fpc Flashcards
Account
A record of assets, expenses, liabilities, equity and revenues in the general ledger, to which debit and credit entries are posted to record changes in the value of the account.
Accountable plan
An employer’s business expense reimbursement plan that satisfies all IRS requirements regarding substantiation, business connection, and return of excess amounts in a reasonable period of time.
Accounting period
The period covered by an income statement (e.g., month, year); also known as the business cycle.
Accrual
The recognition of assets, expenses, liabilities, or revenues in the accounting period that the transaction has occurred.
ACH
Automated Clearing House. A Federal Reserve Bank or private financial institution acting on behalf of an association operating a facility that serves as a clearinghouse for direct deposit or other payment transactions; entries are received and transmitted by the ACH under the rules of the association.
ACH credit entry
A transaction in which a taxpayer instructs its financial institution to originate a federal tax deposit through the ACH system to the appropriate Treasury account. Also known as EFTPS-Through a Financial Institution.
ACH debit entry
A transaction in which an employer’s Financial Agent, after receiving instructions from the employer, instructs the employer’s financial institution to withdraw funds from the employer’s account for a federal tax deposit and to route the deposit to the appropriate Treasury account through the ACH system. Also known as EFTPS-Direct.
Actual deferral percentage (ADP)
The percentage of wages deferred by employees participating in a salary reduction plan (e.g., 401(k) plan). The IRS uses the ADP to determine whether the plan meets the agency’s nondiscrimination requirements.
AD&D
Accidental death and dismemberment insurance.
ADA
Americans with Disabilities Act of 1990.
ADEA
Age Discrimination in Employment Act of 1967.
Adoption assistance
A benefit provided by an employer to an employee to assist the child adoption process. The benefit is excluded from federal income tax withholding, though not social security and Medicare taxes.
ADP
Actual deferral percentage calculation, part of a 401(k) plan’s discrimination testing.
After-tax deduction
A deduction from an employee’s pay that does not reduce the employee’s taxable wages. It is taken out only after all applicable taxes and other deductions have been withheld (e.g., union dues, garnishments, charitable contributions).
Age Discrimination in Employment Act of 1967 (ADEA)
Federal law that prohibits employment discrimination on the basis of an individual’s age (40 or older).
Aggregate method
Method of withholding federal income tax from supplemental wages in which the supplemental wage payment is combined with the regular wages paid during the most recent or current payroll period; after calculating withholding on the total amount using the wage-bracket or percentage method, the amount already withheld from the last wage payment is subtracted to reach the amount that must be withheld from the supplemental wage payment.
Alien
A citizen of a country other than the U.S. or one of its territories or possessions.
Allowances
The number of withholding allowances that the employee claims on Form W-4. The number of allowances multiplied by a value set by the IRS determines the value of the employee’s allowances when calculating federal income tax.
American Payroll Association
The premier professional society for Payroll Professionals in the United States providing education, support and recognition for practitioners in the payroll industry.
Americans with Disabilities Act of 1990 (ADA)
Federal law that broadly prohibits discrimination against individuals with disabilities who can perform the essential functions of a job with or without reasonable accommodation.
Annual Wage Reporting (AWR)
The Social Security Administration’s system of recording wages reported annually by employers on Forms W-2.
APA
American Payroll Association.
ASP
Application Service Provider
Assets
Resources acquired by a business that are consumed by the business.
Assignment
See “Wage assignment.”
ATM
Automated teller machine
Attachment
See “Wage attachment.”
Audit
A review of a business’s records and procedures to determine their accuracy and completeness.
Audit trails
Tracks that identify how data was entered into the company’s records.
Authorization agreement
In general, an agreement that may be written or electronic (entered into voluntarily) authorizing an employer to withhold and distribute a portion of an employee’s wages to a party designated by the employee (e.g., direct deposit, union dues).
Automated Clearing House (ACH)
A Federal Reserve Bank or private financial institution acting on behalf of an association operating a facility that serves as a clearinghouse for direct deposit transactions. Entries are received and transmitted by the ACH under the rules of the association.
Awards
An item of value provided to an employee for exceptional services. The value is generally included in the employee’s income.
AWR
The Social Security Administration’s Annual Wage Reporting program.
Back-pay award
A cash award made to an employee that generally results from legal action to remedy a violation of federal or state wage-hour or employment discrimination laws.
Backup withholding
Income tax withholding required from nonemployee compensation when the payee fails to furnish the payer with a Taxpayer Identification Number (TIN) or the payer is notified by the IRS that the payee’s TIN is incorrect.
Balance
The value of an account as determined by calculating the difference between the debits and credits in the account.
Balance sheet
A financial statement that presents a business’s financial position in terms of its assets, liabilities, and owner’s equity as of a certain date (generally the end of the company’s accounting periods).
Batch
Sample or limited amount of all of the data being processed.
Batch control
Control that is designed to ensure that a batch of data has been entered successfully.
Batch processing
Processing data as a group, either to increase controls or processing efficiency.
Behavioral control
The right of a business to direct and control the details and means by which a worker performs the work to be done.
