FPC 2 Flashcards
1
Q
Gross pay
A
The total amount received from the employer before any deductions are made.
2
Q
Gross-up
A
An IRS-approved formula that employers can use to determine the taxable gross payment when the employer wishes to pay the employee’s share of tax.
3
Q
Group legal services plan
A
An employer plan providing for the advance provision or prepayment of personal legal services for employees and their dependents.
4
Q
Group-term life insurance (GTL)
A
Term life insurance that is provided to employees, with the cost being borne by the employer, the employee, or both.
5
Q
GSA
A
General Services Administration
6
Q
GTL
A
Group-term life insurance.
7
Q
Guaranteed annual wage (GAW)
A
A plan guaranteeing employees their annual income (regardless of the work available) or that they will be kept on the payroll (although possibly at a lower wage).
8
Q
HCE
A
Highly compensated employee.
9
Q
Health Insurance Portability and Accountability Act (HIPAA)
A
Law passed in 1996 restricting the right of group health plans to limit participation by newly hired employees and their dependents because of preexisting medical conditions.
10
Q
Health Savings Account (HSA)
A
Health Savings Accounts (HSAs) are tax-exempt trusts or custodial accounts created exclusively to pay for the qualified medical expenses of the account holder and his or her spouse and dependents, subject to certain qualifications and rules.
11
Q
HI
A
Hospital Insurance (the Medicare component of FICA).
12
Q
High-low substantiation method
A
A safe-harbor method (deemed substantiation) for reimbursing lodging, meal, and incidental expenses incurred by an employee who is traveling overnight on the employer’s business.
13
Q
Highly compensated employee (HCE)
A
In the context of certain fringe benefit plans, an employee who is an owner or officer of a business or whose salary exceeds a certain amount (indexed each year for inflation). Many benefits offered by employers do not qualify for favorable tax treatment if they discriminate in favor of highly compensated employees. Employers may also be restricted in their use of safe-harbor valuations of benefits provided to such employees.
14
Q
HIPAA
A
Health Insurance Portability and Accountability Act.
15
Q
Housing allowance
A
Payment made to a U.S. citizen or resident alien working abroad to make up the added cost of obtaining reasonable living quarters in a foreign country.
16
Q
HRIS
A
Human Resource Information System.
17
Q
HSA
A
Health Savings Account
18
Q
Immigration Reform and Control Act of 1986 (IRCA)
A
Law enacted in 1986 that prohibits employers from hiring persons who are not authorized to work in the U.S. and from discriminating against those who are authorized to work based on their national origin or citizenship.
19
Q
Impute
A
The addition of the value of cash/noncash compensation to an employee’s taxable wages in order to properly withhold income and employment taxes from the wages.
20
Q
Incentive stock options
A
A stock option that gives an employee the opportunity to buy the employer corporation’s stock at a fixed price for a certain period of time, and that offers favorable tax treatment if certain conditions are met.
21
Q
Income statement
A
A financial statement showing a company’s results of operations for an accounting period or fiscal year.
22
Q
Income tax treaties
A
Treaties between the U.S. and foreign countries that may have provisions governing the tax treatment of U.S. employees working in those countries as well as that of aliens from those countries working in the U.S.
23
Q
Indefinite assignment
A
See “Long-term assignment.”
24
Q
Independent contractor
A
A nonemployee contracted by a business to perform services. Although the business specifies the result of the work to be performed, it has no right to control the details of when, how, or who will ultimately perform the work.
25
Individual Retirement Arrangement (IRA)
A trust created or organized for the exclusive benefit of an individual or his or her beneficiaries.
26
Individual Taxpayer Identification Number (ITIN)
A tax reporting identification number issued to aliens in the U.S. who cannot get a social security number but are required to file a tax or information return with the IRS.
27
Information return
A return sent to the IRS (e.g., 1099 series) or the SSA (e.g., Form W-2, Copy A, along with Form W-3) that indicates information relevant to tax liability.
28
Information statement
A statement sent to a payee (e.g., 1099 series) or an employee (e.g., Form W-2) that indicates payments made and taxes withheld by the party issuing the statement.
