# Payroll Tax Glossary

> 48 terms from the Workforce book's Payroll Tax part, each defined in a line and linked to the chapter that explains it.

- **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](https://www.syntaqx.com/books/workforce/deposits-and-returns#paying-with-the-return-and-the-accuracy-of-deposits-rule)).
- **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](https://www.syntaqx.com/books/workforce/state-and-local-tax#local-income-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](https://www.syntaqx.com/books/workforce/fica-futa-and-suta#additional-medicare-tax)).
- **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](https://www.syntaqx.com/books/workforce/tax-notices-and-agency-accounts#penalty-relief)).
- **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](https://www.syntaqx.com/books/workforce/deposits-and-returns#the-returns)).
- **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](https://www.syntaqx.com/books/workforce/multi-state-and-remote-work#the-convenience-of-the-employer-rule)).
- **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](https://www.syntaqx.com/books/workforce/year-end-and-w2s#efw2-and-bso)).
- **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](https://www.syntaqx.com/books/workforce/tax-engines-and-filing#the-calculation-layer)).
- **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](https://www.syntaqx.com/books/workforce/year-end-and-w2s#reconciling-w-2s-to-the-941s)).
- **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](https://www.syntaqx.com/books/workforce/multi-state-and-remote-work#the-convenience-of-the-employer-rule)).
- **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](https://www.syntaqx.com/books/workforce/tax-notices-and-agency-accounts#irs-notices)).
- **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](https://www.syntaqx.com/books/workforce/tax-notices-and-agency-accounts#irs-notices)).
- **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](https://www.syntaqx.com/books/workforce/fica-futa-and-suta#futa)).
- **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](https://www.syntaqx.com/books/workforce/tax-notices-and-agency-accounts#penalty-relief)).
- **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](https://www.syntaqx.com/books/workforce/deposits-and-returns#when-deposits-are-due)).
- **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](https://www.syntaqx.com/books/workforce/deposits-and-returns#how-deposits-are-made-eftps)).
- **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](https://www.syntaqx.com/books/workforce/year-end-and-w2s#efw2-and-bso)).
- **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](https://www.syntaqx.com/books/workforce/fica-futa-and-suta#suta-state-unemployment-insurance)).
- **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](https://www.syntaqx.com/books/workforce/deposits-and-returns#failure-to-deposit-penalties)).
- **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](https://www.syntaqx.com/books/workforce/tax-engines-and-filing#the-file-and-remit-layer)).
- **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](https://www.syntaqx.com/books/workforce/tax-notices-and-agency-accounts#penalty-relief)).
- **Form 940:** the employer's annual FUTA return, with Schedule A for multi-state employers and credit reduction states ([FICA, FUTA & SUTA](https://www.syntaqx.com/books/workforce/fica-futa-and-suta#futa)).
- **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](https://www.syntaqx.com/books/workforce/tax-notices-and-agency-accounts#form-941-x-and-the-interest-free-adjustment)).
- **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](https://www.syntaqx.com/books/workforce/deposits-and-returns#the-returns)).
- **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](https://www.syntaqx.com/books/workforce/fica-futa-and-suta#social-security-and-medicare)).
- **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](https://www.syntaqx.com/books/workforce/fica-futa-and-suta#futa)).
- **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](https://www.syntaqx.com/books/workforce/tax-notices-and-agency-accounts#form-941-x-and-the-interest-free-adjustment)).
- **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](https://www.syntaqx.com/books/workforce/tax-notices-and-agency-accounts#irs-notices)).
- **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](https://www.syntaqx.com/books/workforce/fica-futa-and-suta#which-state-gets-the-unemployment-wages)).
- **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](https://www.syntaqx.com/books/workforce/tax-engines-and-filing#location-codes-and-the-address-problem)).
- **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](https://www.syntaqx.com/books/workforce/deposits-and-returns#the-deposit-schedule)).
- **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](https://www.syntaqx.com/books/workforce/deposits-and-returns#paying-with-the-return-and-the-accuracy-of-deposits-rule)).
- **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](https://www.syntaqx.com/books/workforce/multi-state-and-remote-work#mobile-workforce-thresholds)).
- **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](https://www.syntaqx.com/books/workforce/deposits-and-returns#the-deposit-schedule)).
- **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](https://www.syntaqx.com/books/workforce/deposits-and-returns#the-100-000-next-day-rule)).
- **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](https://www.syntaqx.com/books/workforce/state-and-local-tax#local-income-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](https://www.syntaqx.com/books/workforce/multi-state-and-remote-work#reciprocity-agreements)).
- **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](https://www.syntaqx.com/books/workforce/fica-futa-and-suta#suta-state-unemployment-insurance)).
- **Schedule B (Form 941):** the report of tax liability by day that semiweekly depositors file with Form 941 ([Deposits, Returns & the Tax Calendar](https://www.syntaqx.com/books/workforce/deposits-and-returns#the-returns)).
- **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](https://www.syntaqx.com/books/workforce/deposits-and-returns#when-deposits-are-due)).
- **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](https://www.syntaqx.com/books/workforce/fica-futa-and-suta#social-security-and-medicare)).
- **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](https://www.syntaqx.com/books/workforce/fica-futa-and-suta#suta-state-unemployment-insurance)).
- **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](https://www.syntaqx.com/books/workforce/fica-futa-and-suta#successor-employers-and-wage-base-transfers)).
- **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](https://www.syntaqx.com/books/workforce/fica-futa-and-suta#successor-employers-and-wage-base-transfers)).
- **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](https://www.syntaqx.com/books/workforce/deposits-and-returns#failure-to-deposit-penalties)).
- **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](https://www.syntaqx.com/books/workforce/fica-futa-and-suta#suta-state-unemployment-insurance)).
- **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](https://www.syntaqx.com/books/workforce/year-end-and-w2s#corrections-w-2c-and-w-3c)).
- **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](https://www.syntaqx.com/books/workforce/year-end-and-w2s#the-w-3-and-filing-with-ssa)).

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