Glossary

Abate Term most often used when requesting an agency to reverse or cancel a penalty charge.

ABA/Trans Code A nine-digit numeric code created by the American Bankers Association that identifies an employer’s bank and routing for electronic transactions.

Accrual The recognition of assets, expenses, liabilities or revenues after the cash value has been determined, but before it is transferred.

ACH See Automated Clearing House.

ACH Credit An electronic payment system where an employer initiates a credit against its bank account one day prior to the payment due date, as requested by the financial institution.

ACH Debit An electronic payment system where a company authorizes a debit against its bank account for payments such as payroll taxes.

Acquisition See Merger / Acquisition / Divestiture Analysis.

Additional Claim An additional claim is a notice of new unemployment filed after a series of claims within a benefit year. There must be a break in filing of one or more weeks with intervening employment and there must be a documented separation.

Addressee of Record The address to which the state agency will send unemployment related correspondence. Regulations vary by state as to who can be address of record for different types of documents. Generally, ADP-UCS will act as address of record for clients utilizing the UCM and Total Tax Plus services.

Administrative Procedure Method by which support orders are made and enforced by an executive agency rather than by a court and judge.

Advance Earned Income Credit (AEIC) Payments of earned income credit during the year to employees who expect to be eligible for the credit. Employers make the payments out of federal income, Social Security and Medicate taxes withheld from the employees’ wages.

Advice Number An identifying number for bank purposes. Used on direct deposit vouchers.

Advice of Credit (AOC) A government form or coupon indicating the amount of a federal tax deposit. It is to be used by employers when making payments.

After-Tax Deduction A deduction from an employee’s pay that does not reduce the employee’s taxable wages. It is taken out only after all applicable taxes and other deductions have been withheld (e.g., union dues, garnishments, charitable contributions).

Agency Any governmental taxing authority.

Alien An individual living in or visiting the United States who is not a citizen of the U.S. More information can be found in the Alien Immigration, Payments, and Taxation Guide.

Allowable Lien Limits Federal and state limitations on the amount of an employee’s wages that can be attached for a lien

Amended Rate Once the employer has established an unemployment history, states calculate tax rates annually. An amended rate notice may be issued to reflect a change in any of the components used in calculating the original tax rate. Changes in the tax rate may occur due to voluntary contributions, transfers of experience, employer adjustments to amended quarterly tax filings, removal of benefit charges and/or receipt of a favorable determination resulting from a protest of the components as they appeared on the initial tax rate notice. Changes resulting from state legislation, approved after the issuance of the original tax rate, may also affect the tax rate.

Amendment A corrected tax return intended to replace a previously filed quarterly or annual tax return.

AOC See Advice of Credit.

Applied For Employer Identification Number An Employer Tax Identification Number (EIN) that has been requested from an agency but not yet received.

Arrearages Unpaid child support payments and related assessments owed by a parent who is obligated to pay.

Automated Clearing House (ACH) A Federal Reserve Bank acting on behalf of an association of financial institutions that operates a facility (system) that serves as a clearinghouse for direct deposit or other electronic payment transactions; entries are received and transmitted by the ACH under the rules of the association. Funds moved from bank A to bank B must go through the ACH.

Backup Withholding Usually Federal Income Tax (FIT) withheld from interest payments to a customer’s bank account when no Social Security Number is on file. Financial institutions are required to deposit and report this withholding with their federal payroll taxes on Form 945. Banks, savings and loans, and similar types of institutions are required by law to withhold 31% of taxable interest or dividends paid on accounts that have failed to furnish correct taxpayer identification numbers (Social Security numbers).

Bank Release Date The day the payroll tax debit is sent to the bank.

Bankruptcy The attachment of all or a portion of an employee’s wages to satisfy outstanding debts. Usually, this lien type has the highest priority.When you receive a bankruptcy order, you must inactivate all other liens(except, in most cases, support orders). Currently, all bankruptcies are issued by a federal court

Base Period Utilized in the calculation for unemployment benefits, this is the period usually consisting of the first four of the last five completed calendar quarters immediately preceding the beginning of a claimant’s benefit year. In some states, the base period consists of the 52 weeks prior to the benefit year. The base period is used to determine a claimant’s monetary eligibility and benefit entitlement, as well as the employers’ liability.

