17 terms

Tax Vocabulary

Ability to Pay
A concept of tax fairness that people with different amounts of wealth or different amounts of income should pay tax at different rates.
A person who relies on someone else for support.
Earned Income
Wages, salaries, tips, and net earnings from self-employment and other income received for personal services.
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.
Form W-4
A form that helps an employer determine how much to withhold from an employee's paycheck for federal income tax purposes.
Gross Income
Money, goods, and property you received that must generally be reported on a tax return and may be included in taxable income.
Interest Income
Income a person receives from certain financial accounts or from lending money to someone else.
The federal agency that collects income taxes in the United States.
Public Goods and Services
A benefit that cannot be withheld from those who don't pay for it and that may be "consumed" by one person without reducing the amount of the product available for others. Examples include national defense, street lights, roads, and highways.
Owed to taxpayer if their tax payments are greater than total tax.
Tax Avoidance
Action taken to lessen tax liability and maximize after tax income.
Tax Exemption
A part of a person's total income on which no tax is imposed. Amount that taxpayers can claim for themselves, their spouses, and eligible dependents.
Standard Deduction
An amount, provided by law and bases on filiing status, age, blindness, and dependency that taxpayers can deduct from their adjusted gross income before tax is determined.
Tax Evasion
Failure to pay, or a deliberate underpayment of taxes.
Tax Liability
The amount of tax that must be paid.
Unearned Income
Income other than pay for work performed. Interest and dividends from savings or invesmtents are common types of unearned income.
Voluntary Compliance
A system that relies on individual citizens to report their income freely and voluntarily, calculate their tax liability correctly, and file a tax return on time.