Payroll Tax Glossary · Workforce

Accuracy of deposits rule: the safe harbor that excuses a federal deposit shortfall of no more than the greater of $100 or 2% of the deposit, if made up by the makeup date (Deposits, Returns & the Tax Calendar).
Act 32: Pennsylvania's law requiring employers with Pennsylvania worksites to withhold and remit local earned income tax by tax collection district, using PSD codes (State & Local Payroll Taxes).
Additional Medicare Tax: the 0.9% employee-only Medicare tax an employer withholds on wages it pays an employee in excess of $200,000 in a calendar year (FICA, FUTA & SUTA).
Automatic Exemption from Penalty (AEP): the IRS program replacing first-time abatement requests from summer 2026, under which an eligible taxpayer's penalty is not assessed (Tax Notices, Amendments & Agency Accounts).
Averaged failure-to-deposit penalty: a 2% to 10% penalty the IRS may assess by spreading a quarter's liability evenly when the monthly record or Schedule B is missing or wrong (Deposits, Returns & the Tax Calendar).
Bona fide employer office: a home office that meets New York's test (the primary factor, or four secondary and three other factors), so telecommuting days there count as days worked outside New York (Multi-State, Reciprocity & Remote Work).
Business Services Online (BSO): the Social Security Administration's portal for filing W-2s and W-2cs, uploading EFW2 files and checking submission status (Year-End, W-2s & Wage Reporting).
Calculation layer: the tax engine that turns one payment's wages, elections, addresses and year-to-date totals into tax amounts, statelessly and by pay date (Tax Engines & Filing Services).
Combined Annual Wage Reporting (CAWR): the IRS and SSA program that compares income tax withheld and Social Security and Medicare wages on Forms 94X with the W-2 totals sent to SSA (Year-End, W-2s & Wage Reporting).
Convenience of the employer rule: New York's rule that a nonresident's days worked at home for their own convenience count as New York days when their assigned office is in New York (Multi-State, Reciprocity & Remote Work).
CP136: the IRS notice that an employer's deposit schedule for the next year may differ, computed from its lookback period (Tax Notices, Amendments & Agency Accounts).
CP207: the IRS notice that a Schedule B or monthly liability record has missing or incorrect information, with 45 days to correct it (Tax Notices, Amendments & Agency Accounts).
Credit reduction state: a state with federal unemployment loans outstanding on two or more consecutive January 1s and not repaid by November 10, whose employers lose part of the 5.4% FUTA credit (FICA, FUTA & SUTA).
Deposit designation: an employer's instruction, within 90 days of a penalty notice, on how its deposits apply to liabilities so the failure-to-deposit penalty is smallest (Tax Notices, Amendments & Agency Accounts).
Deposit period: the span over which federal tax liabilities accumulate toward one deposit: a calendar month for monthly depositors, Wednesday to Friday or Saturday to Tuesday for semiweekly ones (Deposits, Returns & the Tax Calendar).
EFTPS: the Treasury's Electronic Federal Tax Payment System, through which employers and their providers make federal tax deposits, and where an employer can verify its provider's deposits with its own PIN (Deposits, Returns & the Tax Calendar).
EFW2: the Social Security Administration's electronic format for filing W-2 Copy A (Publication 42-007), with EFW2C for W-2c (Year-End, W-2s & Wage Reporting).
Experience rating: setting each employer's state unemployment rate from its own history of contributions, benefits charged and payroll, as federal law requires (FICA, FUTA & SUTA).
Failure-to-deposit penalty: the IRS penalty on a late or improper deposit, 2%, 5%, 10% or 15% by how late it is (Deposits, Returns & the Tax Calendar).
File-and-remit layer: the filing service that turns a period's paychecks into deposits, returns, wage reports, amendments and agency correspondence for each employer (Tax Engines & Filing Services).
First-time abatement (FTA): the IRS administrative waiver of failure-to-file, failure-to-pay and failure-to-deposit penalties for taxpayers with three clean prior years (Tax Notices, Amendments & Agency Accounts).
Form 940: the employer's annual FUTA return, with Schedule A for multi-state employers and credit reduction states (FICA, FUTA & SUTA).
Form 941-X: the adjusted employment tax return filed separately for each Form 941 being corrected, as an interest-free adjustment or a claim for refund (Tax Notices, Amendments & Agency Accounts).
Form 944: the annual employment tax return the IRS lets its smallest employers file instead of quarterly Forms 941, only by written notice (Deposits, Returns & the Tax Calendar).
