Federal Income Tax Process (Video Notes) - Vocabulary Flashcards

Vocabulary flashcards covering key terms from the video notes on the federal income tax process.

Earned Income

Income from wages or salary (e.g., wages) taxed by the federal government.

Unearned Income

Income not from work (e.g., bank interest).

W-2

Form from an employer summarizing wages and tax withholding for the year.

1099

Form from a bank or payer reporting income such as interest or other non-employment income.

Form 1040

U.S. individual income tax return used to calculate tax liability or refund.

W-4

Withholding allowance form used by an employer to determine how much tax to withhold.

Tax refund

Money returned by the IRS when your withholdings exceed your tax liability.

Tax owed

Amount you must pay to the IRS if your withholdings are too little.

Total (Gross) Income — Line 9

Sum of income shown on W-2/1099 used to calculate taxable income.

Adjustments and Deductions (Standard) — Line 15

Reductions to gross income; standard deduction lowers taxable income.

Taxable Income — Line 15

Income after adjustments/deductions that is subject to tax.

Tax — Line 16

The amount of tax owed calculated from taxable income via tax brackets.

Tax Bracket

Progressive tax structure where income is taxed in ranges at increasing rates.

Credits

Amounts that directly reduce tax liability; not applicable for this assignment.

Federal income tax withheld — W-2 Box 2

Federal tax already withheld from wages; reduces the amount you owe.