Income Tax Vocab

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Ability To Pay

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A ccriterio of tax fairness that people with different amounts of wealth or different amounts of income should pay different amount of taxes.

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Adjusted Gross Income

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Total income reduced by certain adjustments such as the IRA deducation and the deducation for alimony paid.

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Benefits Received

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A criterion of tax fairness that people should pay taxes in rough proportion to the benefits they receive form goverment goods and services.

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Business Tax

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Taxes levied on business by federal, state, or local goverments. These may include, in additon to corporate income taxes on earning and profits.

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Credit

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A direct reduction of tax owned. Credits may be allowed for purposes such as a child care and the earned income credit for low income tax payers.

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Dependents

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A person relies on someone else for support. A dependent generally may not be the taxpayer or his or her spouse.

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Direct Tax

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A tax that cannot be shifted to others. The federal income tax is good example of a direct tax.

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Dividends

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Ordinary dividneds are a corporation's distribution to its shareholders from its earning and profits.

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Earned Income

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Inculdes wages, salaries, tips, and net earnings fron self-employment and other income recevied for personal services.

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Earned Income Credit

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A refundable credit for low-incme workers even if no income tax was witheld from the worker's pay.

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Excise Taxes

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Taxes on the sale or use of specific products or transactions.

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Exempt(from Withholding)

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Free from federal income tax withholding requiraments by meeting certain income, tax liability, and depedency cretia.

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Exempt(from Tax Liability)

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Tax law provides for a set amount which taxpayers can claim for themselves, theor spouse, and aligible dependents. The total of these amounts is subtracted from adjusted gross income before any tax is computed on the remaining income.

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File A Return

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To file means to mail or otherwise convey to a regional IRS srevice center.

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Filling Status

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Based on taxpayers' martial statues and other factors, the filling status determines the tax bracket and rate at which income tax is.

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Form W-4(Employee's Withholding Allowance Certifacte)

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A form that helps an employer determine how much to withhold fro an employee;s paycheck for federal income tax purposes.

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Formal Tax Legislation Process

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The strict constitutional steps (involving congress and the president)that a proposed tax must pass though before it becomes law.

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Gross Income

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Money, goods, and property you recived that must be included in taxable income.

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Horizontal Equity

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The concept that people in the same income group should pay the same amount of taxes.

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Income Taxes

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Taxes on income, both earned (e.g. salaries, wages, tops, commisions)

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Infoemal Tax legislation

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Individuals and interest groups expressing and promoting thier opinions about tax legislation.

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Interrest Income

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Income recevied from savings accoutns or from lending money to someone else.

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Payroll taxes

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Taxes collected from employers and employees to finance specific programs: levied on earned income such as wages slaries, and self employment earnings.

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Personal Income tax

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A tax based on the amount of taxable income that people recive annually. Taxable income is less than total income because of expemtions and tax deductions.

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Progessive Taxes

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A tax that takes a longer percentage of income because of expemtions adn tax deductions.

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Property Taxes

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Tax om property, esccially real estate, and also boats, automoblies.

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Proportinal tax

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A tax take sthe same percentage of income from all income groups.

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Public goods and Services

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A public good is one that cannot be withheld from thos who don't pay for it, and one that amy be "consumed" by one person.

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Regressice Tax

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A tax that take longer percentage of income from low-income groups than from high income.

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Sale tax

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taxes on retail products, based on a set percentage of retail cost.

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Schedule

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A form on which taxpayers list specfic sources of income, or specfic exzpensesform shich they claim dedustions or credits.

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Standard Deduction

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An ,amount fixed by law and based on filling status and age.

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Tariff (Duties: customs duties or Import Duties)

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Taxes on products imported from foreign countires.

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Tax Credits

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Amounts, based on certain expenditures, that a taxpayer can deduct from taxes owned.

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Tax Deductions

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A person's business expenses thta can be deucted in determined taxable income.

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Tax Exemptions

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A part of a person's total income on which no tax is imposed.

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Tax laiblity ( or Total Tax Bill)

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A part of person's total income on which no tax is imposed.

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Tax Shift

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The process that occurs when tax that has been levied on one person or group.

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Tax withholding

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money that an employer takes from an employee's taxes.

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Taxable income

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The income on which tax is computed.

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Tax

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Required payments of money to govenrments that are used to provide public goods and services

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Trasnaction Taxs

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Taxes on economic transations, such as the sale goodsa nd services.

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vertical equity

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The concept that people in diffenrent income groups should pay different amounts of taxes.

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Voluntary Compliance

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A system of complaince that relies on individual citizens to report thuer income freely and voluantary.

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Withholding ( "pay-as-you-earn" Taxation)

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Money withheld from employee's paychecks. This money is deposited for the government.

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Withholding Allowance

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claimed by an emploee on Form W-4. and employer uses the number if allowance claimed, together with income earned and martial status to determine how much income tax to withold from wages.