29
Integrated
Computer systems providing differing processes that share common data.
30
Interface
The place where two systems meet. Suggestion: The software that enables different computer systems (e.g. accounting, payroll and HR) to communicate with each other.
31
Internal audit
An audit of a business's policies, procedures, operations, and records carried out by employees of the business as opposed to outside parties.
32
Internal control
Measures used by a company to safeguard company assets by preventing errors, waste, embezzlement, and fraud.
33
Internal Revenue Bulletin (IRB)
Issued weekly by the IRS. Contains recently issued regulations, revenue procedures, and other agency announcements.
34
Internal Revenue Code (IRC)
Federal tax laws. Generally referred to as the Internal Revenue Code of 1986, which was the year of its latest major overhaul. The IRC also comprises Title 26 of the United States Code.
35
Internal Revenue Service (IRS)
The U.S. government agency that administers the Internal Revenue Code and U.S. tax laws and regulations.
36
Interstate commerce
The exchange of goods and/or services across state lines. It provides a basis for congressional and federal government agency regulation of wages and hours of work and other employment-related matters.
37
Involuntary deductions
Deductions over which employers and employees have no control.
38
IRA
Individual Retirement Arrangement.
39
IRB
Internal Revenue Bulletin.
40
IRC
Internal Revenue Code.
41
IRCA
Immigration Reform and Control Act.
42
IRS
Internal Revenue Service.
43
ITIN
Individual Taxpayer Identification Number.
44
Journal
A record of financial transactions that debit or credit an account.
45
Key employee
In the context of certain fringe benefit plans, an officer or owner (of all or a significant part) of a business whose annual pay exceeds a certain amount. Many benefits offered by employers do not qualify for favorable tax treatment if they discriminate in favor of key employees.
46
LAN
Local area network.
47
Leased employees
Employees of a leasing agency who are hired and trained for the client firm through the agency. Withholding, depositing, and reporting responsibilities remain with the leasing agency.
48
Levy
An attachment to satisfy a tax debt or a court judgment.
49
Liabilities
Debts of a business that have yet to be paid.
50
Local area network (LAN)
A network in which all computers are physically attached to each other and data is transmitted at high speeds over short distances.
51
Local national
An employee who works in the country where his or her home base is located, even though the employee may actually be a citizen of another country.
52
Long-term assignment
A job assignment that is realistically expected to last more than 12 months.
53
Long-term care insurance
An insurance contract providing for coverage of qualified long-term care services, including diagnostic, preventive, treating, mitigating, and rehabilitative services, which is treated as an accident and health insurance contract for payroll tax purposes.
54
Lookback period
The 12-month period running from July 1 of the second preceding calendar year through June 30 of the preceding calendar year. The employer's payroll tax liability during this period determines its depositor status for the current year. The period may be different for some employers.
55
Mainframe
Large, powerful computer that is generally used for company-wide computing since it can handle multiple users and tasks at the same time.
56
Master file
The collection of data describing the employees of a company.
57
Matching principle
Matching revenue earned during an accounting period with the expenses incurred in generating the revenue.
58
Medical support withholding
The process of withholding amounts from an employee's compensation to satisfy a medical support order from a court or a state child welfare administrative agency. The employer is responsible for withholding the amounts and paying them over to the party named in the medical support withholding order.
59
Medical/dental/health plans
Employer-provided plans covering the employee's health insurance. In most cases the value of medical/dental/health plans are not included in the employee's income.
60
Medicare
A federal hospital insurance program for individuals age 65 or older and some disabled persons. It is funded through the hospital insurance (HI) component of FICA tax.
61
Minicomputer
Smaller than a mainframe computer but still able to handle multiple users and tasks on a more limited basis; often used to handle departmental computing needs in large organizations.
62
Minimum wage
The lowest amount that an employer can pay its employees per hour under federal or state law. The federal minimum wage is $7.25 per hour (effective 7/23/09).
63
Monthly
Once per month.
