Taxes & Payroll Deductions Vocabulary (Lessons 1 & 4)

Taxes

Money paid by individuals and businesses to the different levels of government as required by law. This money is used to fund the different levels of government and pay for the programs and services they provide.

Government

The people and organizations who have the power to make and enforce laws that affects the individuals they are responsible to.

Federal Taxes

Any taxes that are paid to the federal government. The money collected as _________ is used to pay for the day-to-day operation of the federal government and the programs and services they provide to residents of the United States. __________ include Income, Social Security, Medicare and Unemployment taxes on individuals and businesses.

State Taxes

Taxes that are paid to the state in which you live. The money is used to pay for the day-to-day operation of the state government and the programs and services they provide to the residents of the state.

Local Taxes

Taxes that are paid to the city or county in which you live. The money is used to pay for the day-to-day operation of the city or county government and the programs and services they provide to their residents.

Spending

The act of purchasing goods and services by paying cash or using credit.

Medicare

A federal program that provides routine health care and medical services to retired and disabled workers and their dependents. ________ is a component of the Social Security Administration, and is paid for by taxes on current workers and their employers.

Income Taxes

Taxes that are paid to the federal, state and local governments based on the amount of income an individual or business earns during the year.

Sales Taxes

Taxes that are based on the selling price of goods and services. The seller will collect the taxes from the buyer at the time of the purchase and periodically forward them to the different levels of government that imposed the taxes.

Property Taxes

Taxes that are based on the current value of taxable property owned by an individual. The taxes are paid to the city or county government in which the individual lives.

Hidden Taxes

Taxes that are imposed on a transaction such as using a phone, renting a car and purchasing gasoline rather than a person or business. Many individuals don't realize they are actually paying _________.

Earned Income

The money an individual is paid by their employer for the work they do. It is called _________ because the individual has to work to earn the income.

Unearned Income

The money an individual receives from their investments. It is called __________ because the individual did not have to work to earn the money.

Social Security Taxes

Taxes paid by both employees and employers to the federal government based on the amount of money paid to the employee by the employer each pay period. These taxes are used to provide benefits for retirement and disabled workers who have qualified by previously paying their own _________.

Medicare Taxes

Taxes paid by employees and employers to the federal government based on the amount of money paid to the employee by the employer each pay period. These taxes pay for health care benefits for retired and disabled workers.

Merchant

An individual that buys goods and services and then resells them to others for a profit.

Annual

Any reference to a one year period, such as paying taxes on an _____ basis, or having interest compounded annually.

Cumulative

Increasing in value by successive additions. The _______ value is the summation of the individual values over a specified period of time.

Payroll Deductions

The required and voluntary amounts of money that are subtracted from an employee's pay by their employer. _________ may be made for taxes, retirement accounts, various insurance payments (medical, dental, life), or other employee choices.

Paycheck

Originally, a _________ was a check given to an employee by an employer as payment for the work performed by the employee. Now, ________ refers to any method of an employee receiving their pay, either via paper check, or electronic means such as direct deposit into a bank account.

Withholding

The process where employers deduct income taxes from their employee's pay each pay period and forward it to the different levels of government at regular intervals.

Required Payroll Deductions

The deductions an employer makes to an employee's pay each pay period because they are required by law to do so.

Voluntary Payroll Deductions

The deductions an employer makes to an employee's pay each pay period because the employee has requested in writing the deduction be made.

Gross Pay

The total amount of money that is paid to an employee by an employer before taxes and other deductions are subtracted.

Taxable Pay

The total amount of money that is paid to an employee by an employer that is subject to federal, state and local income taxes.

W-4 Form

A form that provides an employer with the information necessary to withhold the appropriate amount of income taxes from an employee's pay.

Allowances

The number of dependents claimed on a W-4 Form. The number of _________ is used by the employer to withhold the correct amount of taxes from the employee's pay each pay period.

Tax Return

The collection of forms an individual must complete each year and forward to the IRS or state(s) where they live or work.

Dependents

Individuals who rely on another for financial support. Children are normally dependent on their parents for financial support until they physically leave their parent's household.

Household

Individuals who live together as a family or extended family in a home or apartment.

Social Security Number

A unique number assigned to everyone within the Social Security system. (For example - '123-45-6789'). Your __________ is used extensively by employers, financial institutions, and all levels of government to track your income and taxes.

Marital Status

An indicator of whether an individual is single or married, often used to help determine tax or insurance rates.

Take Home Pay

The amount of money an individual actually takes home (or has deposited in their bank account) each pay period after all deductions and withholdings are made by their employer. Your __________ is the money you have available to cover your regular expenses, savings, or that you are free to spend as you wish.