FPC 2 Flashcards
Gross pay
The total amount received from the employer before any deductions are made.
Gross-up
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.
Group legal services plan
An employer plan providing for the advance provision or prepayment of personal legal services for employees and their dependents.
Group-term life insurance (GTL)
Term life insurance that is provided to employees, with the cost being borne by the employer, the employee, or both.
GSA
General Services Administration
GTL
Group-term life insurance.
Guaranteed annual wage (GAW)
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).
HCE
Highly compensated employee.
Health Insurance Portability and Accountability Act (HIPAA)
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.
Health Savings Account (HSA)
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.
HI
Hospital Insurance (the Medicare component of FICA).
High-low substantiation method
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.
Highly compensated employee (HCE)
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.
HIPAA
Health Insurance Portability and Accountability Act.
Housing allowance
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.
HRIS
Human Resource Information System.
HSA
Health Savings Account
Immigration Reform and Control Act of 1986 (IRCA)
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.
Impute
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.
Incentive stock options
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.
Income statement
A financial statement showing a company’s results of operations for an accounting period or fiscal year.
Income tax treaties
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.
Indefinite assignment
See “Long-term assignment.”
Independent contractor
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.
Individual Retirement Arrangement (IRA)
A trust created or organized for the exclusive benefit of an individual or his or her beneficiaries.
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.
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.
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.
Integrated
Computer systems providing differing processes that share common data.
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.
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.
Internal control
Measures used by a company to safeguard company assets by preventing errors, waste, embezzlement, and fraud.
Internal Revenue Bulletin (IRB)
Issued weekly by the IRS. Contains recently issued regulations, revenue procedures, and other agency announcements.
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.
Internal Revenue Service (IRS)
The U.S. government agency that administers the Internal Revenue Code and U.S. tax laws and regulations.
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.
Involuntary deductions
Deductions over which employers and employees have no control.
IRA
Individual Retirement Arrangement.
IRB
Internal Revenue Bulletin.
IRC
Internal Revenue Code.
IRCA
Immigration Reform and Control Act.
IRS
Internal Revenue Service.
ITIN
Individual Taxpayer Identification Number.
Journal
A record of financial transactions that debit or credit an account.
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.
LAN
Local area network.
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.
Levy
An attachment to satisfy a tax debt or a court judgment.
Liabilities
Debts of a business that have yet to be paid.
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.
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.
Long-term assignment
A job assignment that is realistically expected to last more than 12 months.
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.
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.
Mainframe
Large, powerful computer that is generally used for company-wide computing since it can handle multiple users and tasks at the same time.
Master file
The collection of data describing the employees of a company.
Matching principle
Matching revenue earned during an accounting period with the expenses incurred in generating the revenue.
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.
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.
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.
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.
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).
Monthly
Once per month.
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.
MQGE
Medicare Qualified Government Employee. Government employee who has only the Medicare component of FICA, not social security, withheld from wages.
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.
MWR
Multiple Worksite Report.
NACHA
National Automated Clearing House Association.
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.).
Net worth
Amount by which a company’s assets exceed liabilities.
Network
System connecting computers and applications that consists of the physical connection (topology) and the software.
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.
NLRB
National Labor Relations Board.
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.
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.
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.
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.
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.
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.
Nonqualified plan
In the context of employee benefits, an employer plan that does not meet IRS qualification requirements.
