# Gross to Net Glossary

> 33 terms from the Workforce book's Gross to Net part, each defined in a line and linked to the chapter that explains it.

- **8 and 80 system:** the FLSA section 7(j) option for hospitals and residential care establishments to pay overtime after 8 hours in a day and 80 in a fixed 14-day period instead of 40 in a workweek ([Payroll by Industry](https://www.syntaqx.com/books/workforce/payroll-by-industry#healthcare)).
- **Aggregate procedure:** withholding on supplemental wages by adding them to a regular period's wages, figuring tax on the total and subtracting what was withheld from the regular wages ([Supplemental Wages & Imputed Income](https://www.syntaqx.com/books/workforce/supplemental-wages-and-imputed-income#flat-and-aggregate-worked)).
- **Allocated tips:** tips a large food or beverage establishment assigns to employees when reported tips fall short of 8% of qualifying sales, reported in W-2 box 8 and never withheld on ([Tips & the 2025 Tax Law](https://www.syntaqx.com/books/workforce/tips-and-the-2025-deductions#allocated-tips-and-form-8027)).
- **Arrears (deduction):** the part of a deduction a short paycheck couldn't take, kept as a balance and recovered on later statements by the election's rule ([Gross-to-Net, Step by Step](https://www.syntaqx.com/books/workforce/gross-to-net#negative-net-and-arrears)).
- **Back pay:** wages paid late for past work, including retroactive increases, taxed as ordinary wages in the year paid ([Retro Pay, Voids & Corrections](https://www.syntaqx.com/books/workforce/retro-pay-voids-and-corrections#retroactive-rate-changes)).
- **Cafeteria plan (Section 125):** a written plan letting employees choose between cash and qualified benefits paid with pre-tax salary reductions, exempt from income tax, Social Security, Medicare and FUTA for the benefits chosen ([Pre-Tax & Post-Tax Deductions](https://www.syntaqx.com/books/workforce/deductions#section-125-cafeteria-plans)).
- **Cash tips (payroll):** tips the employee already holds, taxed through payroll but excluded from net pay; for the section 224 deduction, "cash tips" also includes charged tips ([Tips & the 2025 Tax Law](https://www.syntaqx.com/books/workforce/tips-and-the-2025-deductions#cash-and-charged-tips)).
- **Certified payroll:** the weekly payroll report, with a signed Statement of Compliance, that a Davis-Bacon contractor submits for each covered project, optionally on Form WH-347 ([Payroll by Industry](https://www.syntaqx.com/books/workforce/payroll-by-industry#construction-and-certified-payroll)).
- **Charged tips:** tips paid by card or through an employer-run arrangement and paid to the employee on the paycheck ([Tips & the 2025 Tax Law](https://www.syntaqx.com/books/workforce/tips-and-the-2025-deductions#cash-and-charged-tips)).
- **Computational bridge:** Pub 15-T's optional conversion of a 2019-or-earlier W-4 into 2020-or-later fields, so one withholding path handles both ([Federal Withholding & the W-4](https://www.syntaqx.com/books/workforce/federal-withholding#the-form-w-4-since-2020)).
- **Flat rate (supplemental):** 22% federal income tax withholding on separately paid supplemental wages, allowed when income tax was withheld from regular wages in the current or prior year ([Supplemental Wages & Imputed Income](https://www.syntaqx.com/books/workforce/supplemental-wages-and-imputed-income#flat-and-aggregate-worked)).
- **Gross-up:** solving for the gross payment that leaves a stated net after taxes and deductions, run on an off-cycle statement ([Gross-to-Net, Step by Step](https://www.syntaqx.com/books/workforce/gross-to-net#gross-up-and-net-to-gross)).
- **Group-term life imputed income:** the Table 2-2 cost of employer group-term life coverage over $50,000, less after-tax employee payments, added to wages and reported with W-2 code C ([Supplemental Wages & Imputed Income](https://www.syntaqx.com/books/workforce/supplemental-wages-and-imputed-income#group-term-life-over-50-000)).
- **Housing allowance (clergy):** an amount designated in advance as a minister's housing allowance, excluded from income tax wages but included for self-employment tax ([Payroll by Industry](https://www.syntaqx.com/books/workforce/payroll-by-industry#nonprofits-and-churches)).
- **Imputed income:** the taxable value of a noncash benefit, added to tax bases on the statement without adding to net pay ([Supplemental Wages & Imputed Income](https://www.syntaqx.com/books/workforce/supplemental-wages-and-imputed-income#imputed-income)).
- **Lock-in letter:** an IRS notice to an employer setting an employee's permitted filing status and withholding, which W-4s that lower withholding can't override ([Federal Withholding & the W-4](https://www.syntaqx.com/books/workforce/federal-withholding#lock-in-letters)).
