Payroll and Income Taxes

capital gains tax

Tax on the profit made by selling an asset, such as stocks or property, that has increased in value.

deduction

An item that is subtracted from gross income on a tax return. There are many deductions, with the most common including business expenses, charitable donations, medical expenses and property taxes, interest on mortgages or equity lines of credit, and tax advice.

discretionary income

Income that is available after all necessities (food, shelter, etc.) have been paid for.

gross income

The total income of an individual or couple filing jointly or separately, including all wages, rental income, and interest on investments (except tax-deferred investments).

income tax

A tax imposed by the federal government on any money earned during a fiscal year.

inheritance tax

A tax imposed on the transfer of an estate from a deceased person.

progressive taxes

A form of taxation where people who earn more are charged a higher percentage of their income than people with lower incomes.

property tax

A tax paid by owners of property, based on the estimate of the property’s value.

taxable income

Income after all deductions and exemptions have been subtracted. Using a tax table, taxes are figured based on the taxable income.

tax brackets

The divisions at which tax rates change in a progressive tax system. Income past a certain point will be taxed at a higher rate.

tax credits

Amounts subtracted directly from the taxes due, not from income as deductions are. There are many types of tax credits, including the Earned Income Tax Credit and the Child Tax Credi

What is the purpose of a W-4?

A way for employers to see your filling status, deductions, other jobs, income, etc.

What does EXEMPT mean on your W-4?

Exempt on the W-4 form means that you wont have to pay taxes every year, but you still will be paying for things like medicate and social security.

Dependents

If you are a dependent, under the age of 65, and single, you must file a return if:
● Your earned income was more than $14,600 or
● Your unearned income was more than $1,300 or
● Your gross income (total of your earned and unearned income) was more than the larger of:
○ $1,300 or
○ Your earned income plus $450

W-2

• I arrive in the mail or electronically in January

• There is one of me for every job you work as an employee

• I tell you how much you earned and how much you already paid in taxes

1099

• I arrive in the mail or electronically in January

• You get me if…

  • You are NOT an employee, but were paid by a company

  • You sold investments (for a loss or gain)

  • You received dividend or interest payments

  • You earned other types of income

• You probably didn’t withhold taxes from my earnings, so you may have a big tax bill coming up!

1040

• My filing deadline is in April

• Most people who earned income last year should complete me

• Beware, there is a LOT to fill out

W-4

• Your employer asks you to complete me when you start a new job

• You list information about yourself and your family on me

• I determine how much money gets taken out of each paycheck

I9

• Your employer asks you to complete me when you start a new job

• You use me to prove that you are eligible to work in the U.S.

• You must provide identification when submitting me