Earnings vs Deductions vs Memo Calcs
Video and Transcript: UNDER CONSTRUCTION
University Course: https://learning.myisolved.com/courses/97
Earnings: (Earned Income)
The Internal Revenue Service defines an employee as someone who performs work for an employer who mandates what will be done and how it will be done. Employees receive compensation for these services. Earning types include wages, salaries, and overtime pay.
IRS Articles:
Earned Income (irs.gov)
Deductions:
It's enticing to think of Pay as only involving those items that positively affect your income, but that's not necessarily the case. Another pay item that you'll invariably deal with are deductions, and these can be broken down into Voluntary and Involuntary. Voluntary Deductions are deductions that are agreed upon by the employer and employee but are not legally required. Some examples of voluntary deductions include Medical Deductions, Benefit Deductions, Deferred Compensation, Charitable Donations, and Loans. Alternatively, Involuntary Deductions are deductions that are legally required, regardless of if an employer and employee agree upon the deduction. Examples of involuntary deductions include Child Support, Garnishments, Debts for Federal Taxes, and any deductions required by law. As you're going through the system, if you have questions about or need additional deductions to be set up, please contact customer support.
Examples of Deductions:
Child Support, Federal Tax Levy, Creditors
Memo Calculations:
In addition to Earnings and Deductions, a third type of Pay Item that you may encounter are Memo Calculations. Earnings and Deductions directly affect someone's pay; for example, someone's wages raise their pay, and a 401k deduction reduces their pay. Memo Calculations, on the other hand, are items that do not have an effect on someone's pay. They can be used for a variety of tracking purposes, but a good example to think of when talking about memo calculations is if an employee paid for their uniform with cash, and the employer wanted to record the cost of the uniform on the employee's paycheck, but they didn't want the employee to be charged again for the uniform. In that instance, you could set it up as a memo calculation.