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Income and Taxes
Term | Definition |
---|---|
Bi Weekly | Taking place every two weeks |
Dependent | Requiring someone or something for financial, emotional, or other support. |
Direct Deposit | The electronic transfer of a payment directly from the account of the payer to the recipient's account. |
Earned Income | Money derived from paid work. |
Employee | A person employed for wages or salary. |
Employer | A person or organization that employs people. |
Exemptions | The process of exempting a person from paying taxes on a specified amount of income for themselves and their dependents. |
Federal Income Tax | Federal income tax is a tax levied by the United States Internal Revenue Service (IRS) on the annual earnings of individuals, corporations, trusts, and other legal entities. |
FICA | The Federal Insurance Contributions Act is the federal law that requires you to withhold three separate taxes from the wages you pay your employees. |
Fringe Benefits | An extra benefit supplementing an employee's salary, for example, a company car, subsidized meals, health insurance, etc. |
Gross Income | Gross income, also known as gross pay, is an individual's total pay before taxes or other deductions. |
Hourly Wage | A rate an employer agrees to pay a worker per hour worked. |
Income Tax | A tax imposed on individuals or entities that varies with respective income or profits (taxable income). |
Medicare Tax | A tax on wages that U.S. employers are liable to withhold from employees' paychecks to cover the costs of the Medicare program. |
Net Income | The residual amount of earnings after all expenses have been deducted from sales. |
Overtime Pay | Pay 1.5 the normal pay rate for every hour over the standard 40 hour work week. |
Profit Sharing | A system in which the people who work for a company receive a direct share of the profits. |
Salary | a fixed regular payment, typically paid on a monthly or biweekly basis but often expressed as an annual sum, made by an employer to an employee. |
Sales Commissions | Additional compensation the employee receives for exceeding expectations. Employers pay employees a sales commission to incentive the employees to produce more sales and to reward and recognize people who perform most productively. |
Social Security Tax | The tax levied on both employers and employees to fund the Social Security program. |
Tax Deduction | A reduction of income that is able to be taxed and is commonly a result of expenses, particularly those incurred to produce additional income. |
Tips | A sum of money given to someone as a reward for their services. |
W2 Form | The form that an employer must send to an employee and the Internal Revenue Service (IRS) at the end of the year. The W-2 form reports an employee's annual wages and the amount of taxes withheld from his or her paycheck. |
W4 Form | is an Internal Revenue Service tax form completed by an employee in the United States to indicate his or her tax situation to the employer. |
Withholding Allowance | An exemption that reduces how much income tax an employer deducts from an employee's paycheck. |