Biweekly
Once every two weeks. The most common payroll frequency.
BLS
Bureau of Labor Statistics.
Bona fide
Refers to actions taken in good faith, without pretense or fraud.
Bonus
A cash payment to an employee for excellent services.
BPO
Business Process Outsourcing
BSO
Business Services Online, the Social Security Administration’s employer portal for filing Forms W-2 and the use of the Social Security Number Verification System.
Business expense
Amounts spent by an employee for travel, lodging, meals, etc., while on the employer’s business. Reimbursements for such expenses are excluded from income when paid under an accountable plan. Reimbursements for such expenses are included in income when paid under a nonaccountable plan.
Cafeteria plan
A plan that offers flexible benefits under IRC Section 125. Employees choose their benefits from a “menu” of cash and benefits, some of which can be paid for with pretax deductions from wages.
Cash or deferred arrangement (CODA)
An arrangement under a retirement plan that allows employees to either receive cash or have the employer contribute an equivalent amount to the plan.
Catch-up Contributions
Allowed elective deferrals by an employee to a defined contribution retirement plan above the statutory or plan mandated limit made by employees 50 years and older.
CB
Cumulative Bulletin. The annual publication of the IRS’ Internal Revenue Bulletin.
CCPA
Consumer Credit Protection Act.
Central information file (CIF)
A file maintained by an Automated Clearing House (ACH) that contains depository financial institution names, routing numbers, addresses of contact persons, settlement and delivery information, and output medium requested.
Centralized Support Collection
The welfare reform law passed in 1996 requires all states to implement procedures allowing employers to send many of the child support payments they withhold from workers’ pay to a centralized location within their state, also known as state disbursement units.
Chart of accounts
Lists each account by a name and an identification number; the numbering scheme is designed to identify the type of account.
Child support withholding
The process of withholding amounts from an employee’s compensation to satisfy a child 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 withholding order.
Circular E
IRS Publication 15, Employer’s Tax Guide. This publication contains the basic rules, guidelines, and instructions for withholding, depositing, reporting, and paying federal employment taxes.
Client/server
A method of computing where one computer is tied to another and each share a portion of the workload, with the main data storage being on the server.
COBRA
Consolidated Omnibus Budget Reconciliation Act of 1985 that provides the ability to continue participating in an employer’s health insurance plan after employment ends.
CODA
Cash or deferred arrangement. An arrangement under a retirement plan that allows employees to either receive cash or have their employer contribute an equivalent amount to a qualified retirement plan.
COLA
Cost-of-Living Adjustment.
Commission
Percentage of sales, collections, etc., paid to an employee.
Common law employee
A worker who is an employee under the common law test.
Common law test
A test that measures the right to control and direction that an employer has the authority to exercise over a worker. Where the employer has the right to direct the worker as to how, where, and when the work will be completed, in addition to controlling the result of the work, the worker is a common law employee.
Common paymaster
Employees who work concurrently for one or more related corporations that are treated as a single employer for social security, Medicare, and FUTA taxes.
Communications protocols
Software parameters and standards that control the transfer of information from one computer to another.
Company vehicle fringe benefit
The value of the use of the company vehicle by the employee. When the employee documents the business use of the vehicle, the value is excluded from income. When the employee fails to document the business use of the vehicle, the value is included in income.
Compensation
All cash and noncash remuneration provided to an employee for services performed for the employer.
Compensatory time
Paid time off granted to an employee for working extra hours. The Federal Wage-Hour Law places severe restrictions on the use of compensatory time to avoid paying overtime, although special exemptions are allowed for public-sector employees.
Concurrent employment
Working for more than one related corporation under a common paymaster arrangement.
Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA)
Federal law that requires employers with group health-care coverage to offer continued coverage to separated employees and other qualifying beneficiaries and Medicare-only taxation of certain state and local governmental employees.
Constructive payment
An IRS rule that considers wages to have been paid to an employee when the employee has access to the wages without substantial limitations or restrictions.
Constructive receipt
An IRS rule that considers wages to be received by an employee when the employee has access to the wages without substantial limitation or restriction.
Consumer Credit Protection Act (CCPA)
Federal law that restricts the amount of an employee’s earnings that can be garnished to pay creditor debts, including child support.
Consumer Price Index (CPI)
A measure of the change in prices of certain basic goods and services (e.g., food, transportation, housing) developed and published by the Bureau of Labor Statistics (BLS).
Control group
A group of key or highly compensated employees in a company whose proportion of benefits is limited under the qualification requirements of certain benefit plans (e.g., Section 125 or 401(k) plans). Also, employers may not use the commuting valuation method for such employees when determining the value of their personal use of a company-provided vehicle.
Cost-of-Living Adjustment (COLA)
An adjustment of wages or benefit payments to account for changes in the cost of living, generally based on changes in the Consumer Price Index (CPI).
Cost-of-Living Index
See “Consumer Price Index.”
Covered employees
For each law affecting payroll and human resources, this term defines those workers who are subject to the law.
