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Payroll & Tax Terms

FICA-

The Federal Insurance Contribution Act tax that pays for Social Security and Medicare is split50/50 between employers and employees. For 2008, each pays 7.65 percent on the first $102,000 of wages. The rate drops to 1.45 percent each for any additional wages (which is the Medicare portionof the tax). The amount to which the full rate applies rises to $106,800 in 2009.

Gross Earnings vs Net Earnings-

All of your income from taxable sources, before subtracting anyadjustments, deductions or exemptions. Net earnings is how much you get after everything isdeducted.

IRS-

The

Internal Revenue Service

(

IRS

) is theUnited States federal governmentagencythat collectstaxes and enforces theinternal revenue laws. 4.

Social Security Tax vs Medicare- Social Security

Benefits are funded by taxes imposed on wages of employees and self-employed persons.

Medicare

is asocial insuranceprogram administered by theUnited States government,providinghealth insurance coverage to people who are aged 65 and over, or who meet other special criteria.5.

Pay Period- the amount of time you get paid.

Payroll Clerk -

Apayrollclerk is a member of the payroll department who focuses on activities that help toorganizedatathat is related to the process of providing compensation to employees of the company.

Payroll System – the payroll system is the system in which people get paid for what they have worked.

Hourly Wage vs. Salary vs Commission- hourly wage is when you are payed by the our, commission iswhen you are payed by how much you sell and salary is when you get payed yearly.

Bonus- when you do a good job in your job, they give you more money for what you do.

10.

Overtime Pay- when you work more then you were supposed to and get payed more for working overyour hours necessary.

11.

Electronic Badge Reader- detects who the person is and if they are allowed to enter the building.

12.

Tax Brackets-

is the rate you pay on the "last dollar" you earn

13.

W-4 vs W-2-

Form W-2, Wage and Tax Statement

, is used in theUnited States income tax system as an

information return

to report wages paid to employees and thetaxes withheld from them.

Form W-4

is a tax form used by theUnited States Internal Revenue Service. The form is used by employers to determine the correct amount of tax withholding to deduct from employees' wages.14.

Deductions –union dues, health insurance payments, life insurance payments, pensions, charitable-

Expenses you are permitted to subtract from your taxable income before figuring your tax bill. Alltaxpayers may claim a standard deduction amount - $ 10,900 for 2008 joint returns, for example, half that amount on individual returns. For 2009, the standard deduction will increase to $11,400 for jointreturns and to $5,700 for individuals. If your qualifying expenses exceed your standard deduction, youmay claim the higher amount by itemizing your deductions. Although no records are needed to backup your right to the standard deduction, you must maintain records of qualifying expenditures if youitemize. For higher income taxpayers, the amount of their otherwise allowable itemized deductionswill be reduced when AGI exceeds a threshold amount. For 2008, the reduction is equal to the lesser of 1% of AGI over the threshold amount, or 80 percent of itemized deductions otherwise allowable.For 2008, the threshold amount is $159,950 for all returns except those returns filed married filingseparately, for which the threshold is $79,975.

15.

Audit-

As if you didn't know, this is a review of your tax return by the IRS, during which you are askedto prove that you have correctly reported your income and deductions. Most audits are done by mailand involve specific issues, not the entire return.

16.

State Taxes vs Local Taxes-

State taxes are taxes that are imposed by state governmentsto fund state programs. In addition to federal and state taxes, your local town or citycan also impose taxes. Examples of local taxes are property taxes

17.

Turbo Tax-

Intuit Inc. is an American software company that develops financial and taxpreparation software and related services for small businesses

18.

Tax Deductions-

A tax deduction or a tax-deductible expense affects a taxpayer'sincome tax.

19.

H & R Block-

a tax preparationcompany in the United States, claiming more than 22 million customers worldwide, with offices in Canada, Australia and the United Kingdom.20.

IRA vs Roth IRA-

A tax-deferred or tax-free retirement account established by anindividual that permits the individual to set aside up to a certain amount per year,with earnings tax-deferred until withdrawals begin at age 59 1/2 or later.

anIndividualRetirement Arrangement(IRA) allowed under the tax law of the United States. Named for its chief legislative sponsor, the late Senator William Rothof Delaware, a Roth IRA differs inseveral significant ways from other IRAs.21.

Dependents-

A person who relies on a taxpayer for the provision of home and livingexpenses.

22.

Federal Unemployment Taxes-

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

23.

State Unemployment Taxes-

Each state operates its own unemployment compensation program that is fundedlargely by taxes on employers. So, if you have employees, you should expect to pay some state unemployment taxes. These taxes are in addition to anyfederal unemployment tax you may owe.

24.

Federal Tax Deposit Coupon-

used to pay your withholding and payroll taxes

25.

Form 940 vs Form 941- Form 940

reports the employer's unemployment taxes. Form 941 isthe IRS Employer's Quarterly Federal Tax Return

26.

Tax Day -

is the common term for the day on whichtax returns(statements aboutincome taxes) are due to the federalandstate governments from U.S. citizens, resident aliens, and certainnonresident aliens.27.

Tax Extension- is the extension you get to pay your taxes.

28.

Social Security Numbers-

In theUnited States, a

Social Security number

(

SSN

) is a nine-digitnumber issued toU.S. citizens, permanent residents,and temporary (working) residents under section 205(c)(2) of the Social Security Act, codified as42 U.S.C. § 405(c)(2). 29.

Flat Tax-

A flat tax (short for flat rate tax) is a tax system with a constant rate

30.

Sales Tax-

a tax based on the cost of the item purchased and collected directly fromthe buyer

31.

Progressive Tax vs Regressive Tax- a progressive tax is

any tax in which the rate increases asthe amount subject to taxation increases. A regressive tax is a tax imposed in such amanner that the tax rate decreases as the amount subject to taxation increases.

32.

Tariff vs Quota-

A tariff is a tax on goods upon importation. A quota is The quantity of goods of a specific kind that a country permits to be imported without restriction or imposition of additional duties.

33.

Excise Tax-

An indirect tax charged on the sale of a particular good.

34.

Property Taxes-

annual local taxes charged against the value of a homeowner'sproperty.

35.

Gift Tax-

a tax imposed on transfers of property by gift during the lifetime of the giver

36.

Inheritance Tax-

a tax on the estate of the deceased person