taxes

1040

IRS form that people use to file their annual income tax returns

1099

Form for non employee compensation for freelancers/ contractors

Audit

Inspection of a filers tax return by the IRS

Capital Gain

Profit from the sale of an asset

Corporate Income Tax

Percentage of profits paid by a business to the federal and state government

Discretionary spending

Spending by the federal government determined by legislative action and approved through vote sby elected officials

Dividend

Money from profits of a company that is paid of to its shareholders

Earned income

Any income that is generated by working

Effective Tax Rate

Actual rate you pay on your taxes

Excise Tax

A tax paid on purchases of a specific good

FICA

Federal law that requires an employer to withhold taxes from wages that go toward Social Security and Medicare

Filing Status

Defines the type of tax someone will use

I-9

Form used to see if an employee is eligible to work in the U.S

Income Tax

Taxes paid to federal and state government through a deduction from paycheck

Interest income

Income earned through interest on savings accounts, bonds, etc

Mandatory spending

Spending by the federal government required by previously existing laws, including funding programs like Social Security

Marginal Tax Rate

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

Medicaid

Government insured program that provides healthcare to low income Americans

Medicare

Government insured program that provides healthcare for the elderly and disabled

Paycheck Stub

Document attached to every paycheck that details everything

Payroll Tax

Federal and state taxes that all employers must pay towards social services such as social security

Progressive Tax

Tax system to collect a larger percentage of high income earners

Social Security

Federal program that provides monthly benefits

Standard deduction

Standardized dollar amount that reduces taxable income

Tax bracket

Range of income amounts that are taxed at a particular rate

Tax credit

Amount subtracted directly from the tax owed

Tax Deduction

Amount that can be subtracted from person’s tax liability that lowers their income

Tax Rate

Percentage at which taxed are paid on each dollar of income

Tax Return

Annual report to the IRS summarizing total income, deductions, and the taxes withheld by employers

Taxable income

Amount of income that is used to calculate and individuals or a company’s income tax due

Tax refund

Money paid back by the government given to the taxppayer who has paid more taxes than were due

Unearned Income

Income received from sources other than employment

W-2

A form that an employer must send to an employee and IRs at the end of the year to report the employee’s annual wages

W-4

Form completed to indicate someone’s tax situation, who then withholds the corresponding amount of taxes from each paycheck

Withholding

Portion of an employee’s wage that is not included in their paycheck because it goes to taxes