Pay Stubs, Taxes, and Tax Forms

Flashcards covering key vocabulary and concepts related to pay stubs, taxes, deductions, and tax forms, based on lecture notes.

Pay Stub

A record of an employee’s wages, taxes, and deductions given to each employee by their employer with every paycheck.

Gross Pay

The amount of pay before any taxes, benefits, or other deductions are taken out of wages.

Net Pay

The amount of pay after taxes, benefits, or other deductions are taken out of the wages.

YTD

Abbreviation that stands for Year to Date; gives the total amount from January 1st to the current pay period.

Deductions

Wages withheld (or subtracted) from an employee’s paycheck, usually to pay taxes and benefits.

Federal Income Tax

Tax paid to the federal government to support building infrastructure, the military, social programs, and more.

State Income Tax

Tax generally paid to the state where the employee works, used to fund state education and other state programs.

FICA

A specific type of federal tax that stands for the Federal Insurance Contributions Act, funding Social Security and Medicare benefits.

Social Security Tax

Tax that is part of FICA, currently at 6.2% of wages, providing retirement income for people 62 and older.

Medicare Tax

Tax that is part of FICA, currently at 1.45% of wages, providing health insurance for people 65 and older.

Purpose of Taxes

Income for federal, state, and local governments used to fund government activities, including Public Works and Services such as roads and schools.

FICA (Federal Insurance Contributions Act)

A U.S. payroll tax collected to fund the Social Security and Medicare Programs.

Proportional Taxes

A tax that takes the same rate/percentage of income from all income groups; flat tax rate.

Regressive Taxes

A type of tax where individuals pay the same amount regardless of income; low and high-income earners pay the same dollar amount.

Progressive Taxes

A tax that takes a larger percentage of income from high-income groups than from low-income groups.

W-2 Form (“Wage and Tax Statement”)

Tax form that reports the wages an employee earned during the year, as well as any taxes their employer took out (withheld).

1099 - INT Form

Tax form that reports interest income you received during the year.

1040 Form

Form in which individual taxpayers use to file their taxes with the IRS.

IRS: Internal Revenue Service

Agency with the main functions to collect income taxes and to enforce tax laws.

Filing Status

Determines the rate at which income is taxed; examples include Single, Married filing jointly, Head of household.

Itemized Deduction

Calculated based on specific expenses a taxpayers had during the year; examples include Medical Expenses and Property Taxes

Standard Deductions

Set amount each year and is often best for taxpayers who haven’t spent much money on the categories where you Itemized Deduction.

Taxable Income

Wages, Salaries, and Tips, Interest Income, and Gambling and Lottery winnings.