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48 Cards in this Set

  • Front
  • Back
Ability To Pay
A criterion of tax fairness that people with different amounts of income should pay different amounts of taxes.
Adjusted Gross Income
Total income reduced by certain adjustments such as the IRA deduction and the deduction for alimony paid.
Benefits Received
A criterion of tax fairness that people should pay taxes in rough proportion to the benefits they reveive from government goods and services.
Business Taxes
Taxes levied on business by federal, state, or local governments. These may include unemployment insurance, workmen's compensation, contributions to social security, and Medicare insurance.
A direct reduction of the tax owed. Credits may be allowed for purposes such as child care and the earned income credit for low-income taxpayers.
A person who relies on someone else for support. A dependent generally may not be hte taxpayer or his or her spouse. A taxpayer may claim an exemption for a dependent if the dependency tests are met.
Direct Tax
A tax that cannot be shifted to others. The federal income tax is a good example of a direct tax.
Ordinary dividends are a corporation's distibutions to its shareholders from its earnings and profits.
Earned Income
Includes wages, salaries, tips, and net earnings from self-employment and other income received for personal services.
Earned Income Credit
A refundable creit for low-oncome workers with children. This credit may be paid to the worker even if no income tax was withheld from the worker's pay. To receive the earned income credit, a taxpayer must file a tax return.
Excise Taxes
Taxes on the sale or use of specific products or transactions.
Exempt (from Withholding)
Free from federal income tax withholding requirements by meeting certain income, tax liablility, and dependency criteria.
Exempt (from Tax Liability)
Tax law provides for a set amount which taxpayers can claim for themselves, their spouses, and eligible dependents. The total of these amounts is subtracted from adjusted gross income before any tax is computed on the remaining income.
File a Return
To file means to mail or otherwise convey to a regional IRS Service Center the appropriate IRS form-the return-on which a taxpayer has entered information about income and tax liablility.
Filing Status
Based on taxpayer's marital statues and other factors, the filing status determines the tax bracket and rate at which income is taxed.
Form W-4(Employee's Withholding Allowance Certificate)
A from that helps an employer determine how much to withhold from an employee's paycheck for federal income tax purposes.
Formal Tax Legislation Process
The strict onstiutional steps (involving Congress and the president) that a proposed tax must pass through befire it becomes law.
Gross Income
Money, goods, and property you received that must be included in taxable income.
Horizontal Equity
The concept that poeple in the same income group should pay the same amount of taxes. "Equals should be taxed equally."
Income Taxes
Taxes on income, both earned and unearned. Income taxes can be levied both on individuals and businesses.
Indirect Taxes
A tax that can be shifted to others. The one who pays the tax to the government may be able to shift it to others. Business property taxes are examples of indirect taxes.
Informal Tax Legislation Process
Individuals and interest groups expressing and promoting their opinions about tax legislation.
Interest Income
Income received from savings accounts or from lending money to someone else.
Payroll Taxes
Taxes collected from employers and employees to finance specific programs; levied on earned income such as wages, salaries, and self-employment earnings.
Personal Income Tax
A tax based on the amount of taxable income that people receive anually. Taxable income is less than total income becuase of exemptions and tax deductions.
Progressive Tax
A tax that takes a larger percentage of income from high-income groups than from low-income groups.
Property Taxes
Taxes on property, especially real estate, and also boats, automobiles, recreational vehicles, and business inventories.
Public Goods and Services
A public good is one that cannot be withheld from those who dont pay for it, and one tht may be "consumed" by one person without reducing hte amount of the product available for others.
Redevelopment or Enterprise Zone
A government-designed area that is declared in need of restoration and revitalization. To envourage restoration, tax reductions may be available.
Regressive Tax
A tax that takes a larger precentage of income from low-income groups than from high-income groups.
Sales Tax
Taxes on retail products, based on a set percentage of retail cost.
A from on which taxpayers list ("itemize") specific sources of income, or specific expenses for which they claim deductions or credits.
Standard Deduction
An amount, fixed by law and based on filing status and age, which taxpayers may deduct from their adjusted gross income before tax is determined.
Tariff (Duties: Customs Duties or Import Duties)
Taxes on products imported from foreign countries.
Tax Credits
Amounts, based on certain expenditures, that a taxpayer can deduct from taxes owed.
Tax Deductions
A person's or a bysiness's expenses that can be deducted in determining taxable income.
Tax Exemptions
A part of a peron's total income on which no tax is imposed.
Tax Liability (or Total Tax Bill)
The amount of tax that must be paid. Taxpayers meet (or pay) their federalincome tax liability through wihtholding, estimated tax payments, and payments attached to the tax forms they file with the government.
Tax Shift
The prcoes that occurs when a tax that has been levied on one person r group is in fact paid by others.
Tax Withholding
Money that an employer takes from an employee's paycheck and that is used to pay part or all of the employee's taxes.
Taxable Income
The income on which tax is computed.
Required payments of money to governments that are used to provide public goods and services for the benefit of the community as a whole.
Transaction Taxes
Taxes on economic transactions, such as the sale of goods and services. Such taxes can be based on a set percentage of the sales value (ad valorem-sales taxes) or they can be a set amount on physical quantities ("per unit" - gasoline taxes).
Vertical Equity
The concept that people in different income groups should pay different amounts of taxes, or different percentages of the incomes as taxes. "Unequals should be taxed unequally."
Voluntary Compliance
A system of compliance that relies on individual citizens to report their income freely andn colunatrily, claculate their tax liability correctly, and file a tax return on time.
Withholding ("Pay-as-you-earn" Taxation)
Money that employers whithold from employee's paychecks. This money is deposited for the government. It will be credited against the employee's tax liability when they file their returns. Employers wthhold money for federal income taxes, federal social security taxes, and state and local income taxes in some states and localities.
Withholding Allowance
Claimed by an employee on Form W-4. An employer uses the number of allowances claimed, together with income earned amd marital status to determine how much income tax to withhold from wages.
Proportional Tax
A tax that takes the same percentage of income from all income groups.