The legal seizure of an employee’s wages to satisfy delinquent taxes that the employee owes. The taxation agency sends the levy to the taxpayer’s employer, who must withhold the required amount from the taxpayer’s wages. The minimum hourly rate an employer is allowed to pay nonexempt employees under federal, state, or local law.
But all deductions from an employee’s paycheck except for deductions ordered by a court must be approved by the employee in writing. You should be comfortable with the common terminology even if you have an accountant to do your payroll accounting or you use payroll software or a payroll service company. Handling your own payroll for your business can be tricky because the payroll/payroll tax process involves a vocabulary all its own. These terms are the most important ones you’ll encounter as you begin to work on employee paychecks and start the payroll process. ACH is an electronic network for processing direct deposits and other payroll transactions. It is a safe way to transfer money between banks and credit unions and reduces the needs for paper and checks.
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Imputed Income
Disposable earnings are an employee’s wages after all legally required deductions — including payroll taxes — have been subtracted from his or her gross wages. Compensation includes total cash and noncash payments made to an employee in exchange for his or her services rendered. Payroll deductions taken out of an employee’s wages after applicable payroll taxes are withheld. After-tax deductions include wage garnishments and Roth 401(k) contributions.
Company
The Social Security Administration is the government body set up by the Social Security Act. Its job is to administer both Social Security and the Supplemental Security Income (SSI) program. Citizen living permanently in the United States is referred to as a resident alien.
Compensation
Depending on the state, SDI coverage may be funded by the employee, the employer, or both. Refers to when an employer pays employees twice per month, such as on the 15th and last day of the month. An employee’s take-home pay, after mandatory and voluntary deductions. A paycheck issued to an employee outside of the normal payroll run. Additional compensation to motivate higher employee productivity and reward top performance. Taxable, non-monetary compensation provided to employees as a fringe benefit.
- In payroll processing, an accrual occurs any time there is a difference between the pay cycle allocation and the actual expenses paid.
- The FLSA also sets out how to treat jobs that are primarily compensated by tipping.
- Some hourly workers aren’t covered by the FLSA but they’re subject to other regulations.
- Updated regularly with industry-specific vocabulary and concepts, the Glossary provides easy-to-understand definitions of tax-related terms.
Know the differences between HMO, EPO, and PPO insurance plans to determine which is best for your employees. An acronym for Automated Clearing House, ACH refers types of equity accounts to an electronic network dedicated to credit and debit transfers. Another disadvantage is that payroll services are more expensive than running payroll in-house. The services might charge a set monthly fee or offer different payment structures for varying tiers of service. Payroll services may not be the best option for small companies with tight operating budgets because of their cost.
Allows employees who live in one state and work in another to pay state income tax to their home state, instead of the state they work in. Additional wages paid to employees for working undesirable hours, such as weekends, nights, or holidays. An internal form managers and employees can use to submit payroll requests, such as for manual checks, salary advance, or retroactive pay. “In general, \“hours worked\“ includes all time an employee must be on duty, or on the employer’s premises or at any other prescribed place of work. The amount an employer deducts from a noncustodial parent’s wages to satisfy a child support order from the court.
Federal Income Tax Withholding
Imputed income is added to the employee’s gross income and is subject to Social Security and Medicare taxes but typically not federal income tax. Employers must include imputed income in the employee’s W-2 form for tax purposes. Additionally, imputed income may be used to determine an amount for child support payments in some states. Many medium- and large-size companies outsource payroll services to streamline the process.
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