Every aspect of small business management has a lexicon of terms. Payroll is no exception.

Regardless of the payroll solution you choose, it is important to understand these terms so you can manage your provider effectively.

Payroll Taxes

Employers are required to pay taxes on the services that are offered to and provided by their employees. The bulk of these taxes are commonly referred to as "payroll taxes" and consist of:

Income tax

The Federal government, most states, and some local governments require employers to withhold income tax from their employees' pay.

Social Security and Medicare

Sometimes referred to as FICA (Federal Insurance Contributions Act). Employers are required to withhold and deposit these taxes from employees' paychecks, and also make matching contributions.

Unemployment tax

Employers pay Federal Unemployment Tax (FUTA) to the unemployment insurance system. The amount owed is based on the business' total employee wages. Many states also have their own unemployment taxes.

Tax Deposit Accounts

Employers are required to deposit income tax and FICA withholdings to an authorized financial institution or Federal Reserve Bank. Most businesses are required to make monthly deposits, although some contribute on a semi-weekly basis. Your contributions are deposited through electronic deposits or through Federal Tax Deposit (FTD) coupons. Check with the IRS to determine which payment schedule and deposit method is required of your business.

Cafeteria Plans

Cafeteria plans, also called "flexible benefit" plans, allow employees to set aside pre-tax dollars to pay for certain benefits such as medical and dependent care assistance.

These plans can be beneficial for both employers and employees: employers who carry such plans will pay less FICA and FUTA taxes, and employees will pay less FICA taxes because their amount of taxable income is reduced. Additional benefits that may be offered as part of a cafeteria plan include group life insurance and disability insurance.

Additional Items

Depending on the benefits you offer employees, your company may also need to track the following items as part of payroll management:

Insurance and other benefits

Health coverage, dental insurance, life insurance and other benefits to which employees may contribute.

Profit-sharing plans

Stock option or equity plans offered to employees.

401(k) programs

Pre-tax dollars set aside by employees and employers for retirement purposes.

Education benefits

Company-sponsored training and/or degree advancement.

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