Taxes Cap Quiz

voluntary payroll deductions

The deductions an employer makes to an employee's pay each pay period because the employee has requested in writing the deduction be made.

taxable pay

The total amount of money that is paid to an employee by an employer that is subject to federal, state and local income taxes.

W-4 Form

A form that provides an employer with the information necessary to withhold the appropriate amount of income taxes from an employee's pay.

Allowances

The number of dependents claimed on a W-4 Form. The number of allowances is used by the employer to withhold the correct amount of taxes from the employee's pay each pay period.

Household

Individuals who live together as a family or extended family in a home or apartment.

Social Security Number

A unique number assigned to everyone within the Social Security system. (For example - '123-45-6789'). Your social security number is used extensively by employers, financial institutions, and all levels of government to track your income and taxes.

Earned Income

The money an individual is paid by their employer for the work they do. It is called earned income because the individual has to work to earn the income.

Income Taxes

Taxes that are paid to the federal, state and local governments based on the amount of income an individual or business earns during the year.

Medicare

Taxes paid by employees and employers to the federal government based on the amount of money paid to the employee by the employer each pay period. These taxes pay for health care benefits for retired and disabled workers.

Hidden Taxes

Taxes that are imposed on a transaction such as using a phone, renting a car and purchasing gasoline rather than a person or business. Many individuals don't realize they are actually paying hidden taxes.

Pay Period

The length of time between an employee's paydays. Most employees are paid weekly, twice a month or monthly.

Progressive Tax System

A tax system that assesses higher tax rates as the amount of income subject to taxation increases.

Property Taxes

Taxes that are based on the current value of taxable property owned by an individual. The taxes are paid to the city or county government in which the individual lives.

Sales Taxes

Taxes that are based on the selling price of goods and services. The seller will collect the taxes from the buyer at the time of the purchase and periodically forward them to the different levels of government that imposed the taxes.

Tax Deductions

Any expense that qualifies to be used to reduce the amount of income an individual is required to pay federal, state, or local income taxes on. Interest paid on mortgage loans and contributions to some retirement plans are common tax deductions.

Taxes

Money paid by individuals and businesses to the different levels of government as required by law. This money is used to fund the different levels of government and pay for the programs and services they provide.

Unearned Income

The money an individual receives from their investments. It is called unearned income because the individual did not have to work to earn the money.

Pay as you earn

The current system used to collect income and payroll taxes. The employer is required to withhold these taxes from an employee's pay each pay period and forward it to the different levels of government at regular intervals.

gross pay

The total amount of money that is paid to an employee by an employer before taxes and other deductions are subtracted

required payroll deductions

The deductions an employer makes to an employee's pay each pay period because they are required by law to do so.