Payroll and Payroll Taxes definitions Flashcards
Payroll and Payroll Taxes definitions
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Gross Pay Total earnings of an employee before any deductions such as taxes or benefits are withheld. Net Pay Amount an employee receives after all deductions, including taxes and benefits, are subtracted from gross earnings. Salary Expense Total cost to a company for compensating employees, including wages, taxes, and benefits. Payroll Liabilities Obligations a company owes for amounts withheld from employees' paychecks and employer payroll taxes. Federal Income Tax Mandatory deduction from employee earnings, remitted by the employer to the U.S. government. State Income Tax Deduction from employee pay required by certain states, varying by location and remitted by the employer. FICA Tax Combined Social Security and Medicare taxes, with both employee and employer contributing 7.65% of gross pay. Social Security Federal program funded by payroll taxes, providing retirement and disability benefits to eligible workers. Medicare Federal health insurance program for individuals 65 and older, funded through payroll tax contributions. Unemployment Taxes Employer-paid taxes supporting federal and state programs for workers who lose their jobs. FUTA Federal tax paid by employers, calculated as 6.2% of the first $7,000 of each employee's annual earnings. SUTA State-level unemployment tax paid by employers, with rates and rules varying by state. Employee Benefits Non-wage compensation such as health insurance or retirement plans, often resulting in additional payroll withholdings. 401(k) Plan Employer-sponsored retirement savings account allowing employees to contribute pre-tax earnings. Withholding Portion of employee earnings retained by the employer to cover taxes and other deductions before payment.