NGPF Taxes Unit Review

W-4

Form to indicate tax withholding preferences.

I-9

Form to verify employment eligibility.

Refund

Amount received if you overpaid your taxes.

Pre-tax deduction

Retirement contribution not included in taxable income.

Unearned income

Income received through gifts, unemployment benefits, dividends, or inheritance.

Mandatory government spending

Spending required by law, including Social Security and Medicare.

Withholding

Amount of tax taken out of your earnings.

Self-employed

Individuals who work for themselves, such as freelancers or contractors.

1099

Form used to report various types of income other than wages, salaries, and tips.

Social Security

Provides benefits for people who are retired, disabled, or survivors of deceased workers.

Gross pay

Total earnings before deductions.

Net pay

Amount received after deductions.

FICA

Federal Insurance Contributions Act tax for Social Security and Medicare.

401(k)

Retirement savings plan with tax advantages.

Household employee

An individual hired to perform work in a private home.

Deduction

An expense that can be subtracted from gross income to reduce taxable income.

Income taxes

Taxes imposed on individuals or entities based on their income.

Discretionary government spending

Spending that is not required by law and can be adjusted.

Mandatory government spending

Spending that is required by existing laws.

Employer contributions

Funds contributed by an employer to an employee's retirement plan.

Medicare

Federal health insurance program for people aged 65 and older.

Tax Forms

Documents used to report income, deductions, and tax liability.

Common deductions

Expenses that can be deducted from taxable income.

Important tax dates

Key deadlines for filing taxes and making payments.

Dependent

An individual who relies on another for financial support.

Government Spending

How the government uses tax revenue.

Health

hospital care, nursing home care, physicians; and dentists' services, glasses, and prescription drugs.

National Defense

military personnel, operations, and maintenance, procurement of weapons and research, development, testing, and evaluation.

Social Security

administrative costs

FICA

A mandatory deduction to pay for Social Security and Medicare.

Federal income tax

A mandatory deduction to pay for national government programs.

401(k) contribution

A voluntary deduction to your retirement account.

Gross pay

Your total earnings before any deductions are taken out.

Health insurance

A voluntary deduction to pay for your health coverage.

YTD net pay

Your total take-home pay for the year so far.

Dependent

Someone that you can financially support who can be claimed on a tax return to reduce your taxable income and lower your taxes.

Dependent criteria

A dependent must be a U.S. citizen, under 19 or 24 if full-time student, and living with them for more than half a year.

W-2 form

Tells you how much you earned as an employee.

W-4 form

Form completed when starting a new job to determine tax withholding.

I-9 form

Form completed to verify the identity and employment authorization of individuals.

Form 1099

The standard federal income tax form for reporting various types of income other than wages.

Tax refund

Money returned to a taxpayer when they have overpaid their taxes.

Income threshold

The minimum amount of income that requires an individual to file taxes.

Exempt on W-4

Indicating that no federal income tax will be withheld from an employee's paycheck.

Unearned income

Income received from sources other than employment, such as interest or dividends.

Earned income

Income received from working, including wages, salaries, and tips.

Filing exempt

Will impact his tax situation as he won't have any federal income tax withheld.

Three main methods of filing taxes

Paper filing, doing it digitally, or getting professional help.

Cheapest method of filing taxes

Paper filing.

Most reliable method of filing taxes

Electronic filing.

W-2 form recipients

Only employees.

Reasons for multiple W-2 forms

More than one job, changed jobs within a tax year, another company buys out the organization you work for.

Time of year to receive a W-2

January 31.

Information included on a W-2

Wage and salary.

Use of W-2

Report employer's income and how much tax the employer withheld.

State income taxes requirement

Most states require taxpayers to pay state income taxes, in addition to federal income taxes.

Meaning of a tax refund

His $175 refund means that Ben had overpaid his taxes.

Source of tax refund money

The money comes from the taxes that he overpaid.

Progressive tax system

Tax rates increase as income level increases.

Regressive tax system

Tax rates decrease as income level increases.

Proportional tax system

Tax rates remain constant regardless of income level.

Marginal tax rate

The tax rate you pay on the last dollar of your income.

Income tax bracket

A person whose income falls in the 24% tax bracket will pay a total of 24% of their income in taxes.

Tax deduction

DECREASES a person's taxable income and DECREASES the amount they owe in taxes.

Gross income vs taxable income

A person's gross income is always higher than their taxable income.

Legal strategies to reduce tax liability

Maximizing your pre-tax 401(k) contributions, claiming an education tax credit for your college tuition expenses, choosing to take the itemized or standard deduction based on which is higher.

Tax credit vs tax deduction

A $500 tax credit will reduce your tax bill more than a $500 tax deduction.

Deciding to itemize deductions or take standard deduction

If your total state and local taxes and mortgage interest exceed the Standard Deduction, consider itemizing.

Topics to review

Tax deduction and tax credit.