- **Manual check:** a payment made outside the pay run and recorded afterward as a statement with its taxes and deductions ([Retro Pay, Voids & Corrections](https://www.syntaqx.com/books/workforce/retro-pay-voids-and-corrections#manual-checks)).
- **Nonresident alien wage addition:** the Pub 15-T amount added to a nonresident alien's wages only to figure income tax withholding, never reported on the W-2 ([Federal Withholding & the W-4](https://www.syntaqx.com/books/workforce/federal-withholding#nonresident-aliens)).
- **Off-cycle run:** a pay run outside the regular schedule, such as a bonus, final pay or correction, with its own withholding and deduction choices ([Retro Pay, Voids & Corrections](https://www.syntaqx.com/books/workforce/retro-pay-voids-and-corrections#off-cycle-runs)).
- **Overpayment:** wages paid that the worker wasn't owed, recovered net in the same year and gross in a later one, under federal and state limits on deductions ([Retro Pay, Voids & Corrections](https://www.syntaqx.com/books/workforce/retro-pay-voids-and-corrections#overpayments-and-recovery)).
- **Percentage method:** Pub 15-T's annualize, look up and de-annualize withholding computation (Worksheet 1A for automated systems) ([Federal Withholding & the W-4](https://www.syntaqx.com/books/workforce/federal-withholding#worksheet-1a-worked)).
- **Qualified overtime compensation:** the premium portion of overtime required by FLSA section 7, deductible under section 225 for 2025 to 2028 and reported in W-2 box 12 with code TT from 2026 ([Tips & the 2025 Tax Law](https://www.syntaqx.com/books/workforce/tips-and-the-2025-deductions#the-qualified-overtime-deduction)).
- **Qualified tips:** voluntary cash or charged tips in an occupation that customarily received tips by December 31, 2024, deductible under section 224 up to $25,000 for 2025 to 2028 ([Tips & the 2025 Tax Law](https://www.syntaqx.com/books/workforce/tips-and-the-2025-deductions#the-qualified-tips-deduction)).
- **Retro pay:** the difference owed when a rate change takes effect for periods already paid, recomputed by work period and including overtime on the new regular rate ([Retro Pay, Voids & Corrections](https://www.syntaqx.com/books/workforce/retro-pay-voids-and-corrections#retroactive-rate-changes)).
- **Section 45B credit:** the employer's business credit for Social Security and Medicare paid on tips above the amount needed to reach the minimum wage, for food or beverage and, from 2025, beauty services ([Tips & the 2025 Tax Law](https://www.syntaqx.com/books/workforce/tips-and-the-2025-deductions#the-section-45b-credit)).
- **Service charge:** a mandatory charge on a bill, such as an automatic gratuity, which is regular wages when distributed to staff and never a tip ([Tips & the 2025 Tax Law](https://www.syntaqx.com/books/workforce/tips-and-the-2025-deductions#tips-and-service-charges)).
- **Special accounting rule:** the option to treat noncash fringe benefits provided in November and December as paid in the next year ([Supplemental Wages & Imputed Income](https://www.syntaqx.com/books/workforce/supplemental-wages-and-imputed-income#imputed-income)).
- **Subject wages and taxable wages:** the wages a tax applies to in a period, and the part of them under what is left of the tax's wage base for the year ([Gross-to-Net, Step by Step](https://www.syntaqx.com/books/workforce/gross-to-net#wage-bases-and-caps)).
- **Supplemental wages:** pay outside regular wages, such as bonuses, commissions, severance, back pay and retroactive increases, with their own withholding methods and the 37% rate over $1 million ([Supplemental Wages & Imputed Income](https://www.syntaqx.com/books/workforce/supplemental-wages-and-imputed-income#what-counts-as-supplemental)).
- **Taxability matrix:** the table of each pay item type's treatment (subject, exempt or reported only) for each tax and jurisdiction, effective-dated ([Gross-to-Net, Step by Step](https://www.syntaqx.com/books/workforce/gross-to-net#the-taxability-matrix)).
- **Treasury Tipped Occupation Code (TTOC):** the three-digit code for a tipped occupation reported in W-2 box 14b from 2026, up to two per W-2, with 000 for tips from a nonqualifying occupation ([Tips & the 2025 Tax Law](https://www.syntaqx.com/books/workforce/tips-and-the-2025-deductions#what-employers-report)).
- **Void:** a statement that negates a paid statement line for line, usually because the payment never reached the worker ([Retro Pay, Voids & Corrections](https://www.syntaqx.com/books/workforce/retro-pay-voids-and-corrections#voids-reversals-and-adjustments)).
- **Wage bracket method:** Pub 15-T's lookup tables for manual payroll, generally for wages under $100,000 a year ([Federal Withholding & the W-4](https://www.syntaqx.com/books/workforce/federal-withholding#the-wage-bracket-method)).

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