Money collected from citizens and businesses in the form of taxes.
Taxes that increase in proportion to income. The person with the higher income not only pays more taxes but pays them at a higher rate. Federal income taxes are progressive.
Taxes that decrease in proportion to income. They take a smaller share of income as the amount of income grows. Sales and excise taxes are examples.
Proportional / Flat Tax
Taxes for which the rate stays the same, even though the amount being taxed increases (regardless of income). Property taxes are an example.
Internal Revenue Service
Agency of the Department of Treasury created by the Social Security Act of 1935.
An examination of tax returns by the IRS.
All citizens are expected to prepare and file income tax returns.
Willful failure to pay taxes.
Wage and Tax statement form that shows the total amount of taxes withheld from your paycheck for the year.
The standard IRS form that individuals use to file their annual income tax returns. It summarizes a person's income and taxes for the past year.
Short income tax form to use when you have no adjustments, deductions or dependents.
All the taxable income you receive.
Money you earned from working.
Money you receive from passive activity such as interest earned on investments.
Adjusted Gross Income
Calculated as your gross income minus allowable (either standard or itemized deductions.
Expenses that can be subtracted from adjusted gross income in order to lower your taxable income. Examples include mortgage interest, charitable donations, contributions to an IRA or 401K, and moving or medical expenses.
A stated amount that you may subtract from adjusted gross income instead of itemizing your deductions.
Amount you may subtract from your income for each person who depends on your income to live.
A person who lives with you and for whom you pay more than half of his/her living expenses.
Income on which you will pay tax.
Amount subtracted directly from tax owed.
Personal Income Tax Return
A set of forms provided by the IRS which most residents are required to complete every year.
Charge for the use of borrowed money.