given to partially unemployed workers so that supplemental unemployment benefits may be obtained.

information returns

forms upon which an employer reports compensation paid to individuals who are not employees.

pooled

fund laws-unemployment insurance system wherein the cost of unemployment benefits is spread among all employers in a particular state.

Title XII advances

funds borrowed from the federal government by states that, due to financial difficulties, cannot pay their unemployment compensation benefits.

Tip

gift or gratuity given by a customer in recognition of service performed for him or her.

payroll register

multicolumn form used to assemble and summarize the data needed at the end of each payroll period. It lists all employees who earned remuneration, the amount of remuneration, the deductions, and the net amount paid.

check

off system-withholding of union dues from employees' wages by the employer

tipped employee

one engaged in an occupation in which tips of more than $30 a month are customarily and regularly received.

monthly depositor

one who reported employment taxes of $50,000 or less for the four quarters in the lookback period.

semiweekly depositor

one who reported employment taxes of more than $50,000 for the four quarters in the lookback period.

executive orders

regulations issued by the federal government that ban, in employment on government contracts, discrimination based on race, color, religion, sex, or national origin.

Salary

remuneration paid on a monthly, biweekly, semimonthly, or yearly basis.

Wage

remuneration paid on an hourly, weekly, or piece-work basis; total compensation paid to employees for services.

constructively paid

remunerations that are credited to the account of, or set apart for, an employee so that they may be drawn upon at any time, even though they are not actually possessed by the employee.

separation report

report that provides a wage and employment record of the separated employee and the reason for leaving.

safe harbor rule

rule that determines if an employer has satisfied the deposit obligations by (a) having no shortfall (under deposit) that exceeds the greater of $100 or 2 percent of the amount of employment taxes required to be deposited and (b) having deposited the shortfall on or before the shortfall make-up date.

merit rating

see experience rating.

domestic service

services of a household nature performed in or about a private home of the person who employs the domestic.

profit

sharing plans-compensation plans in which employer shares with employees a portion of the profits of the business.

Commission

stated percentage of revenue paid an employee who transacts a piece of business or performs a service.

Vesting

the process of conveying to employees the right to share in a retirement fund in the event they are terminated before the normal retirement age.

human resources system

those procedures and methods related to recruiting, selecting, orienting, training, and terminating personnel.

payroll accounting system

those procedures and methods related to the disbursement of pay to employees.

principal activities

those tasks employees must perform for the employer.

gross earnings

total regular earnings and total overtime earnings, also known as gross pay.

Semimonthly

twice a month.

gross

up-gross-up amount of payment so that after the appropriate payroll taxes are withheld, the net amount left is equal to the original intended payment.

exempt employees

workers exempt from some, or all, of the FLSA requirements such as minimum wages, equal pay, and overtime pay.

part

year employment-another method of calculating the withholding of federal income tax from an employee's pay.

Form W

2, Wage and Tax Statement-form used by the employer to report the amount of wages paid each worker in the course of the trade or business of the employer.

Form I

9, Employment Eligibility Verification-form that lists the documents an employee must furnish to the employer; they identify the employee and, if an alien, verify authorization to work in the United States.

enterprise coverage

applied to determine if employees of an enterprise are covered under the provisions of the FLSA. The test criteria are at least two employees engaged in interstate commerce and an annual gross sales volume of at least $500,000.

individual employee coverage

applied to determine if the FLSA covers an employee. The test is that the employee either engages in interstate commerce or produces goods for such commerce.

reciprocal agreement

arrangement entered into by two or more states whereby the resident of one state working in another state will not be subject to the withholding of income taxes by the state in which the person is employed if that state has entered into a similar agreement with the employee's resident state.

positive

balance employers-those who have built up a balance in their reserve accounts (contributions paid in less benefits charged).

negative

balance employers-those whose reserve accounts have been charged for more benefits paid out than contributions paid in to the fund.

wage

bracket method-method of determining amount of income taxes to be withheld by reading amount from tables provided by the IRS, which take into consideration length of payroll period, gross earnings, marital status, and number of withholding allowances claimed.

requisition for personnel

document submitted by a department head to the Human Resources Department asking for additional or replacement employees.

change in payroll rate form

document that notifies the proper departments of a change in the employee's rate of remuneration.

reference inquiry form

document used by the employer to investigate the references given on the application blank by the job applicant.

applicable large employer

employers with 50 or more full-time employees during the previous year

small employer

employers with fewer than 50 full-time equivalent employees with average annual wages of less than $50,000.

partial unemployment

employment by the individual's regular employer on a reduced scale because of lack of work.

self

employment income-the net earnings derived by individuals from a business or profession carried on as a sole proprietorship or as a partnership.

