Middlebury

 

Glossary of terms

ACH - Automated Clearing House

Applicable Gross - the maximum amount of employee compensation subject to social security, federal and state income taxes; also known as Taxable Income or Taxable Wage Base

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; also known as Constructive Receipt

Deduction - an amount subtracted from an employee’s gross pay to reach net pay

Direct Deposit - the electronic transfer of an employee’s net pay directly into financial institution accounts designated by the employee

Disposable Earnings - the part of an employee’s earnings remaining after deductions required by law

Earned Income Credit (EIC) – a tax credit available to low-income employees; see IRS Publication 15 http://www.irs.gov/pub/irs-pdf/p15.pdf

EFT – electronic funds transfer

Escheat (Abandoned property) – the turning over of unclaimed wages to the state after a period of time determined by state law; VT is two years

FIT – Federal Income Tax

FICA - Federal Insurance Contributions Act; the combined taxes levied for social security and Medicare

FLSA – Fair Labor Standards Act http://www.dol.gov/esa/whd/Flsa/

FMLA – Family and Medical Leave Act of 1993 http://www.dol.gov/esa/whd/fmla/

Garnishment – a legal proceeding authorizing an involuntary transfer of an employee’s wages to a creditor to satisfy a debt lien

Gross-up – IRS-approved formula employers use to determine the taxable gross payment when the employer wishes to pay the employee’s share of tax

 Gross Pay- all cash and noncash remuneration given to an employee for services performed for the employer (compensation)

Independent Contractor - a non employee contracted to perform services when the employer has no right to control the details of when, how, or who will perform the work, only the result of the work to be performed

Internal Revenue Service (IRS) – federal agency charged with interpreting, implementing, and enforcing the tax laws of the US http://www.irs.gov/

Medicare - a federal hospital insurance program for individuals age 65 or older and some disabled persons; funded through the hospital insurance component of FICA tax

Net Pay - the part of employee’s wages that remains after all deductions have been subtracted

Online paycheck - an electronic version of an employee's paycheck

Originating Depository Financial Institution (ODFI) – a financial institution qualified to initiate deposit entries submitted by an employer as part of the direct deposit process

Overtime - hours worked in excess of maximums set by federal or state law that must be compensated at a premium rate of pay.  Hours worked over 40 in one work week  must be paid at no less than 1½ times the employee’s regular rate of pay.

Paycheck - instrument in which an employee receives in return for services performed

Payroll Period – period of service for which an employer pays wages to employees

Payroll Tax – any tax levied by a government agency on employee’s wages, tips, and other compensation

Post-tax deductions– deductions taken out after all applicable taxes and other pre-tax deductions have been withheld; these deductions do not reduce taxable wages

Pre-tax deductions – deductions taken from gross pay that reduces taxable wages

Receiving Depository Financial Institution (RDFI) – a financial institution qualified to receive direct deposit entries from an Automated Clearing House (ACH)

Regular Rate of Pay – an hourly pay rate determined by dividing the total regular pay earned for a workweek by the total number of hours worked

Social Security - Old Age, Survivors, and Disability Insurance (OASDI) component of FICA; wage limit for 2011 is $106,800

 

Shift Differential – extra pay for working a less-than-desirable shift (e.g., evenings or late nights)

Social Security Administration (SSA) – the federal government agency that administers social security http://www.ssa.gov/

Supplemental Wages – compensation other than regular pay, such as bonuses, commissions, and severance pay; income tax may be withheld at a flat rate under certain circumstances

Taxable income - the maximum amount of employee compensation subject to social security, medicare, federal and state income taxes; also known as Taxable Wage Base

 

Taxes - required deductions for federal and state agencies after all pre-tax deductions have been taken

Withholding – subtracting amounts from employee’s wages for taxes, garnishments or levies, and other deductions

W-2 - form provided to employees to report wages and amounts withheld for a calendar year; employers are required to furnish these forms to employees by January 31st of each year

W-4 (Employee’s Withholding Allowance Certificate) – federal form on which the employee states the number of withholding allowances to be claimed and status, i.e., single, married, etc.; used by the employer to determine the amount of federal, state and local income taxes to withhold; see IRS Form W-4 http://www.irs.gov/pub/irs-pdf/fw4.pdf?portlet=3