FPC flashcards
FPC · Build recall with a focused review session.
32 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Gross Pay
- Total wages earned in a pay period before any deductions, including salary, hourly wages, overtime, bonuses, commissions, and taxable fringe benefits.
- Net Pay
- Gross pay minus all statutory and voluntary deductions; the amount actually paid to the employee by check or direct deposit.
- Exempt Employee
- An employee paid on a salary basis who meets the FLSA salary and duties tests and is therefore not entitled to overtime compensation.
- Nonexempt Employee
- An employee entitled to FLSA minimum wage and overtime at 1.5 times the regular rate for all hours worked beyond 40 in a workweek.
- Regular Rate of Pay
- The hourly rate used to compute overtime; total straight-time earnings including nondiscretionary bonuses divided by total hours worked in the workweek.
- Statutory Deduction
- A deduction required by law, such as federal and state income tax, FICA taxes, tax levies, and court-ordered child support withholding.
- Voluntary Deduction
- A deduction the employee authorizes in writing, such as health insurance premiums, retirement plan deferrals, charitable gifts, or union dues.
- Common-Law Test
- IRS worker classification test weighing behavioral control, financial control, and the type of relationship to decide employee versus independent contractor status.
- Form W-2
- The annual wage and tax statement employers furnish to employees and the Social Security Administration, reporting wages paid and taxes withheld.
- FICA Tax Rates
- Social Security 6.2% and Medicare 1.45% paid by both employee and employer, plus 0.9% additional Medicare withheld from the employee only above $200,000.
- Social Security Wage Base
- The annually indexed cap on wages subject to Social Security tax; earnings above the cap are exempt from Social Security but still subject to Medicare.
- FUTA
- Federal Unemployment Tax Act tax of 6.0% on the first $7,000 of each employee's wages, reduced to 0.6% by the maximum 5.4% state credit.
- Form 941
- The employer's quarterly federal tax return reporting total wages, federal income tax withheld, and both employee and employer FICA amounts.
- Form 940
- The annual federal unemployment tax return, due January 31, reporting FUTA wages, state credits, and any credit reduction states.
- Deposit Lookback Period
- The four quarters ending June 30 of the prior year; $50,000 or less of employment taxes makes an employer a monthly depositor, more makes it semiweekly.
- Next-Day Deposit Rule
- If accumulated undeposited employment taxes reach $100,000 on any day, the employer must deposit by the next banking day regardless of schedule.
- CCPA Garnishment Limit
- Withholding is capped at the lesser of 25% of disposable earnings or the amount by which disposable earnings exceed 30 times the federal minimum wage.
- Form I-9
- Employment eligibility verification completed within three business days of the first day of work, confirming identity and authorization to work in the United States.
- Overtime Calculation
- Multiply hours over 40 in the workweek by one-half the regular rate, then add that premium to straight-time earnings for the period.
- Disposable Earnings
- Wages remaining after legally required deductions such as income tax and FICA; it is the base used for CCPA garnishment calculations.
- Gross-Up Calculation
- Divide the desired net payment by one minus the combined tax rate to determine the gross wages needed to deliver that net amount.
- Section 125 Cafeteria Plan
- A pre-tax benefit arrangement in which qualified premium deductions reduce federal income tax wages and also Social Security and Medicare wages.
- Traditional 401(k) Deduction
- A pre-tax elective deferral that reduces federal taxable wages but does not reduce Social Security and Medicare wages subject to FICA.
- Percentage Method Withholding
- The IRS procedure using Publication 15-T tables: subtract pre-tax deductions from wages, apply the bracket percentage, then subtract the base amount.
- Piece Rate Regular Rate
- Total piece-rate earnings in the workweek divided by total hours worked; overtime is then paid at one-half of that computed rate.
- Supplemental Wage Withholding
- Bonuses, commissions, and similar payments withheld at the optional flat 22% federal rate or aggregated with regular wages for the period.
- Payroll Register
- A report listing each employee's gross pay, deductions, and net pay for a pay period; it supports tax deposits and general ledger entries.
- Segregation of Duties
- An internal control separating payroll preparation, approval, and disbursement among different employees to reduce the risk of fraud and error.
- Prenotification
- A zero-dollar direct deposit test sent before the first live payment to validate the employee's bank routing and account numbers.
- FLSA Record Retention
- Employers must keep payroll records for three years and time cards or other supplementary time records for at least two years.
- Escheatment
- The process of remitting unclaimed wages to the state after the dormancy period set by state unclaimed property law expires.
- W-2 Reconciliation
- Year-end comparison of payroll register totals with the four quarterly Form 941 filings and W-2 totals before statements are issued.