Professional Employer Organization (PEO)
Professional employer organizations (PEOs) enable clients to cost-effectively outsource the management of human resources, employee benefits, payroll and workers' compensation. PEO clients focus on their core competencies to maintain and grow their bottom line.

FEIN Number
Applicable to the United States, an Employer Identification Number or EIN (also known as Federal Employer Identification Number or (FEIN)) is the corporate equivalent to a Social Security Number, although it is issued to anyone, including individuals, who have to pay withholding taxes on employees.

Also known as the Tax Identification Number (TIN), Federal Employer Identification Number (FEIN) or the Federal Tax Identification Number, the EIN is a unique nine-digit number assigned by the Internal Revenue Service (IRS) to business entities operating in the United States for the purposes of identification. When the number is used for identification rather than employment tax reporting, it is usually referred to as a TIN, and when used for the purposes of reporting employment taxes, it is usually referred to as an EIN. This article will use the latter term.

Comparison to Social Security Numbers

Similar in purpose to the Social Security Number assigned to individuals, EINs are used by employers, sole proprietors, corporations, partnerships, non-profit organizations, trusts and estates, government agencies, certain individuals and other business entities. The IRS uses this number to identify taxpayers that are required to file various business tax returns. Individuals who are employers may choose to either obtain an EIN or use their Social Security Number for the purpose of reporting taxes withheld on behalf of their employees. Contrary to some misconceptions, credit bureaus and credit issuers can tell the difference between SSN and EIN Numbers. SSN Numbers can be validated as to origin and state / year of issuance. The credit bureaus and issuers are highly trained in fraud detection, and increasingly sophisticated algorithms and protections are used.
 

EIN Format

An EIN is usually written in the form 00-0000000 whereas a Social Security Number is usually written in the form 000-00-0000 in order to differentiate between the two. There are EIN Decoders on the web that can identify which state the company had registered the EIN Number in. All businesses must have an EIN in order to file yearly tax returns. Those businesses that do not are considered proprietorships and the Owner / Operator SSN is used on the tax form.

Prior to 2001, the first two digits of an EIN (the EIN Prefix) indicated the business was located in a particular geographic area. In 2001, EIN assignment was centralized at three of the IRS campuses, although all 10 campuses can assign an EIN, if necessary.

EIN Expiration

EINs do not expire. Once an EIN has been issued to an entity, it will not be reissued.

W-4
Form W-4 is a tax form used by the United States Internal Revenue Service.  The form is used by employers to determine the correct amount of withholding tax to deduct from employees' wages. When filling out a Form W-4, an employee calculates how many deductions are allowed based on his or her expected tax filing situation for the year. For each deduction taken, the amount of money withheld is reduced. This, in turn, reduces any tax refund for which he or she may be eligible. You can also use the IRS Withholding Calculator to calculate your withholding allowances more exactly.

W-2
Form W-2 is used in the United States income tax system as an information return to report wages paid to employees and the taxes withheld from them. The form is also used to report FICA taxes to the Social Security Administration. Relevant amounts on Form W-2 are reported by the Social Security Administration to the Internal Revenue Service.

Employers must complete a Form W-2 for each employee to whom they pay a salary, wage, or other compensation as part of the employment relationship. The Form W-2 reports income on a calendar year (January 1 through December 31) basis, regardless of the fiscal year used by the employer or employee for other Federal tax purposes.

The form consists of six copies:

        Copy A - Submitted by the employer to the Social Security Administration. (In addition, the employer must also submit Form W-3, which is a summary of all Forms W-2 completed, along with all Copies A submitted. The Form W-3 must be signed by the employer.)

        Copy B - To be sent to the employee and filed by the employee with the employee's federal income tax returns.

        Copy C - To be sent to the employee, to be retained by the employee for the employee's records.

        Copy D - To be retained by the employer, for the employer's records.

        Copy 1 - To be filed with the employee's state or local income tax returns (if any).

        Copy 2 - To be filed with the employee's state or local income tax returns (if any).

Employers are instructed to send copies B, C, 1, and 2 to their employees generally by January 31 of the year immediately following the year of income to which the Form W-2 relates, which gives these taxpayers about 2 1/2 months before the April 15 income tax due date. The Form W-2, with Form W-3, generally must be filed by the employer with the Social Security Administration by the end of February.

