Test 8

• 1099INT?


  Report on interest income sent from the bank to both the IRS and the taxpayer for savings account interest.
• 1099MISC?


  Report of income made to the IRS and the taxpayer for any money paid by the job not as a salaried employee.
• FICA?


  The Federal Insurance Contributions Act, the name given to Social Security and Medicare taxes. The employee pays some of the FICA tax, and the employer pays some of this tax for each employee. Social Security pays benefits for older people, people with disabilities, and minor children and surviving spouses of deceased workers. Medicare pays for hospital insurance for those over 65.
• Income Tax?


  Tax paid to the state, federal, and local governments based on income earned over the past year.
• Payroll Taxes?


  Federal or state taxes deducted directly from a worker’s pay.
• Simplified 1040?


  The quick tax form most often used for those with uncomplicated tax situations.
• Standard Deduction?


  The deduction allowed for those not claimed as a dependent on a parent’s taxes.
• Tax Deduction?


  A donation or expense that reduces the taxable income amount.
• Tax refund?


  A check returning the taxpayer’s money to the taxpayer after returns are filed and the overpaid tax is determined.
• W2?


  Report sent from the employer to both the IRS and the employee showing gross income, total taxes paid, and total voluntary deductions.
• Itemized Deduction?


  An expense that can be subtracted from adjusted gross income (AGI) to reduce your tax bill
• Adjusted gross income?


  Your gross income reduced by adjustments to income, before exemptions and deductions are applied
• Amount due?


  Your total tax bill. The amount of money you owe in taxes.
• Credit?


  A dollar-for-dollar reduction of your taxes owed. Some credits are refundable
• Deduction?


  An amount subtracted from your taxable income for certain expenses.
• Earned Income?


  Money or other compensation given to you for working, whether you receive a paycheck or you are self-employed and pay yourself.
• Electronic Filing?


  Filing your tax return online, also known as efiling or e-filing. This is generally more secure, more accurate, and faster than filing your taxes by paper through the mail.
• Filing Status?


  A category of taxpayer. Each taxpayer must select a filing status on their tax return: Single, Head of Household, Married Filing Jointly, Married Filing Separately, or Qualifying Widow(er). Filing status determines things such as your overall tax rate and your eligibility and income limits for various credits and deductions.
• Gross Income?


  The total amount of income you must report on your tax return. Your income before applying adjustments, exemptions, credits, and deductions.
• Head of Household?


  A filing status claimed by taxpayers who are single but have qualifying dependents.
• Internal Revenue Service (IRS)?

  A bureau of the Department of the Treasury, the IRS is the government agency responsible for collecting taxes and for enforcing the tax code.
• Investment Income?


  Money or other compensation received from profitable investments, generally in the form of interest or dividends.
• Married Filing Jointly?


  A filing status claimed by married couples who wish to combine income and file a single tax return together in order to take advantage of various tax benefits.
• Married Filing Separately?


  A filing status claimed by married couples who do not wish to file a joint return and agree to report their income separately.
• Nontaxable?


  This describes income which is not subject to taxation
• Penalty?


  Charges added to your tax bill for late filing and late payment. The IRS may also charge interest for late tax payments.
• Personal Exemption?


  An exemption claimed for yourself and, if married filing jointly, for your spouse.
• Progressive Tax?


  A tax based on a percentage of income. The higher your income, the larger a percentage you pay. Our current federal income tax system.
• Self-Employment Tax?


  The tax paid by self-employed taxpayers to support Social Security and Medicare. The self-employment tax rate in 2010 is 15.3% of self-employment profit.
• single?


  A filing status claimed by those who are unmarried, divorced, or legally separated and who do not qualify for Head of Household status
• Tax bracket?


  A range of incomes that is taxed at a specified tax rate. Also, the bracket into which the last dollar of one's income falls.
• Tax Break?


  A general term for exemptions, credits, deductions, or any legal way to reduce your taxes.
• Tax code?


  The entire body of tax laws, regulations, and procedures.
• Tax-deferred?


  When taxes levied now are owed at a later time, such as interest on IRA contributions
• Tax evasion?


  Illegally hiding income from the IRS. Deliberately underpaying taxes or using an abusive tax scheme.
• Tax Liability?


  The total amount of taxes you owe
• Tax rate?


  The percentage of income that is owed as tax
• Taxable income?


  Your Adjusted Gross Income reduced by all applicable exemptions, credits, and deductions. The amount of income that is taxed.
• Unearned income?


  Income which was not earned by working, such as investment income or gifts.
• Withholding?


  Money held back from your paycheck and used to pay taxes. This amount is applied to your annual tax liability.