Consumer ed - taxes and pay

Gross Pay

The amount you earn before deductions are subtracted.

Deductions

Amounts subtracted from gross pay.

Net Pay

The amount left after all deductions are taken out. Also known as “take-home pay.”

Hourly Wage

Fixed hourly rate- you are paid by the hour

Salary

A fixed amount of gross pay (regardless of hours worked).

Social Security

Federal insurance program that benefits people who are retired or disabled

Medicare

Federal health insurance for people age 65 and older

Tax Audit

An examination of income that questions the validity of the information on a tax return.

Tax Evasion

Willful failure to pay taxes or not enough in taxes

Exempt Status

Available to those who work but know they will not earn enough in one year to owe income tax

W-4

Determines how much to withhold from your paycheck.

Allowances

A number you claim on your W-4 that reduces the amount of money withheld from your paycheck

Filing Status

Describes your marital status as of the last day of the tax year

W-2

A summary of your earnings (income) and withholdings (taxes and benefits)

Gross Income

All the taxable income (money) you received during the year, using your W-2(‘s)

Exemptions

An amount you may subtract from your income for each person who depends on your income to live

Adjusted Gross Income

An income that has been reduced

Standard Deduction

Amount you can claim and subtract from your income using your filing status

Itemized Deductions

Expenses you can subtract from your gross income to lower and determine your taxable income

Dependents

People you are responsible for

Taxable Income

The final amount you will pay taxes on after all deductions have been subtracted