Trying to understand tax-related terms and abbreviations can be difficult if you are not a tax professional. This resource serves as an easy-to-understand reference for common terms you may run into.
3PSP (Third-Party Sick Pay): A benefit of disability insurance that will provide an employee with partial or full wages while on long-term medical leave.
401(k): A defined-contribution pension where money comes out of an employee’s paycheck and that amount is matched by the employer.
408(k): This pension plan is available to companies that have 25 or fewer employees. In this plan, employees do not contribute, only the employer does.
Advice of Credit: A government document used to confirm that a someone requesting credit has been approved. This is often used by employers when they make payments.
COBRA (Consolidated Omnibus Budget Reconciliation Act of 1985): This law sets a requirement that businesses with at least 20 employees must offer continuation coverage in certain instances where coverage would otherwise end.
DBA (Do Business As): The fictitious business name that a company operates as, separate from their registered, legal name.
De Minimis Fringe Benefit: These are benefits that are so miniscule, in terms of both value and frequency, that reporting them would be impractical. If they qualify for exclusion they do not have to be reported. If they are taxable, then they must be reported.
EIC (Earned Income Credit): A program designed for low and moderate income workers to reduce federal taxes owed. This comes in the form of a refundable tax credit.
EIN (Employer Tax Identification Number): Also known as a Federal Tax Identification Number, this is what is used to identify a business.
FUTA (Federal Unemployment Tax): This tax is used to fund federal unemployment programs. This is to be taken out of employee’s paychecks and matched by employer.
Garnishment: Also known as wage garnishment, this is when a third party known as the garnishee, in most cases the debtor’s employer, legally withholds money from the debtor’s paycheck to be given to another party.
Goal Limit: The total amount that is due in order to satisfy a tax lien.
I-9 Form: A form used for employment to verify an employee’s identity and their employment authorization to work in the United States.
Immediate Wage Withholding: When you receive an order known as an income withholding order (IWO) to withhold a portion of an employee’s wages to be used to pay for support such as child or medical support.
Independent Contractor: Someone who is self-employed and is contracted to provide independent services or work as a nonemployee. An independent contractor is subject to self-employment tax and must pay their own social security and medicare taxes. Their employer also does not have to provide health benefits.
Lookback Period: The time period used to determine all of the employment taxes that have been paid by an employer.
Monetary Determination: Assesses whether or not you had enough wages in the past year for you to be able to file monetarily for unemployment.
Nil Return: Filing an income tax return to declare that nothing has been paid as taxes in the respective fiscal year.
Nonexempt Status Employee: An employee who is not exempt from overtime provisions and is entitled to overtime pay for hours over 40 during a workweek.
OASDI (Old Age Survivor and Disability Insurance): The tax taken from an employee’s paycheck that funds Social Security programs.
Overtime Premium: This is the additional amount of money that is given to employees for overtime hours on top of their usual pay.
Part-Total Unemployment: When an employee is receiving unemployment compensation that is less than the full weekly benefit amount payable. It is the unemployment of that employee in any week of less than full-time work.
QTD (Quarter-to-Date): A time interval that has all relevant company activity from the beginning of the current quarter until now.
Reimbursable Employer: An employer who opts out of the state unemployment insurance system and pays the state the amount the it paid to its former employees who receive unemployment benefits.
Remuneration: The money paid for a service or work.
Sarbanes-Oxley Act (SOX): A law meant to protect investors from fraudulent financial practices from corporations. It established auditing and financial regulations for public companies.
Severance Pay: Benefits an employee may be entitled to after being laid off from a company. This could include additional pay based on how long you have worked there or reimbursement of unused PTO. This is not guaranteed to be given by a company.
Tax Lien: A claim by the government of your property and other assets when you are past due on your taxes.
Tax Levy: After a tax lien, it is the seizure of property and other assets for past-due taxes.
Vesting: Giving or earning the right to a future payment, benefit or asset.
W-2 Form: Also known as the wage and tax statement, it shows a report of the annual wages and taxes taken from an employee.
W-3 Form (Transmittal of Income and Tax Statements): A summary of all of a business’ employee wages and contributions for that previous year.
W-4 Form (Employee’s Withholding Exemption Certificate): A form filed out by the employee to indicate how much money they would like to be withheld from their paycheck for federal taxes.
Wage and Separation Report: A form used by the state to determine whether or not a former employee is eligible for unemployment. This requires a company to provide the earnings for said previous employee from the company
Work Sharing: When employers temporarily reduce the hours of their employees instead of laying them off when the economy is in a downturn.
YTD (Year-To-Date): The period of time from the first day of the fiscal or calendar year until now.