Biweekly

every two weeks.

pre

hire inquiries-questions asked in the employment interview and on application forms, résumés of experience or education required of an applicant, and any kind of written testing.

status report

initial statement filed by new employers with their state unemployment office, which determines their liability to make contributions into the state unemployment compensation fund.

common

law relationship-the state existing when the employer has the right to control both what work will be done and how it will be done.

fair employment practices

laws that deal with discrimination on the basis of age, race, color, religion, gender, or national origin as a condition of employment.

income tax

levy on the earnings of most employees that is deducted from their gross pay.

experience rating

method by which employer contribution payments may be adjusted because of a favorable employment record; also known as merit rating.

overtime premium

method of calculating overtime pay by multiplying the total hours worked (including overtime hours) by the regular rate of pay and then multiplying the overtime hours by one-half the regular hourly rate.

annualizing wages

method of determining amount of income taxes to be withheld by multiplying the wages for one payroll period by the number of periods in the year, determining the annual amount of withholding required on the total wages, and dividing the annual withholding by the number of payroll periods.

percentage method

method of determining amount of income taxes to be withheld using Table of Allowance Values and Percentage Method Withholding Table.

quarterly averaging

method of determining the amount of income taxes to be withheld by estimating the employee's average wages for the calendar quarter, computing an average payment, and withholding an amount based on the average payment.

continental system

method of recording time on time cards in which the day is divided into one 24-hour period, with time running from 12 midnight to 12 midnight.

voluntary contributions

payments deliberately made by employers to their state funds in order to qualify for a lower unemployment compensation tax rate.

disability benefits

payments to employees who are absent from their jobs because of illness, accident, or disease not arising out of their employment.

employee's earnings record

payroll record for each employee that is used to provide complete information about the accumulated earnings of each employee.

electronic paystubs

paystub information made available through a secured Web site, kiosk, or interactive voice response system.

application form

personnel record which gives the applicant an opportunity to provide complete information as to personal qualifications, training, and experience.

independent contractors

persons who follow an independent trade, business, or profession where services are offered to the public.

workers' compensation insurance

protection provided to employees and their dependents against losses due to injury or death incurred during employment.

contribution report

quarterly tax return filed with the state by the employer that provides a summary of the wages paid during the period and shows the computation of the tax or contribution.

piece

rate system-compensation plan under which workers are paid according to their output (units or pieces produced).

reserve

ratio formula-experience-rating plan used in most states, based on: Contributions - Benefits Paid ÷ Average Payroll.

wage information reports

statements filed by the employer, usually with the quarterly contribution report, which list employee names, social security numbers, taxable wages, taxable tips, state in which worker was employed during the reported quarter, and employer's federal account number.

wage and tax statements

statements furnished by employers to their employees informing them of the wages paid during the calendar year and the amount of taxes withheld from those wages.

electronic funds transfer system (EFTS)

system whereby the employer transfers employees' net pays to employees' bank accounts with electronic equipment rather than issuing paychecks.

lookback period

the block of time, consisting of four quarters beginning July 1 of the second preceding year and ending June 30 of the prior year, used to determine if an employer is a monthly or a semiweekly depositor.

disposable earnings

the earnings remaining after withholding for federal and state income taxes, FICA taxes, state unemployment and disability taxes, and deductions required for state employees' retirement systems.

Shortfall

the excess of the amount of employment taxes required to be deposited over the amount deposited on or before the last date prescribed for the deposit.

educational assistance

the expenses that an employer pays for an employee's education, such as tuition, fees, and payments for books, supplies, and equipment.

taxable wage base

the maximum amount of wages during a calendar year that is subject to a particular tax, such as FICA.