Base Period (Employer) The period for measuring a qualified employer’s past experience with unemployment; the four fiscal years preceding the computation date (July 1 of each year). For claimants, the base period is the base year.

Benefit Accrual Hours that are considered an employee benefit, such as paid vacation or paid sick hours, are sometimes accumulated (accrued) by the employee over a period of time.

Benefit Charging Unemployment Compensation Benefit amounts paid to an individual. The benefit amount is based on the amount of wages the employer paid the employee during the base period. The base period is a four-quarter period, most commonly the first four of the last five completed calendar quarters, used by the state to determine benefit eligibility. The states also use the base period to pinpoint an individual’s chargeable employers. How much each employer will be charged is based on one of several charging methods. (Also see: Benefit Wage, Employer with Majority of Wages, Inverse Chronological Order, Most Recent Employer, & Prorating)

Benefit Eligibility Conditions Statutory requirements which must be satisfied by an individual with respect to each week of unemployment for which compensation or allowance payments are claimed before payment for the week is made. The most basic requirement in order to receive benefits is that the claimant must be out of work through no fault of their own.

Benefit Formula A mathematical formula specified in State unemployment compensation law or Federal laws used as the basis for determining an individual’s weekly benefit amount and potential maximum benefit entitlement.

Benefit Ratio (BR) A calculated formula used by some states to compute the Unemployment Insurance Experience Tax Rate. The Benefit Ratio is computed by dividing the taxable wages for the previous three to five year period by the benefits charged for the same period. In most states, this ratio is then compared to the state-rating table to determine the employer tax rate.

Benefit Ratio Formula 3 or more years Benefit Charges (divided by) Taxable Payroll for the same period = BENEFIT RATIO

Benefits The monetary amount paid to an unemployed or partially unemployed worker.

Benefit Wage Delaware and Oklahoma use this benefit charging method. Each base period employer is charged an amount equal to the amount of wages it paid the individual during the base period, up to a set liability amount. Charging is triggered when the individual has collected a specified number of weeks of benefits.

To help offset the increased liability, the states using the benefit wage charging method provide rehire credits to any employer that rehires a former employee during his benefit year (the year following the initial filing of an unemployment claim). To receive a rehire credit against benefit wages charged to its account an employer must send a request letter to the state.

Delaware employers must submit their request within 90 days from the end of the individual’s benefit year.

Oklahoma employers must request the credit within 30 days following the end of the individual’s benefit year or the receipt of a charge statement whichever is later. The credit is then applied to future rate computations. (Also see: Benefit Wage Ratio)

Benefit Wage Formula 3 years Benefit Wages (divided by) 3 years Taxable Payroll = BENEFIT WAGE RATIO (Also see: Benefit Wage Ratio)

Benefit Wage Ratio (BWR) A calculated formula used by the state to compute the Unemployment Insurance Experience Tax Rate. The Benefit Wage Ratio is computed by dividing the benefit wages for the previous three to five year period by the benefits charged for the same period. This ratio is then compared to the state rating table to determine the employer tax rate. This formula is currently used in Delaware and Oklahoma.

Biweekly Once every two weeks; type of payroll period that can be used in the percentage of wage-bracket method of withholding.

Bonus Compensation received by an employee for services performed. A bonus is given in addition to an employee’s usual compensation.

Business Tax Credit for Employer-paid FICA on Tips This tax credit is available to employers at food and beverage establishments — not to other types of tipped employment. Also, it applies only with respect to tips not already used to support a tip credit for minimum wage rate purposes. The credit is against the business income tax of the employer and is claimed by filing IRS Form 8846, Credit for Employer Social Security and Medicare Taxes Paid on Certain Employee Tips.