Income Tax Vocab

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Ability To Pay

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A criterion of tax fairness that people with different amounts of wealth or different amounts of income should pay different amounts of taxes. Wealth may include assets and property such as houses, cars, stocks, bonds, savings accounts, or valuables. Income includes wages, rents, interest, profits, or other payments.

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Adjusted Gross Income

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Total income reduced by certain adjustments such as the IRA deduction and the deduction for alimoney 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 from government goods and services

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Business Taxes

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Taxes levied on businesses by federal, state,or local governements. These may include, in addition to corporate income taxes on earnings and profits, unemplyment insurance, workmen's compensation, contributions to social security, and medicare insurance

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Credits

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A direct reduction of the tax owed.

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Dependent

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A person who relies on someone else for support

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Direct Tax

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

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Dividends

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Ordinary dividends are a corporations distributions to its sharholders from its earnings and profits.

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Earned Income

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Includes wages, salaries, tips, and net earnings from self-empleyment and other income received for personal services

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Earned Income Credit

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A refundable credit for low income workers with children.

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Excise Taxes

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Taxes on the sale or use of specific produts or transactions

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Exempt (from withholding)

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Free from federal income tax withholding requirements by meeting certain income, tax liability, and dependency criteria.

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Exempt (from tax liability)

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Tax law provides for a setr amount which taxpayers can claim for themselves, their spouses, and eligible dependents.

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File a Return

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To file means to mail or otherwise convey to a regional IRS Service center the apporpriate IRS forms

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Filing Status

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Based on taxpaers marital status and other factors, the filing status determines the tax bracket and rate at which income is taxed

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Form W-4 (Emplyees withholding allowance certificate

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A form that helps an employer determine how mcuh to withold from an employees paycheck for federal income tax purposes

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Formal Tax Legislation Process

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The strict constitutional steps invoving congress and the presidednt that a proposed tax must pass through before it becomes law.

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Gross Income

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Money, goods, and property you received 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 and unearned.

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Indirect Tax

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A tax that can be shifted to others

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Informal Tax Legislation process

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individuals and interest groups expressing and pomoting their opinions about tax legislation

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Interest Income

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Income received from savings accounts or from lending money to someone else

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Payroll Taxes

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Taxes collected from emplyers and empleyees to finance specific programs

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Personal Income Tax

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A tax based on the amount of taxable income that people recieve annually.

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Progressive Tax

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A tax that takes a larger percentage of income from high-income groups to low income groups

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Property Tax

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Taxes on property, especially real estate, also boats, automobiles,recreational vehicles, and buisness inventories

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Proporitonal Tax

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A tax that tkaes the 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 those who dont pay for it, and one that may be consumed by one person without reduceing the amount of the prodcut available for others.

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Redevelopement or Enterpise Zone

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A goverment designated area that is declared in need of restoration and reviatlization

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Regressive Tax

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A taxz that takes a larger percentage of icome from low income groups than from high income groups

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Sales Taxes

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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 specific sources of income, or expenses

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Standard Deduction

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An amount, fixed by law and based on filing status and age which taxpayers may deduct from their adjusted gorss income before tax is determined

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Tariff

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taxes on products imported from foreign countries

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Tax Credits

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Amounts based on certian expenditures, that a taxpayer can decut from taxes owed

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Tax deductions

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A person or a business expenses that can be deducted in dtermining taxable income

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Tax Exemptions

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a part of a persons total income on which no tax is imposed

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Tax Liability

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The amount of tax that must be paid

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Tax shift

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The process that occurs when a tax that has been levied on one person or group is in fact paid by others

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Tax Withholding

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Money that an emplyer takes form an emplyees paycheck and that is used to pay part or all of the emplyees taxes

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Taxable Income

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The income on which tax is computed

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Taxes

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Required payments of money to goverments that are used to provide public goods and services for the benefit of the community as a whole

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transaction taxes

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Taxes on economic transactions such as the sale of goods and services

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Vertical Equity

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The concept that people in different income groups should pay different amounts of taxes or different percentages of the inomces as taxes

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Voluntary Compliance

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A system of compliance thqat relies on individual citizens to report their income freely and voluntarily

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Withholding

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Money that emplyers withhold from emplyees paychecks

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Withholding Allowance

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Claimed by an emplyee on form w-4