64
Moving expenses
Amounts paid to move an employee from an old home's location to a new home. If the move and the expenses meet certain requirements, the expenses are qualified moving expenses and not taxable. If the move or the expenses do not meet certain requirements, the expenses are nonqualified moving expenses and taxable.
65
MQGE
Medicare Qualified Government Employee. Government employee who has only the Medicare component of FICA, not social security, withheld from wages.
66
Multiple Worksite Report (MWR)
A report developed by the Bureau of Labor Statistics to help it collect statistical information on U.S. businesses with multiple work sites.
67
MWR
Multiple Worksite Report.
68
NACHA
National Automated Clearing House Association.
69
Net pay
That part of an employee's wages that remains after all deductions have been subtracted (e.g., taxes, health insurance premiums, union dues, etc.).
70
Net worth
Amount by which a company's assets exceed liabilities.
71
Network
System connecting computers and applications that consists of the physical connection (topology) and the software.
72
New-hire reporting
The reporting of newly hired and rehired employees to state agencies to facilitate the collection of child support and/or to uncover abuse in the state's unemployment compensation, workers' compensation, or public assistance programs.
73
NLRB
National Labor Relations Board.
74
No-additional-cost fringe benefits
A tax-free fringe benefit for employees consisting of free services offered by an employer at no substantial additional cost to the employer.
75
Nonaccountable plan
An employer's business expense reimbursement plan that does not meet the requirements regarding business connection, substantiation, and returning excess amounts. Payments made under the plan are included in employees' income.
76
Noncash fringe benefits
Benefits provided to employees in some form other than cash (e.g., company car, health and life insurance, parking facility, etc.), which may be taxable or nontaxable.
77
Nondiscretionary bonus
Contractual or agreed-upon bonus or incentive related to production, efficiency, attendance, quality, or some other measure of performance; included in the regular rate of pay.
78
Nondiscrimination testing
Tests that determine whether benefit plans provided by an employer discriminate in favor of highly compensated or key employees. If such discrimination is found, the employer will lose its favorable tax treatment for the benefit. Benefits provided under the plan may be taxable to employees receiving them.
79
Nonexempt employees
Employees who are covered by the minimum wage and overtime provisions of the Fair Labor Standards Act. They may be paid on an hourly or salary basis.
80
Nonqualified plan
In the context of employee benefits, an employer plan that does not meet IRS qualification requirements.
81
Nonresident alien
An individual from a foreign country working in the U.S. who does not pass either the "green card" or "substantial presence" tests and is subject to federal income tax on U.S. source income.
82
Nonstatutory stock option
A stock option plan that gives an employee the opportunity to buy the employer corporation stock at a fixed price for a certain period of time. The employee is taxed on the gain between the price paid and fair market value (FMV) of the stock on the date of purchase.
83
Normal credit
Amount of an employer's timely-paid contributions into a state unemployment insurance fund, taken as a credit against the employer's federal unemployment tax.
84
Normal retirement age
The age at which retirees may receive unreduced social security benefits. Individual company retirement plans may use a different age.
85
OASDI
Old Age, Survivors, and Disability Insurance, also known as social security.
86
Obligee
A person to whom a debt is owed.
87
Obligor
A person who owes a debt.
88
OCSE
Office of Child Support Enforcement.
89
ODFI
Originating Depository Financial Institution.
90
OMB
Office of Management and Budget.
91
On-call time
Nonwork time during which employees are required to be available to handle job-related emergencies.
92
One-day deposit rule
Requires employers that accumulate a tax liability of $100,000 or more during a deposit period to deposit the withheld taxes within one banking day of the day the liability was incurred.
93
Online processing
Processing performed under direct control of the computer (can be batch or real time).
94
Operating system
The computer program that controls the basic operations of a computer (e.g., MS-DOS, UNIX, Windows, Linux).
95
Opportunity wage
A reduced minimum wage ($4.25 per hour) that can be paid to teenagers during their first 90 days at work.
96
Originating Depository Financial Institution (ODFI)
A financial institution that is qualified to initiate deposit entries submitted by an employer as part of the direct deposit process.
97
Other compensation
Compensation other than wages and tips that an employer must report on an employee's Form W-2 and other payments which may be included in the regular rate of pay.