W-9
Form W-9, Request for Taxpayer Identification Number and Certification, is used in the United States income tax system by a third party who must file an information return with the IRS. It requests the taxpayer identification information of a taxpayer (usually in the form of a Social Security Number or Tax Identification Number).

The form is never actually sent to the IRS, but is maintained by the person who files the information return for verification purposes.

1099
Form 1099 is a form promulgated by the Internal Revenue Service (IRS) and is used in the United States income tax system to prepare and file an information return to report various types of income other than wages, salaries, and tips (for which Social Security Administration Form W-2 is used instead). The term information return is used in contrast to the term tax return although the latter term is sometimes used colloquially to describe both kinds of returns.
Each payer must complete a 1099 for each covered transaction. Three copies are made: one for the payer, one for the payee, and one for the IRS.

A notable use of Form 1099 is to report amounts paid to independent contractors (in IRS terminology, such payments are nonemployee compensation). The ubiquity of the form has also led to use of the phrase "1099" to refer to contractors themselves. U.S. tax law requires businesses to submit a Form 1099 for every contractor paid more than $600 for services during a year. This requirement usually does not apply to corporations receiving payments.

Workers' Compensation
Workers' compensation laws were enacted to reduce the need for litigation, as well as the need for injured workers to prove that the injuries were the employer's "fault". The first state law was passed in Maryland in 1902, and the first law covering federal employees was passed in 1906. By 1949, all states had enacted some kind of workers' compensation regime.

This system was originally known as "workman's compensation." Today, most jurisdictions have adopted the term "workers' compensation" as a gender-neutral alternative.

In the United States most employees who are injured on the job have an absolute right to medical care for that injury, and in many cases, monetary payments to compensate for resulting temporary or permanent disabilities.

Most employers are required to subscribe to insurance for workers' compensation, and an employer who does not may have financial penalties imposed. In many states, there are public uninsured employer funds to pay benefits to workers employed by companies who illegally fail to purchase insurance. Insurance policies are available to employers through commercial insurance companies: if the employer is deemed an excessive risk to insure at market rates, it can obtain coverage through an assigned-risk program.

In the vast majority of states, workers' compensation is solely provided by private insurance companies. 12 states operate a state fund (which serves as a model to private insurers and insures state employees), and a handful have state-owned monopolies. To keep the state funds from crowding out private insurers, they are generally required to act as assigned-risk programs or insurers of last resort, and they can only write workers' compensation policies. In contrast, private insurers can turn away the worst risks and can write comprehensive insurance packages covering general liability, natural disasters, and so on. The largest state fund is California's State Compensation Insurance Fund. The federal government pays its workers' compensation obligations for its own employees through regular appropriations.

It is illegal in some states (although not in others) for an employer to terminate an employee for reporting a workplace injury or for filing a workers' compensation claim. Most states also prohibit refusing employment for having previously filed a workers' compensation claim. However, employers can consult commercial databases of claims data and it would seem nearly impossible to prove that an employer discriminated against a job applicant because of his or her claims history. To abate discrimination of this type, some states have created a "subsequent injury trust fund" which will reimburse insurers for benefits paid to workers who suffer aggravation or recurrence of a compensable injury. It is also suggested that laws should be made to prohibit inclusion of claims history in databases or to make it anonymous.

It is also illegal to falsely claim workers' compensation benefits. Employers at times hire private investigators to videotape claimants surreptitiously. Some of the sub rosa videos have shown employees engaging in sports or other strenuous physical activities despite allegedly having suffered disability or injury. TV shows have recently been made using these videos. Such evidence may not be admissible in law courts if it has been found to be taken unlawfully.

Some employers vigorously contest employee claims for workers' compensation payments. In any contested case, or in any case involving serious injury, a lawyer with specific experience in handling workers' compensation claims on behalf of injured workers should be consulted. Laws in many states limit a claimant's legal expenses to a certain fraction of an award; such "contingency fees" are payable only if the recovery is successful. In some states this fee can be as high as 40% or as little as 11% of the monetary award recovered, if any. If no award is recovered, the attorney will be paid nothing and loses the time and money he or she put into the case, thereby having essentially worked for free.

