| A | B |
|---|
| 1040 | The standard Internal Revenue Service (IRS) form that individuals can use to file their annual income tax returns |
| 1040-EZ | An alternative to the Internal Revenue Service's (IRS) 1040 income tax form that offers a faster and easier way to file taxes, meant for taxpayers with very basic tax situations |
| 1099 | Form that details all "non-employee" compensation, including for specific jobs like freelancers or contractors |
| Allowances | Employee-claimed exemptions on the W-4 to determine how much of an employee's pay to withhold from his or her paycheck for taxes |
| Audit | An inspection of a filer's tax return by the IRS |
| Capital Gain | Profit from the sale of an asset, such as a stock or a bond, calculated by subtracting the price you initially paid from the price you then sold it for |
| Corporate Income Tax | A percentage of profits paid by a business to the federal and state government Dependent |
| Dependent | Someone you financially support who can be "claimed" on a tax return to reduce your taxable income and lower your taxes |
| Discretionary Spending | Spending by the federal government determined by legislative action and approved through votes by elected officials |
| Dividend | Money from the profits of a company that is paid out to its shareholders, typically on a quarterly basis |
| Effective Tax Rate | The actual rate you pay on your taxes, as a percentage of your overall income |
| Estate Tax | A tax on property (cash, real estate, stock, or other assets) transferred from deceased persons to their heirs |
| Excise Tax | A tax paid on purchases of a specific good, like gasoline or cigarettes |
| Exemption | The set amount of money, per dependent, you can subtract from your taxable income |
| Filing Status | A category that defines the type of tax return an individual will use, primarily based on marital status; it also determines the size of your tax brackets and how much of your income is taxed at each rate |
| I-9 | Form used by an employer to verify an employee's identity and to establish that the worker is eligible to accept employment in the United States |
| Income Tax | Taxes paid by employees to federal and state government through a direct deduction from their paycheck |
| Interest Income | Income earned through interest on savings accounts, bonds, CDs, etc |
| Mandatory Spending | Spending by the federal government required by previously existing laws, including funding programs like Social Security and Medicare/Medicaid |
| Marginal Tax Rate | The tax bracket that your highest dollar of income falls into, and therefore the highest tax rate you pay |
| Medicaid | A government-run insurance program that provides healthcare assistance to low income Americans |
| Medicare | A government-run insurance program that provides healthcare assistance to elderly and disabled Americans |
| Paycheck Stub | A document attached to every paycheck that details your earnings and the amount withheld for taxes, health insurance, retirement funds, etc. |
| Payroll Tax | Federal and state taxes that all employers must pay, based on a percentage of the employee's salary, toward social services such as Social Security and Medicare |
| Progressive Tax | A tax system that uses tax brackets to collect a larger percentage from the income of high-income earners than it does from low-income earners |
| Social Security | A federal program that provides monthly benefits to millions of Americans, including retirees, military families, surviving families of deceased workers, and disabled individuals |
| Standard Deduction | A standardized dollar amount that reduces your taxable income, specifically for individuals who do not receive additional benefit by itemizing their deductions into medical expenses, donations, etc. |
| Tax Bracket | A range of income amounts that are taxed at a particular rate |
| Tax Rate | The percentage at which taxes are paid on each dollar of income |
| Taxable Income | The amount of income that is used to calculate an individual's or a company's income tax due |
| W-2 | Form that an employer must send to an employee and the IRS at the end of the year to report the employee's annual wages and taxes withheld from their paycheck |
| W-4 | A form completed by an employee to indicate his or her tax situation (exemptions, marital status, etc.) to the employer, who then withholds the corresponding amount of taxes from each paycheck |
| Withholding | The portion of an employee's wages that is not included in their paycheck because it goes directly to federal, state and local taxes |
| Federal Insurance Contributions Act (FICA) | A federal law that requires an employer to withhold taxes from the wages they pay their employees; the funds go toward Social Security and Medicare |