98
Outplacement services
Services provided by employers to help employees find a new job after a layoff or reduction in force.
99
Overtime
The Fair Labor Standards Act (FLSA) requires that all nonexempt employees be paid a premium of 50% of their regular rate of pay for hours worked in excess of 40 hours per week.
100
Overtime premium pay
The premium required to be paid under the FLSA to employees who work more than 40 hours in a workweek.
101
Overtime premium rate
Amount equal to one-half of an employee's regular rate of pay.
102
Owner's equity
The assets of a company minus its liabilities.
103
Paid time off (PTO)
Payment received for time not worked due to holiday, illness, vacation, jury duty, bereavement, or the failure of the employer to provide sufficient work.
104
Payroll card
An electronic payment method that allows employees without bank accounts to receive pay through EFT.
105
Payroll expense
Expense that may be recorded in the payroll expense journal by function or by type of pay.
106
Payroll period
The period of service for which an employer pays wages to its employees.
107
Payroll register
A report listing and summarizing the compensation paid and deductions taken from each employee's wages for the payroll period.
108
Payroll tax
Any tax levied by a government agency on employees' wages, tips, and other compensation.
109
PC
Personal computer.
110
PDS
Private delivery service.
111
PEO
Professional Employer Organization
112
Per diem
A flat daily rate of reimbursement for business expenses (e.g., meals, lodging, and incidentals) incurred by employees while traveling overnight on business.
113
Percentage method of withholding
One allowable method for calculating federal income tax withholding from an employee's wages, most often used when the calculation is automated.
114
Personal computer (PC)
Computers that are designed for personal use by having all the computer functionality, operating systems, and applications self-contained.
115
Pieceworker
Worker who is paid per unit, or piece, produced.
116
Posting
Recording a transaction in a journal entry, or recording a journal entry in the general ledger.
117
Premium pay
In a payroll context, the extra pay above an employee's regular rate of pay that is paid for working overtime hours or a special pay rate for work done on weekends, on holidays, during undesirable shifts, or for doing dangerous work.
118
Pretax deduction
A deduction taken from gross pay that reduces taxable wages.
119
Private delivery service (PDS)
A private-sector company that delivers packages. If their services are "designated" by the IRS, materials delivered to them by a taxpayer for delivery to the IRS are considered postmarked on the date the delivery to the PDS is recorded on their database or marked on the package.
120
Private Letter Ruling (PLR)
A ruling provided by the IRS when requested by a taxpayer who wants to know how the tax laws apply to a particular factual situation. The ruling applies only to the taxpayer requesting it and cannot be relied on by other taxpayers.
121
Prizes
An item of value provided to an employee. The fair-market value is included in the employee's income.
122
Profit
Occurs when income exceeds costs and expenses.
123
PTO
Paid time off.
124
Public-sector employer
An employer that is a state or local governmental unit (e.g., county, town, village) or a political subdivision of such a unit (e.g., school district, sewer district).
125
Qualified plan
A benefit plan that meets IRS qualification requirements for tax-favored treatment (e.g., nondiscrimination) under IRC 401(a).
126
Qualified transportation fringe
Certain employer-provided transportation benefits that can be excluded from employees' income up to certain annually adjusted limits (i.e., transit passes, van pools, parking, bicycle).
127
Qualifying event
One of several events that results in the loss of group health insurance coverage for employees or their dependents and entitles them to continued coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA).
128
Quarterly
Once every three months or four times per year.
129
RDB
Relational database.
130
RDFI
Receiving Depository Financial Institution.
131
Real-time
Processing that occurs immediately when the data is entered into the system.
132
Reasonable basis test
A standard used to determine whether a worker can be treated as an independent contractor regardless of whether the common law test is met, based on prior court and administrative rulings, IRS audits, or long-standing practice in the industry.
133
Receiving Depository Financial Institution (RDFI)
A financial institution that receives direct deposit entries from an automated clearinghouse.
134
Reconcile
Process of ensuring that amounts withheld, deposited, paid, and reported by employers agree with each other and, if they do not, determining the reasons and making the necessary corrections.
