more tax terms
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Created by:
johngottwald on February 9, 2012
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50 terms
Terms | Definitions |
|---|---|
 ability to pay | A concept of tax fairness that states that people with different amounts of wealth or different amounts of income should pay tax at different rates. Wealth includes assets such as houses, cars, stocks, bonds, and savings accounts. Income includes wages, interest and dividends, and other payments. |
| adjusted gross income | Gross income reduced by certain amounts, such as a deductible IRA contribution or student loan interest |
| amount due | Money that taxpayers must pay to the government when the total tax is greater than their total tax payments |
| appeal | To call for a review of an IRS decision or proposed adjustment. |
| Authorized IRS e-file Provider | A business authorized by the IRS to participate in the IRS e-file Program. The business may be a sole proprietorship, a partnership, a corporation, or an organization. Authorized IRS e-file Providers include Electronic Return Originators (EROs), Transmitters, Intermediate Service Providers, and Software Developers. These categories are not mutually exclusive. For example, an ERO can at the same time, be a Transmitter, a Software Developer, or an Intermediate Service Provider, depending on the function being performed. |
| benefits received | A concept of tax fairness that states that people should pay taxes in proportion to the benefits they receive from government goods and services. |
| bonus | Compensation received by an employee for services performed. A bonus is given in addition to an employee's usual compensation. |
| business | A continuous and regular activity that has income or profit as its primary purpose. |
| Citizen or Resident Test | Assuming all other dependency tests are met, the citizen or resident test allows taxpayers to claim a dependency exemption for persons who are U.S. citizens for some part of the year or who live in the United States, Canada, or Mexico for some part of the year. |
| commission | Compensation received by an employee for services performed. Commissions are paid based on a percentage of sales made or a fixed amount per sale. |
| compulsory payroll tax | An automatic tax collected from employers and employees to finance specific programs. |
| deficit | The result of the government taking in less money than it spends. |
| dependency exemption | Amount that taxpayers can claim for a "qualifying child" or "qualifying relative". Each exemption reduces the income subject to tax. The exemption amount is a set amount that changes from year to year. One exemption is allowed for each qualifying child or qualifying relative claimed as a dependent. |
| dependent | A qualifying child or qualifying relative, other than the taxpayer or spouse, who entitles the taxpayer to claim a dependency exemption. |
| Direct Deposit | This allows tax refunds to be deposited directly to the taxpayer's bank account. Direct Deposit is a fast, simple, safe, secure way to get a tax refund. The taxpayer must have an established checking or savings account to qualify for Direct Deposit. A bank or financial institution will supply the required account and routing transit numbers to the taxpayer for Direct Deposit. |
| direct tax | A tax that cannot be shifted to others, such as the federal income tax. |
| earned income | Includes wages, salaries, tips, includible in gross income, and net earnings from self-employment earnings. |
| Earned Income Credit | A tax credit for certain people who work, meet certain requirements, and have earned income under a specified limit. |
| electronic filing (e-file) | The transmission of tax information directly to the IRS using telephones or computers. Electronic filing options include (1) Online self-prepared using a personal computer and tax preparation software, or (2) using a tax professional. Electronic filing may take place at the taxpayer's home, a volunteer site, the library, a financial institution, the workplace, malls and stores, or a tax professional's place of business. |
| electronic preparation | Electronic preparation means that tax preparation software and computers are used to complete tax returns. Electronic tax preparation helps to reduce errors. |
| Electronic Return Originator (ERO) | The Authorized IRS e-file Provider that originates the electronic submission of an income tax return to the IRS. EROs may originate the electronic submission of income tax returns they either prepared or collected from taxpayers. Some EROs charge a fee for submitting returns electronically. |
| employee | Works for an employer. Employers can control when, where, and how the employee performs the work. |
| excise tax | A tax on the sale or use of specific products or transactions. |
| exempt (from withholding) | Free from withholding of federal income tax. A person must meet certain income, tax liability, and dependency criteria. This does not exempt a person from other kinds of tax withholding, such as the Social Security tax. |
