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Earned Income
Any income (wages/salary) that is generated by working.
Social Security
A federal insurance program funded by taxpayer dollars that provide benefits to people who are retired, unemployed, or disabled: 6.2% of income.
Income Tax
Taxes paid out by anyone who earns an income.
Federal Income Tax
Used to support government programs such as military defense and public services.
State Income Tax
Used to support protection, roads and social services.
Form W-4 (Employee's Withholding Allowance Certificate)
A federal tax form filled out by an employee to indicate the amount that should be withheld from his/her paycheck for taxes.
Tax Liability
Total amount of taxes that you owe
Tax Evasion
Willful failure to pay taxes.
Tax Audit
An examination of an individual's tax returns by the IRS to verify income and deductions are accurate.
Form W-2 (Wage & Tax Statement)
Summary of the income you earned during the year and all amounts the employer withheld for taxes.
Medicare
Federal health insurance program for people who are 65 or older and certain younger people with disabilities.
Excise Tax
Tax on specific goods such as gas, air fare and cell service
Estate Tax
levied on the total value of a deceased person's money and property and is paid out of the decedent's assets before any distribution to beneficiaries.
Inheritance Tax
A tax collected on the property left by a person's will- beneficiary pays the tax
Gift Tax
a tax on money or property that one living person gives to another
Wages
Payments received for each hour of work
Salary
Payments received regardless of the number of hours worked
Interest Income
Interest from banks, credit unions and other financial institutions
Adjusted Gross Income
Income after certain reductions have been made
Taxable Income
income on which tax must be paid; total income minus exemptions and deductions
Tax Deduction
An expense you can subtract from your adjusted gross income to arrive at your taxable income; ex. child care, sales tax, health insurance, charity contributions, etc.
Exemption
Amount set by the IRS on which no taxes are paid
Dependents
Someone you support financially and is under the age of 24.
Tax Credits
An amount subtracted directly from the taxes that you owe; ex. higher ed.
Earned Income Tax Credit
Credit for people who work but their income is under a certain amount
Medicaid
Federal program that provides medical benefits for low-income persons.
free enterprise
Economic system in which individuals and businesses are allowed to compete for profit with a minimum of government interference
consumption tax
a plan in which people are taxed not on what they earn but on what they spend
property tax
a tax based on real estate and other property
pay-as-you-go
Withholding taxes on on income payments to employees
401(k) plan
a tax-deferred retirement plan offered to employees by their employer
IRS (Internal Revenue Service)
US government agency that is responsible for the collection and enforcement of taxes
