Payroll & Tax Terms

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FICA- The Federal Insurance Contribution Act tax that pays for Social Security and Medicare is split 50/50 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 portion of 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 any adjustments, deductions or exemptions. Net earnings is how much you get after everything is deducted.

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IRS- The

Internal Revenue Service (IRS) is the United States federal government agency that collects taxes and enforces the internal revenue laws. Social Security Tax vs Medicare- Social Security Benefits are funded by taxes imposed on wages of employees and self-employed persons. Medicare is a social insurance program administered by the United States government, providing health insurance coverage to people who are aged 65 and over, or who meet other special criteria.
Pay Period- the amount of time you get paid. Payroll Clerk - A payroll clerk is a member of the payroll department who focuses on activities that help to
organize data that is related to the process of providing compensation to employees of the company.

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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 is when 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. Overtime Pay- when you work more then you were supposed to and get payed more for working over your hours necessary. Electronic Badge Reader- detects who the person is and if they are allowed to enter the building. Tax Brackets- is the rate you pay on the "last dollar" you earn W-4 vs W-2- Form W-2, Wage and Tax Statement, is used in the United States income tax

system as an information return to report wages paid to employees and the taxes withheld from them. Form W-4 is a tax form used by the United 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, charitableExpenses you are permitted to subtract from your taxable income before figuring your tax bill. All taxpayers 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 joint returns and to $5,700 for individuals. If your qualifying expenses exceed your standard deduction, you may claim the higher amount by itemizing your deductions. Although no records are needed to back up your right to the standard deduction, you must maintain records of qualifying expenditures if you itemize. For higher income taxpayers, the amount of their otherwise allowable itemized deductions will 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 filing separately, for which the threshold is $79,975.

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

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State Taxes vs Local Taxes- State

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taxes are taxes that are imposed by state governments to fund state programs. In addition to federal and state taxes, your local town or city can also impose taxes. Examples of local taxes are property taxes Turbo Tax- Intuit Inc. is an American software company that develops financial and tax preparation software and related services for small businesses Tax Deductions- A tax deduction or a tax-deductible expense affects a taxpayer's income tax. H & R Block- a tax preparation company in the United States, claiming more than 22 million customers worldwide, with offices in Canada, Australia and the United Kingdom. IRA vs Roth IRA- A tax-deferred or tax-free retirement account established by an individual 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. an Individual Retirement Arrangement (IRA) allowed under the tax law of the United States. Named for its chief legislative sponsor, the late Senator William Roth of Delaware, a Roth IRA differs in several significant ways from other IRAs. Dependents- A person who relies on a taxpayer for the provision of home and living expenses.
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. State Unemployment Taxes- Each state operates its own unemployment compensation program that is funded largely by taxes on employers. So, if you have employees, you should expect to pay some state unemployment taxes. These taxes are in addition to any federal unemployment tax you may owe.

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Federal Tax Deposit Coupon- used to pay your withholding and payroll taxes Form 940 vs Form 941- Form 940 reports the employer's unemployment taxes.

Form 941 is the IRS Employer's Quarterly Federal Tax Return Tax Day - is the common term for the day on which tax returns (statements about income taxes) are due to the federal and state governments from U.S. citizens, resident aliens, and certain nonresident aliens.
Tax Extension- is the extension you get to pay your taxes. Social Security Numbers- In the United States, a Social

Security number (SSN) is a nine-digit number issued to U.S. citizens, permanent residents, and temporary (working) residents under section 205(c)(2) of the Social Security Act, codified as 42 U.S.C. § 405(c)(2). Flat Tax- A flat tax (short for flat rate tax) is a tax system with a constant rate Sales Tax- a tax based on the cost of the item purchased and collected directly from the buyer Progressive Tax vs Regressive Tax- a progressive tax is any tax in which the rate increases as the amount subject to taxation increases. A regressive tax is a tax imposed in such a manner that the tax rate decreases as the amount subject to taxation increases. 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. Excise Tax- An indirect tax charged on the sale of a particular good. Property Taxes- annual local taxes charged against the value of a homeowner's property. Gift Tax- a tax imposed on transfers of property by gift during the lifetime of the giver Inheritance Tax- a tax on the estate of the deceased person

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Estate Tax- A tax

which the federal and state governments impose on assets of a person at death based on their net value at the time of death. An easement often reduces estate taxes. 401K Plan- The 401(k) plan is a type of employer-sponsored defined contribution retirement plan under section 401(k) of the Internal Revenue Code Direct Deposit- An automatic deposit of wages or benefits to a customer's bank account. Tax Evasion- the deliberate failure to pay taxes (usually by making a false report) Common Tax Deductions- A tax deduction or a tax-deductible expense affects a taxpayer's income tax. A tax deduction represents an expense incurred by a taxpayer CPA- certified public accountant: an accountant who has passed certain examinations and met all other statutory and licensing requirements
Standard Deduction vs Itemized Deductions- If you can claim a child as your dependent on your tax return, the child may not claim a personal exemption on his or her tax return. But if the child files a tax return, he or she still gets a standard deduction of between $900 and $3,500 in 2008, depending on how much money is earned and the source of that income. Itemized deductions is when Individual

taxpayers in the United States are allowed a choice when preparing their Federal income tax returns. 44.
Capital Gain- the

amount by which the selling price of an asset exceeds the purchase

price 45. Capital Loss- the amount by which the purchase price of an asset exceeds the selling price; the loss is realized when the asset is sold

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