Taxes & Payroll Deductions
Tax Return
The collection of forms an individual must complete each year and forward to the IRS or state(s) where they live or work.
pay as you earn
The current system used to collect income and payroll taxes. The employer is required to withhold these taxes from an employee's pay each pay period and forward it to the different levels of government at regular intervals.
Gross Pay
The total amount of money that is paid to an employee by an employer before taxes and other deductions are subtracted.
W-4 Form
A form that provides an employer with the information necessary to withhold the appropriate amount of income taxes from an employee's pay.
Take Home Pay
The amount of money an individual actually takes home (or has deposited in their bank account) each pay period after all deductions and withholdings are made by their employer. Your take home pay is the money you have available to cover your regular expenses, savings, or that you are free to spend a
Voluntary payroll Deductions
The deductions an employer makes to an employee's pay each pay period because the employee has requested in writing the deduction be made.
Required Payroll Deductions
The deductions an employer makes to an employee's pay each pay period because they are required by law to do so.
Allowances
The number of dependents claimed on a W-4 Form. The number of allowances is used by the employer to withhold the correct amount of taxes from the employee's pay each pay period.
Withholding
The process where employers deduct income taxes from their employee's pay each pay period and forward it to the different levels of government at regular intervals.
Payroll Deductions
The required and voluntary amounts of money that are subtracted from an employee's pay by their employer. Payroll Deductions may be made for taxes, retirement accounts, various insurance payments (medical, dental, life), or other employee choices.
Taxable Pay
The total amount of money that is paid to an employee by an employer that is subject to federal, state and local income taxes.
Progressive Tax System
A tax system that assesses higher tax rates as the amount of income subject to taxation increases.
SSN
A unique number assigned to everyone within the Social Security system. (For example - '123-45-6789'). Your social security number is used extensively by employers, financial institutions, and all levels of government to track your income and taxes.
Martial Status
An indicator of whether an individual is single or married, often used to help determine tax or insurance rates.
tax deduction
Any expense that qualifies to be used to reduce the amount of income an individual is required to pay federal, state, or local income taxes on. Interest paid on mortgage loans and contributions to some retirement plans are common tax deductions.
Household
Individuals who live together as a family or extended family in a home or apartment.
Dependents
Individuals who rely on another for financial support. Children are normally dependent on their parents for financial support until they physically leave their parent's household.
Paycheck
Originally, a paycheck was a check given to an employee by an employer as payment for the work performed by the employee. Now, paycheck refers to any method of an employee receiving their pay, either via paper check, or electronic means such as direct deposit into a bank account.