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Income Tax Vocab
| Term | Definition |
|---|---|
| Income Tax | Annual charge levied on both earned income (wages, salaries, commission) and unearned income (dividends, interest, rents). |
| Progressive Tax | Income tax that takes a larger percentage of a larger income and a smaller percentage of a smaller income. For example, a tax on luxury cars. |
| Regressive Tax | Taxation that takes a larger percentage of a lower-income and a smaller percentage of a higher income. For example, a tax on the basic necessities (which form a larger percentage of the expenditure of the lower income population) is a regressive tax. |
| 1040EZ Form | The simplest of the three tax forms you can use to file your federal income taxes. |
| Income | The flow of cash or cash-equivalents received from work (wage or salary), capital (interest or profit), or land (rent). |
| Adjusted Gross Income | Tax payer's total income from which certain sums such as student loan interest payments (but not allowed or standard deductions) have been subtracted. |
| W2 Form | Form that an employer must send to an employee and the Internal Revenue Service (IRS) at the end of the year |
| Deduction | Fixed amount or percentage permitted by taxation authorities that a tax payer can subtract from his or her adjusted gross income to arrive at the taxable income. |
| Standard Deduction | Fixed amount that a tax payer is allowed to deduct from his or her adjusted gross income, in lieu of itemizing deductible personal expenses |
| Direct Deposit | Automatic transfer of salaries, wages, rents, benefits, or other such sums, directly to the account of an employee or beneficiary. |
| Filing Status | A category that defines the type of tax return form a taxpayer must use when filing his or her taxes. |
| FICA | The Federal Insurance Contributions Act is a U.S. law that creates a payroll tax requiring a deduction from the paychecks of employees as well as a contribution from employers to fund the Social Security and Medicare programs. |
| Withholdings | the portion of an employee's wages that is not included in his or her paycheck, but is instead remitted directly to the federal, state or local tax authorities |
| Internal Revenue Service (IRS) | A bureau of the Department of Treasury that is tasked with the enforcement of income tax laws and oversees the collection of federal income taxes. |
| Taxable Income | the amount of income used to calculate how much tax an individual or a company owes to the government in a given tax year |
| Tax Credit | an amount of money that can be offset against a tax liability. |
Created by:
claybeth15
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