In the vast majority of states, original jurisdiction over workers' compensation disputes has been transferred by statute from the trial courts to special administrative agencies. Within such agencies, disputes are usually handled informally by administrative law judges. Appeals may be taken to an appeals board and from there into the state court system. However, such appeals are difficult and are regarded skeptically by most state appellate courts, because the point of workers' compensation was to reduce litigation. A few states still allow the employee to initiate a lawsuit in a trial court against the employer. 

Payroll Taxes
Employers are required to withhold federal income tax, plus one-half of the Social Security tax, and one-half of the Medicare tax. Together, the employer's and employee's shares of the Social Security and Medicare taxes are known as the FICA tax. In some places, employers may be required to withhold state income tax, or even city income tax. In addition the employer is required to pay State and Federal unemployment tax.

Social security and Medicare taxes

Social security and Medicare taxes, also known as FICA taxes must be withheld from your employees' wages. As an employer, you must also pay a matching amount of FICA taxes for your employees.

1. Social Security Tax: As of 2007, the employer must withhold 6.2% of an employee's wages and pay a matching amount in social security taxes until the employee reaches the wage base for the year. The total is 12.4% for the employee and the employer. The wage base for social security tax in 2007 is $97,500. Once that amount is earned for a given year, neither the employee nor the employer owe any additional social security tax for that year.

2. Medicare Tax: As of 2007, the employer must withhold 1.45% of an employee's wages and pay a matching amount for Medicare tax. The total is 2.9% for the employee and the employer. Unlike the Social security tax, there is no maximum wage base for the Medicare portion of the FICA tax. Both the employer and the employee continue to incur and pay Medicare tax on each additional amount of gross compensation, with no limit on the amount of gross compensation on which the tax is imposed.

Unemployment Taxes
Each employer also must pay State and Federal Unemployment Taxes (SUTA and FUTA). The FUTA rate is 6.2% but normally nets to 0.8% because the employer is allowed to take a credit of up to 5.4% for SUTA taxes that it pays. This will be the case if the employer is eligible for the maximum credit. The wage base for FUTA is $7,000 (i.e., the employer is liable for FUTA only on the first $7,000 of compensation paid to each employee per calendar year).

Each state has different rate, so that employers must consult the state requirements for each applicable state regarding tax rates and maximum wage base. Many states require new business to have an average starting rate until an employment history is created. For example, Indiana requires new employers to pay 2.7% for the first 3 years. Afterwards the rate is adjusted depending on various factors, such as whether an ex-employee files a request for unemployment benefits.

Wage Garnishment
the most common type of garnishment, is the process of deducting money from an employee's monetary compensation (including salary) as a result of a court order. In the United States, such payments are limited by federal law to 25 percent of the disposable income that the employee earns. Garnishments can be taken for any type of debt but common examples of debt that result in garnishments include:

child support
taxes
unpaid Court Fines
any other type of money judgment

When served on an employer, garnishments are taken as part of the payroll process. When processing payroll, sometimes there is not enough money in the employee's net pay to satisfy all of the garnishments. In such a case, the correct order to take a garnishment must be satisfied. For example, in a case with federal tax, local tax, and credit card garnishments, the first garnishment taken would be the federal tax garnishments, then the local tax garnishments, and finally, garnishments for the credit card.

At present four U.S. states North Carolina, Pennsylvania, South Carolina and Texas do not allow wage garnishment at all except for debts related to taxes, child support, federally guaranteed student loans, and court-ordered fines or restitution for a crime the debtor committed. Several other states observe maximum thresholds that are lower than the 25 percent maximum provided by federal law. States may also prohibit garnishment altogether in certain circumstances. For example, in Florida the wages of a person who provides more than half the support for a child or other dependent are exempt from garnishment altogether (though this exemption is subject to waiver).

The other type of garnishment, also known as attachment, (or attachment of earnings), requires the garnishee to deliver all the defendant's money and/or property in the hands of the garnishee at the time of service of process to the court, to be paid over to the plaintiff. Since this type of garnishment is not continuing in nature, but is not subject to the type of restrictions that apply to wage garnishment, it is most often used against banks, or other persons or companies that incur liquidated obligations in the regular course of business.

