Personal Finance Unit 1 Taxes

Dependent

Qualifying child/relative who relies on you for financial support

Deduction

An amount you subtract from your income to reduce total portion that you have to pay taxes on

Earned income

All taxable income and wages received for working for someone else, yourself, or form you own

Income tax

Government levy charged on financial income/profits earned by individuals and businesses

Social Security Tax

Federal payroll tax used to fund retirement, disability and survivor benefits

Medicare tax

Mandatory federal tax used to fund the US gov’s medical benefits from certain individual 65+

Payroll tax

Tax that employers withhold from employee paychecks and pay directly to fund programs like social security

Standard deduction

Specific dollar amount that reduces amount of taxable income

Paycheck stub

Part of paycheck that shows how pay was calculated and what was taken out

Income Tax Return

Form you file with gov that tells how much money you earned, how much tax you already paid, and how much tax you actually owe

Tax refund

Money gov. gives you back when you paid more in taxes than actually owed

Withholding

Money that employers takes out of paycheck and sends to government

Gross Pay

Total amount of money earned before any taxes or other deductions

Net pay

Amount you actually take home after taxes

I-9

Verifies that you are who you say you are and are authorized to work in US. Needs to be completed by end of first day of work

W-4

Form employee fills out when starting a new job that helps employer determine how much federal income to take out of each pay check

W-2

Form employer fills out and gives at end of the year to summarize how much you earned and how much was withheld for taxes. Needs to be completed by January 31st

1040

Federal income tax return from individuals use to report income and calculate federal income tax. Needs to be completed by April 15

1099

Reports income received that wasn’t paid as regular employee wages. Needs to be completed by January 31st