Fractions-of-cents adjustment: the Form 941 line 7 difference between employee FICA withheld payment by payment and the quarter's wages times the rates (FICA, FUTA & SUTA).
FUTA credit: the credit of up to 5.4% against the 6.0% federal unemployment tax for state contributions paid in full and on time, leaving 0.6% (FICA, FUTA & SUTA).
Interest-free adjustment: a Form 941-X correction of underreported tax, filed and paid by the due date of the return for the quarter the error was discovered (Tax Notices, Amendments & Agency Accounts).
Letter 99C: the IRS letter telling an employer that its employment tax returns and W-2s disagree after CAWR review, with 45 days to respond (Tax Notices, Amendments & Agency Accounts).
Localization of work: the ordered state unemployment tests (localized service, base of operations, direction and control, residence) that assign a multi-state worker's wages to one state (FICA, FUTA & SUTA).
Location code: a tax engine's code for the set of taxing jurisdictions an address falls in, computed when the address changes and passed to every calculation (Tax Engines & Filing Services).
Lookback period: for Form 941 filers, the four quarters from July 1 two years back to June 30 of the prior year, whose total taxes set the deposit schedule (Deposits, Returns & the Tax Calendar).
Makeup date: the date by which a deposit shortfall under the accuracy of deposits rule must be deposited: the return due date for monthly depositors, the first Wednesday or Friday on or after the 15th of the next month for semiweekly ones (Deposits, Returns & the Tax Calendar).
Mobile workforce threshold: a state's or city's number of days (or dollars) of work below which a nonresident isn't withheld for, such as Indiana's 30 days or Ohio municipalities' 20 (Multi-State, Reciprocity & Remote Work).
Monthly depositor: an employer that reported $50,000 or less of taxes in its lookback period and deposits by the 15th of the following month (Deposits, Returns & the Tax Calendar).
Next-day deposit rule: the rule that $100,000 or more of taxes accumulated on any day must be deposited by the next business day, making a monthly depositor semiweekly (Deposits, Returns & the Tax Calendar).
Political Subdivision (PSD) code: Pennsylvania's code for a municipality and school district pair, used to determine local earned income tax (State & Local Payroll Taxes).
Reciprocity agreement: an agreement between two states not to tax each other's residents on wages, effective for an employee once they file the work state's certificate (Multi-State, Reciprocity & Remote Work).
Reserve ratio: the most common experience rating formula, contributions minus benefits charged divided by payroll; the higher the ratio, the lower the unemployment rate (FICA, FUTA & SUTA).
Schedule B (Form 941): the report of tax liability by day that semiweekly depositors file with Form 941 (Deposits, Returns & the Tax Calendar).
Semiweekly depositor: an employer above $50,000 in its lookback period, depositing taxes on Wednesday to Friday paydays by the following Wednesday and on Saturday to Tuesday paydays by the following Friday (Deposits, Returns & the Tax Calendar).
Social Security wage base: the most wages per employee per employer per year subject to Social Security tax: $184,500 for 2026 and $192,300 announced for 2027 (FICA, FUTA & SUTA).
State unemployment insurance (SUI, SUTA): the employer contributions, and in a few states employee contributions, that fund state unemployment benefits and earn the FUTA credit (FICA, FUTA & SUTA).
Successor employer: an employer whose predecessor's wages count toward the year's wage bases (Social Security, the Additional Medicare threshold, FUTA and state unemployment) when the rules are met: one that acquires substantially all of a trade or business, or a CPEO and its customer under IRC 3511(b) (FICA, FUTA & SUTA).
SUTA dumping: shifting payroll to an entity with a lower unemployment rate to escape a bad experience rating, which 42 USC 503(k) requires states to prevent and penalize (FICA, FUTA & SUTA).
Trust fund recovery penalty: a penalty of 100% of unpaid trust fund taxes, assessable against the people responsible for paying them over who acted willfully (Deposits, Returns & the Tax Calendar).
Voluntary contribution: an extra state unemployment payment, made early in the rate year, that lowers the employer's assigned rate in states that allow it and is never refunded (FICA, FUTA & SUTA).
W-2c and W-3c: the corrected wage statement and its transmittal, showing previously reported and correct amounts for each changed box (Year-End, W-2s & Wage Reporting).
W-3: the transmittal that totals an employer's W-2s for the Social Security Administration and must agree with its Forms 941 (Year-End, W-2s & Wage Reporting).