The following is a glossary for Payroll terms for anyone working in the Payroll Department or working with payroll.

1099-MISC (Form)

Miscellaneous Income. Form used to transmit miscellaneous income paid to a entity that is not a corporation. For payroll purposes, it is used to report the wages paid to deceased employees

401(k) Plans

Type of deferred compensation plan. Refers to Internal Revenue Code that authorizes the plan

403(b) Tax Sheltered Annuities

Type of deferred compensation plan. Refers to the Internal Revenue Code that authorizes the plan

457 Plans

Type of deferred compensation plan. Refers to the Internal Revenue Code that authorizes the plan

668-W (Form)

Federal Tax Levy

940 (Form)

Employer�s Annual Federal Unemployment (FUTA) Tax Return. Used to report FUTA taxes

940EZ (Form)

Employer�s Annual Federal Unemployment (FUTA) Tax Return. Used to report FUTA taxes

941 (Form)

Employer�s Quarterly Federal Tax Return. Filed quarterly reconciling the federal income tax withheld and the FICA taxes withheld and paid

941c (Form)

Supporting Statement to Correct Information. Used to correct Form 941

Accountable Plan

Reimbursement arrangement that meets IRS requirements for non-taxation

ACH

Automated Clearing House

Annual Lease Value Method

Under the annual lease value method, the employer determines the value of an automobile that it provides to an employee by using its annual lease value

Annual Wage

The fixed salary paid to an employee over the course of a calendar year

Back Pay

Wages or salary due to an employee from prior payroll periods

Belo Plan

Named after the Supreme Court case that approved its use, it is a guaranteed wage plan for employees whose jobs require irregular work weeks-sometimes working less than 40 hours, sometimes more

Biweekly payroll

Paid 26 times per year

BLS

Bureau of Labor Statistics

Branded Paycards

Cards that usually carry either a VISA� or Mastercard� logo. The card functions just like a VISA� or Mastercard� debit card and are accepted anywhere a VISA� or Mastercard� is accepted

Cafeteria Plan

Type of plan that allows employees to pay their share of insurance premiums, certain out-of-pocket medical and dependent care expenses, and certain other benefits with pre-tax dollars versus paying these same expenses with after-tax dollars

Cents Per Mile Method

Used for taxation of the personal use of a company vehicle. Under the cents per mile method, the employer takes the vehicle log of mileage as describe under the annual lease value method, determines the personal use miles and multiplies that by the current rate per mile

Certified Payroll Administrator

An HR professional who has completed the Payroll Training & Certification Program and passed the accompanying certification exam.

Child Support

The money that is ordered by law to be paid by a parent for the support of his or her (minor) child, when that parent does not live with the child

Child Support Enforcement Amendments of 1984

The Consumer Credit Protection Act requires states to adopt laws governing withholding of child support payments by October 1985

Circular E

IRS publication number 15. Contains information to assist employers on IRS regulations

COBRA

Consolidated Omnibus Budget Reconciliation Act of 1985 (P.L. 99-272)

CODA

Cash-or-deferred arrangement

Common-law employee

A common-law employee relationship exists if an individual performs services for an employer and the employer can control what will be done and how it will be done. Since there is no statute or law that describes what an employee is, but is merely what has evolved over the years by the IRS, the term used is common-law employee.

Commuting Method

Used to determine the value of a vehicle that an employer provides to an employee for commuting use by multiplying each one-way commute (that is, from home to work or from work to home) by the allowed rate

Consumer Credit Protection Act

Federal law that limits the amount an employee�s wages that may be withheld for payment of debts

Davis-Bacon Act

The Davis-Bacon Act authorizes the Secretary of Labor to set minimum pay standards for laborers and mechanics working on federally funded construction contracts of $2,000 or more.

DCAP

Dependent Care Assistance Plan

De minimis benefit

A de minimis benefit is any property or service provided to an employee that has so little value (taking into account how frequently similar benefits are provided to employees) that accounting for it would be unreasonable or administratively impracticable.

De Minimus

Small, miniscule. In payroll terms, used to describe a payment or fringe benefit too small to keep track of for taxing purposes

Disposable Pay

The amount of the employee's earnings left after legally required deductions have been made for federal, state and local taxes, Social Security, unemployment insurance and state employee retirement systems

DOL

Department of Labor

EFT

Electronic Funds Transfer

EIC

Earned Income Credit

EIN

Employer Identification Number

Electronic Funds Transfer

This is a system by which commercial payments are made electronically instead of using paper instruments such as checks or drafts

Employee

Individual who performs services subject to the will and control of an employer (common law rule)

Employee Self Service Systems

Uses the Human Resources Information System (HRIS) to automate many of the labor intensive and time consuming tasks that payroll currently handles for employees

Employee Stock Purchase Plan

Stock option plan under which an employer grants to its employees stock options which entitles the employee to purchase stock in the employer corporation at a future date for a discounted price

Employer

Person or organization for whom a worker performs a service as an employee

Employer Identification Number

To deposit federal income taxes and employment taxes correctly, the IRS issues a nine-digit "Employer Identification Number" (EIN) to identify the tax accounts of employers and certain others that have no employees.

