Glossary of Terms for Payroll Services

401(k) – An employer sponsored defined contribution pension account defined in subsection 401(k) of the Internal Revenue Code. Employee funding comes directly off their paycheck and may be matched by the employer.

Consolidated Omnibus Budget Reconciliation Act (COBRA) – A landmark federal law that was passed in 1985 that provides for continuing group health insurance coverage for some employees and their families after a job loss or other qualifying event.

Corporate Tax – A corporate tax is a tax on the profits of a corporation.

Deduction – A subtraction from net pay. A positive deduction amount reduces net pay. A negative (reverse) deduction amount increases net pay.

Disability Benefits – Funds provided from public or private sources to a person who has a disability.

Employer Identification Number (EIN) – A unique identification number that is assigned to a business entity so that itcan easily be identified by the IRS.

Family Medical Leave Act (FMLA) of 1993 – This expansive law provides eligible employees the right to take up to twelve (12) weeks leave of absence from work in any one designated twelve-month period, for the following reasons: birth or care for a newborn child of the employee; care for adopted or foster care child placed with the employee; care for a seriously ill son or daughter, parent, or spouse of the employee; or, employee’s own health condition renders the employee unable to perform his or her normal job duties.

Federal Unemployment Tax Act (FUTA) of 1938 – This law established an employer-paid tax for the purpose of funding the cost of administering the unemployment insurance and employment service programs at both the state and federal levels.

Form 941 – A payroll form that reports the total federal taxes that employers have withheld from employee compensation during the quarter.

Form 1099 – A series of documents the Internal Revenue Service (IRS) refers to as “information returns.” There are a number of different 1099 forms that report the various types of income you may receive throughout the year other than the salary your employer pays you.

Form I-9 – A form required to confirm the identity of a new employee and eligibility for employment in the U.S. according to the USCIS.

Form W-2 – The document an employer is required to send to each employee and to the IRS at the end of the year.

Form W-3 – A form for transmittal of wage and tax statements. It is a Form W-2 accompanying document that summarizes Form W-2 information.

Form W-4 – An IRS tax form that is filled out by employees to indicate their tax withholding according to how many individuals in their household that they want to claim on their taxes to their employer.

Gross Earnings – The sum of all earnings, taxable or not. Often referred to simply as ‘gross’. Does not include reverse deductions, such as those used for loans or advances.

HSA – A tax-advantaged medical savings account available to taxpayers in the United States who are enrolled in a high-deductible health plan.

Human Resources – The department of a business or organization that deals with the hiring, administration, and training of personnel.

Individual Retirement Account (IRA) – A traditional IRA allows individuals to direct pre-tax income toward investments that can grow tax-deferred.

IRS Form 940 – A form that computes the amount of federal unemployment tax liability of a business for the previous year. The form also is used to determine the amount of unemployment tax owed for the previous year, as well as any unpaid and due unemployment taxes.

Limited Liability Company (LLC) – A limited liability company is the US-specific form of a private limited company. It is a business structure that can combine the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation.

Local Tax – A tax assessment by a state, county, or a municipality to fund public services such as garbage collection.

Long Term Disability Insurance – Can be used following short-term disability plans or alone. Insurance that provides wage replacement that is between 50-70% of your earnings before a non-work-related injury impacted your ability to work.

Maternity Leave – A period of absence from work granted to a mother before and after the birth of her child.

Medicare – A U.S. federal government health insurance program that subsidizes healthcare services. The plan covers people age 65 or older, younger people who meet specific eligibility criteria, and individuals with certain diseases.

National Association of Professional Employer Organizations (NAPEO) – An organization that is the voice of PEO companies. PEOs provide payroll, benefits, regulatory compliance assistance, and other HR services to small and mid-sized companies.

Net Pay – An employee’s earnings after all deductions are taken out.

New Hire Report – A submission of information to a U.S. state about a new or rehired employee in that state.

Online Payroll – A web-based payroll software application that performs payroll calculations and payroll tax deposits, as well as payroll reports. Online payroll allows business owners to run payroll anywhere with an internet connection. This is just one of the payroll services that APS offers to clients in Boardman, Youngstown, and Canfield, Ohio, and beyond!

Other Earnings – Usually refers to earnings other than regular or overtime, such as vacation, sick, bonus, etc.

Partnership Corporation – A partnership is the default business structure for a company with multiple owners.

Payroll – The total amount of wages and salaries paid by a company to its employees.

Payroll Company – A company that automatically processes payroll checks, deposits payroll taxes, and provides final year-end payroll taxes. APS is a payroll company that provides payroll services to business owners to help save them time and money.

PrismHR Platform – A 100% web-based Human Resource software platform that APS uses that is designed to help their clients focus on growing and running their business.

Professional Employer Organization (PEO) – An organization that provides comprehensive HR solutions for small to large businesses. APS is a local PEO business with over 20 years of experience.

Public Company – A corporation whose shareholders have a claim to part of the company’s assets and profits.

S Corporations – A corporation that elects to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes.

School District Income Tax – An income tax that is distinct from municipal, state, and federal taxes, meant specifically for school districts.

Section 125 Plan – A written plan that lets employees choose between qualifying benefits and cash.

Sick Pay – A salary or wages paid to an employee while on sick leave.

Short Term Disability Insurance – A type of insurance benefit that provides some compensation or income replacement for non-job-related injuries or illnesses that render you unable to work for a limited time period.

State Income Tax – A direct tax levied by a state on your income.

Social Security Tax – The tax levied on both employers and employees to fund the Social Security program.

Tax Return – A form on which a taxpayer makes an annual statement of income and personal circumstances that is used by the tax authorities to assess liability for tax.

Term Life Insurance – A type of life insurance policy that provides coverage for a certain period of time.

Universal Life Insurance – A type of cash value life insurance.

Vacation Pay – A benefit that employers typically give full-time employees that allows the employees to take a paid vacation.

Withholding Tax – An income tax paid to the government by the payer of the income rather than by the recipient of the income. The tax is thus withheld or deducted from the income due to the recipient.

Workers’ Compensation Insurance – A type of business insurance that provides benefits to employees who suffer work-related injuries or illnesses.

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