Glossary of Payroll Terms

W-2 - Dependent care benefits

Area of W-2 where you show the amount of dependent care benefits paid or incurred by the company for the employee. This includes the fair market value of the employer-provided or employer-sponsored day care facilities and amounts paid for the services.

W-2

Wage and Tax Statement. The form used to report wages, tips other compensation, withheld income and social security taxes, and advance earned income credit payments to the IRS, the Social Security Administration and the employee.

W-2 - Medicare Wages and tips

Wages that are subject only to Medicare taxes. For example, a 401k plan is not subject to federal and state withholdings, but is subject to Medicare and Social Security taxes. Up until this year Medicare had an annual limit, and was handled like Social Security (except the limit difference).

W-2 - Non- qualified plans

Unlike tax-deferred plans, these plans do not qualify for tax-favored status. Any amount deferred under a non-qualified plan should be included as social security and Medicare wages.

W-2 - Social Security Tips

The amount of tips that are subject to Social Security tax. If you make less than a certain amount of tips, then they are not subject to Social Security tax.

W-2 - Social Security Wages

Wages that are subject only to Social Security taxes. For example, a 401k plan is not subject to federal and state withholdings, but is subject to Social Security and Medicare taxes. Social Security also has an annual limit which changes each year, so if someone makes more than the limit within a calendar year, the rest of the wage will not be subject to Social Security tax. This will then show total wages as one figure and the Social Security wage as a different figure, reflecting the total wage at the time the Social Security Maximum was reached.

W-4

Employee's Withholding Allowance Certificate. Required by Federal law to be on file with the Payroll Office before any salary or wage payments are made.Wage-Bracket Withholding MethodA procedure for determining the amount of income tax to be withheld using wage-bracket tables. These tables are usually classified by payroll periods, the employee's marital status, withholding allowances, etc. To find out how much to withhold, the employer determines the employee's wages and uses the appropriate wage bracket table for the period.

Wages

Amount earned by an employee, before tax withholding and deductions, for a certain period of service.

Withholding

Amounts deducted from an employee's wages for federal, state, and local taxes.

Worker

Workers can be defined as anyone who performs functions for the organization and receives compensation from the organization's operating expense funds in return. Workers can be direct employees or independent contractors (includes individuals contracting business directly from the company or through an agency).

Work-Week

Any 7 consecutive days or 168 consecutive hours. The workweek is the basis for determining the total overtime pay that is due employees under the FLSA.

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