There are only a few requirements that must be met before the IRS starts a wage garnishment:

The IRS must have assessed the tax and sent a Notice and Demand for Payment;

The taxpayer must have neglected or refused to pay the tax; and,
 

The IRS must have sent a Final Notice of Intent to Levy and Notice of Your Right to A Hearing (levy notice) at least 30 days before the levy.

The IRS can serve the Final Notice in person, leave it at the taxpayer's home or usual place of business, or send it to the last known address by certified or registered mail. It is important to note that the IRS is only required to send the Final Notice to the last address known to it. The taxpayer does not need to actually receive the notice for it to be effective. Many taxpayers never actually receive the final notice. Those taxpayers may not realize they are in danger of receiving a levy until their wages are actually garnished.

COBRA
The Consolidated Omnibus Budget Reconciliation Act of 1985, or COBRA, is a law passed by the U.S. Congress that mandates an insurance program giving some employees the ability to continue health insurance coverage after leaving employment. COBRA includes amendments to the Employee Retirement Income Security Act of 1974 (ERISA).

Although this statute became law on April 7, 1986, its official name is the Consolidated Omnibus Budget Reconciliation Act of 1985. Because of the discrepancy between the official name of the Act and the year in which it was enacted, some government publications refer to the Act as the Consolidated Omnibus Budget Reconciliation Act of 1986. The Act is often referred to simply as "COBRA".

Health Maintenance Organization (HMO)
Proposed in the 1960s by Dr. Paul Elwood in the "Health Maintenance Strategy", the HMO concept was promoted by the Nixon Administration as a fix to rising health care costs and set in law as PL 93-222. As defined in the act, a federally qualified HMO would in exchange for a subscriber fee (premium) allow members access to a panel of employed physicians or a network of doctors and facilities including hospitals. In return the HMO received mandated market access and could receive federal development funds.

In practice, an HMO is an insurance plan under which an insurance company controls all aspects of the health care of the insured. In the design of the plan, each member is assigned a "gatekeeper", a primary care physician (PCP) who is responsible for the overall care of members assigned to him/her. Specialty services require a specific referral from the PCP to the specialist. Non-emergency hospital admissions also required specific pre-authorization by the PCP. Typically, services are not covered if performed by a provider not an employee of or specifically approved by the HMO, unless it is an emergency situation as defined by the HMO. Financial sanctions for use of emergency facilities in non-emergent situations were once an issue; however, prudent layperson language now applies to all emergency-service utilization and penalties are rare.

Since the 1980s, under the ERISA Act passed in Congress in 1974 and its preemptive effect on state common law tort lawsuits that "relate to" Employee Benefit Plans, HMOs administering benefits through private employer health plans have been protected by Federal law from malpractice litigation on the grounds that the decisions regarding patient care are administrative rather than medical in nature. See "Cigna v. Calad ", 2004.

Preferred Provider Organization (PPO)
Rather than contract with the various insurers and third party administrators, providers may contract with preferred provider organizations. They generally agree to a discount from a relative value-based fee schedule or simply a discount from whatever they bill (which is perhaps subject to reasonable, usual, and customary limitation (generally a percentile of national or regional charge data)). The PPO, in turn, promises convenience, less administrative expenses, and/or prompt payment.

In terms of using such a plan, unlike an HMO plan, which has a copayment cost share feature (a nominal payment generally paid at the time of service), a PPO generally does not have a copay and instead offers a deductible and a coinsurance feature. The deductible represents the first dollar of coverage and is paid by the patient. After the deductible is met, the coinsurance portion applies. If the PPO plan is a 80% coinsurance plan with a $1,000 coinsurance out of pocket, then the patient will pay 20% of the allowed provider fee up to $1,000. After this amount has been paid by the patient, the insurer will pay 100% of subsequent costs.

Because the patient is picking up a substantial portion of the "first dollars" of coverage, PPO are the least expensive types of coverage.

Point Of Service (POS)
A POS plan utilizes some of the features of each of the above plans. Members of a POS plan do not make a choice about which system to use until the point at which the service is being used.

In terms of using such a plan, a POS plan has levels of progressively higher patient financial participation as the patient moves away from the more managed features of the plan. For example, if the patient stays in a network of providers and seeks a referral to use a specialist, they may have a copayment only. However, if they use a network provider, but do not seek a referral, they will pay more, and so on.