Employer�s Quarterly Federal Tax Return

The name of the Form 941 filed quarterly reconciling the federal income tax withheld and the FICA taxes withheld and paid

Engaged to wait

"Engaged to wait" time is compensable time because it is controlled by the employer.

ERISA

Employee Retirement Income Security Act of 1974

Escheat

Abandoned property such as uncased or unclaimed payroll checks

ESPP

Employee Stock Purchase Plans

Exempt Employee

An employee who is exempt from the overtime and minimum wage provisions of the Fair Labor Standards Act

Expatriate

U.S. citizen or resident alien working outside of the United States

Fair Labor Standards Act

Enacted in 1938, the federal law that sets the minimum wage, hours worked, overtime requirements and child labor regulations for employers; known as the FLSA

Fair Market Value

The cost the employee or a person would have to pay for goods or services if purchased on the open market. For payroll purposes, used to determine the gross taxable wages on non-cash goods or fringe benefits

Family Support Act of 1988

The Family Support Act allows custodial parents to request automatic withholding regardless of whether payments are in arrears

FAVR

Fixed and Variable Rate Allowance

Federal Insurance Contributions Act

The Federal Insurance Contributions Act (FICA) provides for a Federal system of old-age, survivors, disability, and hospital insurance.

Federal Reserve Board Regulation E (Title 12, Code of Federal Regulations, Part 205)

Sets forth the consumer protection rights and requirements that apply to electronic funds transfer

Federal Unemployment Tax Act

The Federal Unemployment Tax Act (FUTA), with state unemployment systems, provides for payments of unemployment compensation to workers who have lost their jobs.

Fee Basis

If the employee is paid an agreed sum for a single job, regardless of the time required for its completion, the employee will be considered to be paid on a "fee basis."

FICA

See Federal Insurance Contribution Act

FIT

Federal Income Tax

FITW

Federal Income Tax Withheld

Flat Rate Method

Withhold federal income tax on a flat rate of 25% of taxable gross. State rates will vary

FLSA

See Fair Labor Standards Act

FMLA

Family and Medical Leave Act

FMV

Fair Market Value

Form 941

The IRS Form 941 was created to report and reconcile the payments made to the IRS for the income tax and FICA taxes during a quarter period.

Form SS-4

If an employer does not have an EIN, a Form SS-4 "Application for Employer Identification Number" must be completed and submitted to the Internal Revenue Service Center appropriate for the employer's location.

Form SS-8

The Internal Revenue Service has a service to help those employers who are uncertain as to whether its workers should be classified as employees or independent contractors. To utilize this service, employers should complete Form SS-8, "Determination of Employee Work Status for Purposes of Federal Employment Taxes and Income Tax Withholding".

Form W-2

Form W-2 is a six-part form (Copies A-D and 1 & 2) is used to inform both the employee and the taxing agencies how much the employee received in wages and what taxes were withheld and paid. It also includes information on fringe benefits paid and state taxation.

Form W-4

This IRS form is used to inform the payroll department on the marital status and number of allowances the employee wants the payroll department to use to determine the amount of income tax to deduct from the employee�s paycheck.

Form W-5

The Form W-5 states the eligibility requirements for receiving advance EIC payments.

FSA

Flexible spending accounts

FUTA

See Federal Unemployment Tax Act

Garnish

To attach, such as money due, from a debtor while it is in the hands of a third party

Garnishee

A person or business served with a garnishment

Garnishment

Court order served on a person or firm as the result of a lawsuit or ruling that requires an employer to withhold money from an employee�s pay and disperse according to the court order�s requirements

General Ledger

A formal ledger containing all the financial statement accounts of a business

Golden Parachute Payments

A golden parachute payment is a contract entered into by a corporation and key personnel under which the corporation agrees to pay certain amounts to the key personnel in the event of a change in ownership or control of the corporation.