135
Reconciliation
The balancing process that ensures accuracy of the information.
136
Regular rate of pay
An hourly pay rate determined by dividing the total regular pay actually earned for the workweek by the total number of hours worked.
137
Regular wages
The amount of pay that an employee receives for working.
138
Regulations
The means by which government agencies administer and enforce laws (e.g., rules issued by the IRS to enforce the tax laws).
139
Reimbursed expense
Payment for business-related expenses incurred by an employee on behalf of, or for the convenience of, the employer.
140
Reimbursement financing
An unemployment insurance financing system that allows employers to pay back to the state unemployment trust fund any benefits paid to their former employees rather than paying a tax based on their experience rating. This form of financing is most often used by nonprofit groups and public-sector employers.
141
Reimbursement Fund
See "Flexible Spending Arrangement."
142
Related corporations
A group of corporations meeting certain common ownership and concurrent employment requirements that may be treated as one employer for social security, Medicare, and FUTA taxes.
143
Relational database (RDB)
A file management system that organizes data into a series of tables, each containing a series of related data in columns and rows.
144
Remuneration
Payment for services, including benefits.
145
Resident alien
In the context of payroll, an individual who meets the "green card" or "substantial presence" test for determining resident status in the U.S. Resident aliens are generally subject to federal income, social security, and Medicare taxes on the same basis as U.S. citizens.
146
Retained earnings
Amount that a company's revenue exceeds its expenses, reduced by any amount returned to the owners.
147
Retroactive pay
Pay for time worked in a previous workweek; retroactive pay must be applied to both regular and overtime hours.
148
Revenue
Income received for goods and services provided by an organization.
149
Revenue account
Identifies amounts received for goods sold and services rendered during the accounting period.
150
Revenue Procedure (Rev. Proc.)
Official statements from the IRS on how to carry out tax compliance.
151
Revenue Rulings (Rev. Rul.)
Published decisions issued by the IRS that apply the tax laws to a particular set of facts. They can be used by taxpayers to determine their tax liability in similar factual situations.
152
Roth 401(k)/403(b)
A part of an employer's 401(k)/403(b) plan that defers taxation on the plans earnings. The contributions to a Roth 401(k)/403(b) are taxable wages for federal income, social security, and Medicare taxes.
153
RRTA
Railroad Retirement Tax Act.
154
Safe harbor
An IRS-approved alternative method (usually a short cut) for complying with IRS rules, regulations, and procedures (e.g., per diem allowances and high-low substantiation).
155
Salary reduction arrangement
See "Cash or deferred arrangement."
156
Sarbanes-Oxley Act of 2002 (SOX)
The Sarbanes-Oxley Act is a federal law that focuses on accounting reforms for financial reporting and disclosure for public companies. This act requires chief executive to take personal responsibility for the accuracy and completeness of corporate financial statements, plus other important issues.
157
Savings incentive match plans for employees of small employers (SIMPLE Plans)
Retirement plans for employees of small employers (no more than 100 employees) that have simpler administrative and nondiscrimination requirements than other retirement plans.
158
SECA
Self-Employment Contributions Act.
159
Segregation of duties
A basic principle of internal control that prevents individuals from having responsibility for all phases of a job process, thus guarding against misuse or misappropriation of company assets.
160
Self-Employment Contributions Act (SECA)
Requires self-employed individuals to pay both the employer and employee share of social security and Medicare taxes.
161
Semiannual
Twice per year or once every six months.
162
Semimonthly
Twice per month.
163
SEP
Simplified employee pension.
164
Severance pay
A payment offered by some employers to terminated employees (usually those who are terminated through no fault of their own) that is designed to tide them over until new employment is secured.
165
Shift differential
Extra pay received by employees for working a less-than-desirable shift (e.g., evenings or late nights).
166
Short-term assignment
See Temporary assignment
167
Sick pay
Replacement wages paid to an employee who cannot work because of an illness or injury that is not work-related.
168
SIMPLE plans
Savings incentive match plans for employees of small employers, a type of qualified retirement plan.
