Taxes

filing status

A category that defines the type of tax return an individual will use, primarily based on marital status; it also determines the size of your tax brackets and how much of your income is taxed at each rate

paycheck stub

A document attached to every paycheck that details your earnings and the amount withheld for taxes, health insurance, retirement funds, etc.

federal insurance contributions act (FICA)

A federal law that requires an employer to withhold taxes from the wages they pay their employees; the funds go toward Social Security and Medicare

social security

A federal program that provides monthly benefits to millions of Americans, including retirees, military families, surviving families of deceased workers, and disabled individuals

medicare

A government-run insurance program that provides healthcare assistance to elderly and disabled Americans

corporate income tax

A percentage of profits paid by a business to the federal and state government.

excise tax

A tax paid on purchases of a specific good, like gasoline or cigarettes

tax deduction

An amount that can be subtracted from person's tax liability that lowers their taxable income

earned income

Any income (wages/salary) that is generated by working

payroll tax

Federal and state taxes that all employers must pay, based on a percentage of the employee's salary. They go to such things as Social Security and Medicare/Medicaid.

W-2

Form that an employer must send to an employee and the IRS at the end of the year to report the employee's annual wages and taxes withheld from their paycheck

I-9

Form used by an employer to verify an employee's identity and to establish that the worker is eligible to accept employment in the United States.

dividend

Money from the profits of a company that is paid out to its shareholders, typically on a quarterly basis

capital gain

Profit from the sale of an asset, such as a stock or a bond, calculated by subtracting the price you initially paid from the price you then sold it for

mandatory spending

Spending by the federal government required by previously existing laws. This includes funding programs like Social Security and Medicare/Medicaid.

withholding

The portion of an employee's wages that is not included in their paycheck because it goes directly to federal, state and local taxes

1040

The standard Internal Revenue Service (IRS) form that individuals use to file their annual income tax returns.

tax credit

an amount subtracted directly from taxes owed

marginal tax rate

the tax bracket that your highest dollar of income falls into, and therefore the highest tax rate you pay