| exemptions | Amount that taxpayers can claim for themselves, their spouses, and eligible dependents. There are two types of exemptions-personal and dependency. Each exemption reduces the income subject to tax. While each is worth the same amount, different rules apply to each. |
| Federal/State e-file | A program sponsored by the IRS in partnership with participating states that allows taxpayers to file federal and state income tax returns electronically at the same time. |
| federal income tax | The federal government levies a tax on personal income. The federal income tax provides for national programs such as defense, foreign affairs, law enforcement, and interest on the national debt. |
| Federal Insurance Contributions Act (FICA) Tax | Provides benefits for retired workers and their dependents as well as for disabled workers and their dependents. Also known as the Social Security tax. |
| file a return | To mail or otherwise transmit to an IRS service center the taxpayer's information, in specified format, about income and tax liability. This information-the return-can be filed on paper, electronically (e-file). |
| filing status | Determines the rate at which income is taxed. The five filing statuses are: single, married filing a joint return, married filing a separate return, head of household, and qualifying widow(er) with dependent child. |
| financial records | Spending and income records and items to keep for tax purposes, including paycheck stubs, statements of interest or dividends earned, and records of gifts, tips, and bonuses. Spending records include canceled checks, cash register receipts, credit card statements, and rent receipts. |
| flat tax | This is another term for a proportional tax. |
| formal tax legislation process | This is another term for a proportional tax. |
| Form W-4, Employee's Withholding Allowance Certificate | Completed by the employee and used by the employer to determine the amount of income tax to withhold. |
| foster child | A foster child is any child placed with a taxpayer by an authorized placement agency or by court order. Eligible foster children may be claimed by taxpayers for tax benefits. |
| gasoline excise tax | An excise tax paid by consumers when they purchase gasoline. The tax covers the manufacture, sale, and use of gasoline. |
| gross income | Money, goods, services, and property a person receives that must be reported on a tax return. Includes unemployment compensation and certain scholarships. It does not include welfare benefits and nontaxable Social Security benefits. |
| Head of Household filing status | You must meet the following requirements: 1. You are unmarried or considered unmarried on the last day of the year. 2. You paid more than half the cost of keeping up a home for the year. 3. A qualifying person lived with you in the home for more than half the year (except temporary absences, such as school). However, a dependent parent does not have to live with the taxpayer. |
| horizontal equity | The concept that people in the same income group should be taxed at the same rate. "Equals should be taxed equally." |
| income taxes | Taxes on income, both earned (salaries, wages, tips, commissions) and unearned (interest, dividends). Income taxes can be levied on both individuals (personal income taxes) and businesses (business and corporate income taxes). |
| independent contractor | Performs services for others. The recipients of the services do not control the means or methods the independent contractor uses to accomplish the work. The recipients do control the results of the work; they decide whether the work is acceptable. Independent contractors are self-employed. |
| indirect tax | A tax that can be shifted to others, such as business property taxes. |
| luxury tax | luxury tax |
| market economy | An economic system based on private enterprise that rests upon three basic freedoms: freedom of the consumer to choose among competing products and services, freedom of the producer to start or expand a business, and freedom of the worker to choose a job and employer. |
| Married Filing Joint filing status | You are married and both you and your spouse agree to file a joint return. (On a joint return, you report your combined income and deduct your combined allowable expenses.) |
| Married Filing Separate filing status | You must be married. This method may benefit you if you want to be responsible only for your own tax or if this method results in less tax than a joint return. If you and your spouse do not agree to file a joint return, you may have to use this filing status. |
| tax evasion | A failure to pay or a deliberate underpayment of taxes. |
| taxes | Required payments of money to governments that are used to provide public goods and services for the benefit of the community as a whole. |
| withholding ("pay-as-you-earn" taxation) | Money, for example, that employers withhold from employees paychecks. This money is deposited for the government. (It will be credited against the employees' tax liability when they file their returns.) Employers withhold money for federal income taxes, Social Security taxes and state and local income taxes in some states and localities. |
| revenue | The income the nation collects from taxes. |
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