Income and Taxes Overview

community

a group of people working together for a common good

taxpayer

A person who pays a tax to national, state, county or municipal governments

Workers Compensation

A form of insurance paid by the employer providing cash benefits to workers injured or disabled in the course of employment.

unemployment insurance

a government program that partially protects workers' incomes when they become unemployed

What is meant by dependent when dealing with taxes?

Someone who relies on a taxpayer to financially support them

How can an employer pay their employees?

paper check, direct deposit, payroll card

Earned Income

Any income (wages/salary) that is generated by working

Social Security

A federal insurance program funded by taxpayer dollars that provides benefits to people who are retired, unemployed or disabled 6.2% of income

Income tax

Taxes paid out by anyone who earns an income. Taxed on both earned and unearned income

Federal Income Tax

Used to support government programs such as military defense and public services

State Income Tax

Money collected by some state governments to be used for state public services, such as education and state road maintenance.

Form W-4 (Employee's Withholding Allowance Certificate)

A federal tax form filled out by an employee to indicate the amount that should be withheld from his/her paycheck for taxes

tax liability

the total amount of taxes owed

Form W-2, Wage and Tax Statement

A summary of the income you earned during the year and all amounts the employer withheld for taxes.

Medicare

A federal program of health insurance for persons 65 years of age and older and certain younger people with disabilities

excise tax

Tax on specific goods such as gas, air fare and cell service

estate taxes

taxes levied on a person's estate or total holdings after that person's death

Taxable Income

income on which tax must be paid; total income minus exemptions and deductions

property tax

a tax based on real estate and other property

Net Income/pay

income after deductions are taken out

IRS (Internal Revenue Service)

US government agency that is responsible for the collection and enforcement of taxes

Form 1099-INT

a statement of the interest your bank paid on your savings that year

payroll tax

tax on wages and salaries to finance Social Security and Medicare costs. Taxed on earned income only

Gross Income

the total amount of income from wages before any payroll deductions

Form I-9 (Employment Eligibility Verification)

Used to verify the identity and employment authorization of individuals hired in the United States. Includes both citizens and noncitizens.

Taxes

Fees for the support of government required to be paid by people and businesses.

Earned Income

Money earned from working for pay

Unearned Income

money received from sources other than working

What are the components of income tax?

Federal and State income taxes

sales tax

A tax on a sale of merchandise or services