Gross Earnings

Grand total of all regular, overtime, and other compensation paid to an employee prior to any deductions being taken

Hypothetical tax

An approximation of what the employee's U.S. tax liability would have been had he or she remained in the United States

HHS

U.S. Department of Health and Human Services

HI

Hospital Insurance. Refers to the Medicare tax

Host Based Stored Value Cards

Value is associated with the card and this value is stored and authorized centrally on a host computer system versus on the physical card

HRIS

Human resources information system. A system of software and supporting computer hardware specifically designed to store and process all HR information

HSA

Health Savings Account

Incentive Stock Option

A stock option granted under an arrangement that meets the requirements of IRC �422 is referred to as an ISO

Independent Contractor

Person who follows an independent trade or business or profession in which they offer their services to the public

Independent Contractor

An independent contractor is someone such as lawyers, contractors, subcontractors, public stenographers, and auctioneers who follow an independent trade, business, or profession in which they offer their services to the public.

Information Return

Form or report to the Internal Revenue Service that provides information on an employee/or employer�s tax liability

Internal Revenue Bulletin

An authoritative publication of the Commissioner of Internal Revenue. It is used to announce official rulings and procedures of the Internal Revenue Service and for publishing Treasury Decisions, Executive Orders, Tax Conventions, legislation, court decisions and other items of general interest

Interstate Commerce

Trade, commerce, transportation, transmission, or communications among the several states or between any state and any place outside thereof.

Involuntary Deduction

Deduction withheld from an employee�s wages at the request of someone other than the employee such as the IRS, a court or other federal or state authority

IRC

Internal Revenue Code

IRS

Internal Revenue Service

IRS Notice

Any communication from the IRS to an employer

Mandatory Deductions

Deductions required or mandated by law. Examples would be federal income tax or the FICA taxes

Manual check

Term that is used to indicate any check that is issued off a normal payroll cycle

Minimum Wage

Lowest legal amount an employer may pay an employee per hour

MMREF

Magnetic Media Reporting and Electronic Filing

NACHA

National Automated Clearing House Association

National Automated Clearing House Association

Private organization that establishes the rules for the exchange of commercial electronic payments - corporate, consumer, as well as direct de- posit payments - through a national network of more than 40 automated clearing houses

NMSN

National Medical Support Notice

Non-accountable Plan

Reimbursement arrangement that does not meet IRS requirements and payments made under this type of plan are considered taxable income

Non-Exempt

Employee who is subject to the provisions of the Fair Labor Standards Act

Non-Qualified Deferred Compensation Plans

Plan or arrangement established and maintained by an employer for one or more of its employees that provides for the deferral of compensation, but does not meet the requirements for a tax-qualified deferred compensation plan

Non-Statutory Stock Option

A stock option issued under a plan that does not meet the IRC requirements is referred to as a Non-Statutory Stock Option (NSO)

OASDI

Old Age, Survivors, and Disability Insurance. The official name for the social security tax deducted from an employee�s taxable wages

ODFI

Originating depository financial institution

Opportunity Wage

The opportunity wage allows employers to pay new hires under 20 years of age not less than $4.25 per hour for the first 90 days (calendar days) after the employee is hired.

Overtime

Hours worked in excess of a prescribed maximum weekly (or daily in some states) requirement permitted without excess compensation

Parallel Testing

Running the old system side by side with the new system using the same data

Paycard

Method of paying the employee by a plastic card that has the value of the net wages

Payroll Period

Period of service for which an employer usually pays wages

Per diem allowance

Flat rate, stated schedule, or other IRS-specified rate or schedule payment made under an accountable plan for lodging, meals, and incidental expenses for business travel away from home

Percentage Method

Internal Revenue Service method for withholding federal income tax on wages

Phantom Employee

Nonexistent employee

Portal-to-Portal Act

The purpose of this act was to offset the effects of a series of Supreme Court decisions that expanded the compensable working time that required payment under the FLSA.

Pre-notification

Process by which the accuracy of the direct deposit transaction data (e.g., the employee name, bank transit number, account number, etc.) may be tested before actual dollar transactions take place

Private Letter Ruling

A reply from the Internal Revenue Service in response to a particular question and set of facts to a specific employer

PRWORA

The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA): contains comprehensive child support enforcement provisions

Qualified deferred compensation plans

Retirement plans that comply with certain requirements set forth in the Internal Revenue Code and, as such, are afforded special tax treatment

RDFI

Receiving Depository Financial Institution

Reciprocal Agreement

Arrangement entered into by two or more states to decide the withholding of state income tax for an employee working in one state and living in another

Regular Rate of Pay

Hourly rate used to pay premium time

Revenue Ruling

A decision published by the Internal Revenue Service in the Internal Revenue Bulletin

RFP

Request For Proposal

ROI

Return on Investment

Rule Of Constructive Receipt

For income and employment tax purposes, wages must be considered paid when the check is issued, the funds allocated by the company, and the check is made available to the employee.

