Taxes

April 15th………..

Tax Terms

Withholdings

money from paycheck that goes to prepay your federal income taxes

Tax Terms

Payroll Taxes=based on employee total earnings

Income Taxes=taxes you pay on the income you receive

FICA=law requiring workers to contribute to social security and Medicare

Tax Terms

Gross Income=amount your earn before taxes are withheld

Net Income=amount you receive after taxes are subtracted

Taxable Income=all wages, tips, and interest on which you pay taxes

How Taxes Are Collected

Direct Taxes=paid directly to the government (property and income taxes)

Indirect Taxes=tax you pay that are included in the cost of a good or service

Types of Tax

Taxes added to the price of goods and services at the time of purchase=sales tax

Taxes on the value of real estate property=property tax

Taxes collected on the sale of specific goods and services=excise tax

Example: Tobacco, gasoline, alcoholic beverages, firearms, oil products, and air travel. Unlike sales tax excise taxes are included in the price charged to the consumer

Types of Tax

Taxes that are paid by the giver of gifts worth more than $13,000=gift tax

Taxes on goods that are harmful to yourself=sin tax

When a person dies, there may be an estate tax on the property which will be received by those legally entitled to the estate. Only estates that be higher than a certain amount are taxed

Internal Revenue Service

An Agency that collects taxes. Taxes are due on April 15th

IRS=Internal Revenue Service

TAX TIME

Tax Return=A set of forms that taxpayers

use to calculate their tax obligations

Tax Time

All taxpayers must use one of the three basic forms of filing income taxes.

1040 Tax Form1040 A Tax Form1040 EZ

1040EZ

Simplest of the income tax forms. Most often used by younger people with uncomplicated finances.

Taxable income below $100,000Single or Married Filing JointlyUnder 65No dependentsInterest income of $1,500 or less

W-2 Form

Summary of your earnings and withholdings for the year

W-4 Form

Provides info to your employer that determines the amount to withhold from your paycheck

1099 INT

Statement of interest earned from your bank

Tax Terms

Allowance=number that reduces amount of the money withheld from your paycheck. The more the allowances on your W-4 the less tax that is taken out each paycheck.

Dependents=the people you support financially

Deductions=any expenses you can legally subtract from your income when figuring your taxes