Taxes Vocabulary Flashcards

A collection of vocabulary flashcards covering important tax-related terms and their definitions.

1040

The standard Internal Revenue Service (IRS) form that individuals can use to file their annual income tax returns.

1099

A form that details all 'non-employee' compensation, including specific jobs like freelancers or contractors.

Allowances

Employee-claimed exemptions on the W-4 to determine how much of an employee's pay to withhold from their paycheck for taxes.

Audit

An inspection of a filer's tax return by the IRS.

Capital Gain

Profit from the sale of an asset, calculated by subtracting the price initially paid from the price sold.

Corporate Income Tax

A percentage of profits paid by a business to the federal and state government.

Dependent

Someone you financially support who can be claimed on a tax return to reduce taxable income.

Discretionary Spending

Spending by the federal government determined by legislative action and approved through votes.

Dividend

Money from the profits of a company that is paid out to its shareholders, typically on a quarterly basis.

Earned Income

Any income (wages/salary) generated by working.

Effective Tax Rate

The actual rate you pay on your taxes, as a percentage of your overall income.

Excise Tax

A tax paid on purchases of specific goods, like gasoline or cigarettes.

Exemption

The set amount of money, per dependent, you can subtract from your taxable income.

Federal Insurance Contributions Act (FICA)

A federal law that requires an employer to withhold taxes from wages for Social Security and Medicare.

Filing Status

A category that defines the type of tax return an individual uses, based on marital status.

I-9

Form used by an employer to verify an employee's identity and eligibility to work in the U.S.

Income Tax

Taxes paid by employees to federal and state government through direct deduction from their paycheck.

Interest Income

Income earned through interest on savings accounts, bonds, CDs, etc.

Mandatory Spending

Spending by the federal government required by existing laws, including Social Security and Medicare.

Marginal Tax Rate

The tax bracket that your highest dollar of income falls into, and therefore the highest tax rate you pay.

Medicaid

A government-run insurance program that provides healthcare assistance to low-income Americans.

Medicare

A government-run insurance program that provides healthcare to elderly and disabled Americans.

Paycheck Stub

A document attached to every paycheck that details earnings and amounts withheld for taxes.

Payroll Tax

Federal and state taxes that employers must pay based on a percentage of the employee's salary.

Progressive Tax

A tax system that collects a larger percentage from high-income earners than from low-income earners.

Social Security

A federal program that provides monthly benefits to millions of Americans, including retirees and disabled individuals.

Standard Deduction

A standardized dollar amount that reduces your taxable income for individuals who do not itemize their deductions.

Tax Bracket

A range of income amounts that are taxed at a particular rate.

Tax Credit

An amount subtracted directly from the tax owed.

Tax Deduction

An amount that can be subtracted from a person's tax liability that lowers their taxable income.

Tax Rate

The percentage at which taxes are paid on each dollar of income.

Tax Return

An annual report to the IRS summarizing total income, deductions, and taxes withheld.

Taxable Income

The amount of income used to calculate an individual or company's income tax due.

Tax Refund

An amount given back to a taxpayer who has paid more taxes than were due.

Unearned Income

Income received from sources other than employment.

W-2

A form employers must send to employees and the IRS to report annual wages and taxes withheld.

W-4

A form completed by an employee to indicate tax situation to the employer for withholding.

Withholding

The portion of an employee's wages that is not included in their paycheck because it goes to taxes.