Salary

A fixed compensation paid to an employee for regular work or services

Schedule B

Employer�s Record of Federal Tax Liability. Used to report individual dates and amounts of FIT and FICA liability stated on the Form 941

SDU

State Disbursement Unit

Semi-monthly Payroll

Paid 24 times per year

SEP

Simplified Employee Pension

Service Contract Act

The Service Contract Act requires that employers who contract with the federal government to provide services to a federal agency or organization must comply with the McNamara-O'Hara Service Contract Act (SCA).

Shift Differential

Rate adjustment usually paid to employees working swing or graveyard shifts

SIMPLE

Savings Incentive Match Plan for Employees

SS-4 (Form)

Application for Employer Identification. Used to apply for an employer identification number

SS-8 (Form)

Determination of Employee Work Status for Purposes of Federal Employement Taxes and Income Tax Withholding. Used to determine if a worker is an employee or independent contractor

SSA

Social Security Administration

SSN

Social Security Number

State Disbursement Units

Centralize the collection and disbursement of specified child support payments

Statutory Employees

Statutory employees are different from common-law employees in one important area: they are considered employees by statute or law and not under the IRS opinion.

Statutory Non-Employees

Statutory non-employees are workers who are expressly excluded as employees by the IRS Code.

Stored value cards

Similar to the prepaid phone cards or store gift cards that are popular today, funds are loaded directly on the card by the employer

SUI

State Unemployment Insurance

Supplemental Wages

Items paid to an employee in addition to regular wages. Examples include awards and bonuses or tips

TAMRA

Technical and Miscellaneous Revenue Act

Tax-deferred arrangement

Allows an employer to purchase insurance contracts (annuities) that promise to pay periodic payments to the employee upon retirement

Taxable Wage Base

The maximum amount of wages paid during a calendar year that is subject to a particular tax. Types of taxes that use a taxable wage base include FICA, FUTA and SUI

Taxpayer Advocate Office

Independently represents the taxpayer�s interests and concerns within the IRS by protecting his or her rights and resolving problems that have not been fixed through normal channels

TDA

Tax Deferred Annuity

Theoretical tax

Is an approximation of what the employee's U.S. tax liability would have been had he or she remained in the United States

Totalization Agreements

Agreement between the United States and another country to eliminate dual social security taxation

TSA

Tax Sheltered Annuities

U.S. Department of Labor Wage and Hour Division

Department of the federal government that enforces the Fair Labor Standards Act

Uniform Interstate Family Support Act

Presented to the states as a model law in 1992, the Uniform Interstate Family Support Act (UIFSA) allows agencies to serve out of state child support orders directly to employers instead of having to register the orders with the agency in the receiving state

Use it or lose it rule

The IRS requires that DCAPs contain an element of risk for both the employer and employee. Therefore, amounts selected and deducted - but not used by the end of the plan year - must be forfeited. This is known as the "use it or lose it" rule

USERRA

Uniformed Services Employment and Reemployment Rights Act of 1994

Voluntary Deductions

Amounts withheld from an employee�s wages at the request of the employee

W-2 (Form)

Income and Tax Statement. Six part combined federal and state form. Given to employees and furnished to the Social Security Administration by January 31st of each year

W-2c (Form)

Corrected Wage and Tax Statement. Form used to correct the Form W-2

W-3 (Form)

Transmittal of Income and Tax Statements. Used to summarize the Forms W-2 submitted to the SSA

W-3c (Form)

Transmittal of Corrected Wage and Tax Statements. Form used to submit Forms W-2 to the SSA

W-4 (Form)

Employee Withholding Allowance Certificate. Used by employees to indicate number of withholding allowances and tax filing status they wish to claim for payroll taxation withholding

W-5 (Form)

Earned Income Credit Advance Payment Certificate. Used by employees to request payment of the EIC in advance

Wage Bracket Withholding Method

Internal Revenue Service method for withholding federal income tax based on wage tables provided in the Circular E

Walsh-Healey Public Contracts Act

The Walsh-Healey Public Contracts Act governs wages and hours of employees of manufacturers and dealers furnishing materials, supplies, articles or equipment to the federal government on contracts exceeding $10,000.

WARN

See Worker Adjustment And Retraining Notification Act.

Worker Adjustment And Retraining Notification Act

The federal Worker Adjustment and Retraining Notification (WARN) Act requires that employers with at least 100 employees who plan plant closures or mass layoffs of 50 or more employees for at least 30 days, must give affected employees at least 60 days written notice.

Workweek

Time frame for the fixed and regularly-recurring period used to base the payment of overtime.