169
Simplified employee pension (SEP)
An individual retirement arrangement (IRA) with special participation requirements that is available for small employers.
170
SIT
State income tax.
171
Social security
The Old Age, Survivors, and Disability Insurance (OASDI) component of FICA.
172
Social Security Administration (SSA)
The federal government agency that administers social security.
173
Social security number (SSN)
An individual's Taxpayer Identification Number; consists of nine digits (000-00-0000).
174
Social Security Number Verification Service (SSNVS)
An online service offered by the Social Security Administration allowing employers to verify the accuracy of their employees' social security numbers.
175
Social Security Statement
Statement from the Social Security Administration that provides an employee with a year-by-year display of the employee's earnings reported to the SSA and an estimate of retirement, survivors', and disability benefits the employee (and family) may be eligible for, now and in the future.
176
Special accounting rule
A safe-harbor rule that allows employers to treat certain noncash fringe benefits provided to employees in November or December as received in the following year. If an employer uses the special accounting rule, the employee must also report the benefit for the same period.
177
Special wage payments
Payments made to employees or former employees for services performed in an earlier year. These payments require special reporting by employers so that retirees' social security benefits are not reduced under the annual earnings test because of amounts earned in prior years.
178
Split shifts
A workday that is divided into two parts separated by a spread of hours longer than the conventional rest or meal period.
179
SSA
Social Security Administration.
180
SSN
Social security number.
181
SSNVS
Social Security Number Verification Service
182
Statement of cash flow
Financial statement that shows the sources and uses of cash during the accounting period.
183
Statute of limitations
A period of time established by law during which parties can take legal action to enforce their rights.
184
Statutory employees
Special groups of employees identified by law (e.g., full-time life insurance salespeople, certain homeworkers) whose wages are not subject to federal income tax withholding but are subject to social security, Medicare, and FUTA taxes.
185
Statutory nonemployees
Special groups of workers who may qualify as common law employees but are treated under the law as independent contractors (e.g., qualified real estate agents and direct sellers); their compensation is not subject to federal income tax withholding, social security, Medicare, or FUTA taxes.
186
Straight time
The number of work hours during a workweek for which an employee's regular hourly rate of pay will be paid.
187
SUB
Supplemental unemployment benefits.
188
Subsidiary ledger
Replaces a journal; summarized entries are posted from subsidiary ledgers directly to the general ledger; arose with the computerization of most companies' accounting systems.
189
Substantiation
In the context of reimbursed employee business expenses, the requirement that employees keep records of the time, place, and business purpose of reimbursable expenses they incur, including receipts (also used to track business use of company-provided vehicles).
190
Substitute forms
Tax forms that are printed by private printers rather than the Internal Revenue Service. They must meet certain specifications to be acceptable for filing.
191
SUI
State unemployment insurance.
192
Supper money
The irregular and occasional payment of amounts to employees who work late to cover the cost of meals eaten during that extra working time.
193
Supplemental unemployment benefits (SUB)
Employer plans that provide supplements to state unemployment compensation benefits.
194
Supplemental wages
Compensation received by employees other than their regular pay, such as bonuses, commissions, and severance pay. Income tax may be withheld from such payments at a flat rate under certain circumstances.
195
System edit
Warning or alert built into computer software; a system edit checks for errors and either corrects them or notifies the operator that something may be wrong; system edits generally check for values outside accepted ranges (e.g., negative net pay).
196
T-account
Diagram used for recording entries into an account.
197
Table I
Refers to IRS Uniform Premiums Table I, which is used to calculate the value of group-term life insurance over $50,000.
198
Take-home pay
In the context of a federal tax levy, the amount of an employee's wages that remains after all normal deductions in effect at the time of the levy have been subtracted. (See Net pay)
199
TAMRA '88
Technical and Miscellaneous Revenue Act of 1988.
200
Tangible
Type of asset that includes land and improvements, buildings, computers and software, furniture, and automobiles.
201
Tax equalization plan
A plan offered by an employer to an employee working abroad that would provide the employee with the same take-home pay he or she would have in the U.S.
