Budgeting & Taxes Vocabulary

paycheck stub

A document that details your earnings and the amount withheld from your taxes, health insurance, retirement funds etc

W-4

A form completed by an employee to indicate his or her tax situation (exemptions, marital status, etc.) to the employer, who then withholds the corresponding amount of taxes from each paycheck

medicare

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

budget

A plan of your expected income and how you will use it to meet your expected expenses over a period of time

variable expenses

Cost that appears irregularly or that changes in amount (e.g., utility bills)

fixed expenses

Cost that can be expected at regular intervals and that remains the same amount (e.g., monthly rent payment)

Medicaid

Federal program that provides medical benefits for low-income persons/families

50-30-20 Budget Rule

Financial plan that allocates 50% to needs, 30% to wants, and 20% to savings and debt repayment

Zero-Based Budgeting

Financial plan where every anticipated earning is assigned a role to be spent, saved, or invested somewhere, so there's no "leftover" money with no purpose

Cash Envelope System

Financial plan where money for all variable spending is taken out in cash and placed in labeled envelopes by budget category and then spending occurs only from the envelopes

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

1099

Form that details all "non-employee" compensation, including for specific jobs like freelancers or contractors

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

needs

Purchases a person must have to live or succeed or bills that must be paid to remain in good standing

income tax

Taxes paid by employees to federal & state government through a direct deduction from their paycheck

1040

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

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.

tax return

a form or forms filed with a tax authority that reports income, expenses and other pertinent tax information.

payroll tax

federal and state taxes that all employers must pay, based on a percentage of the employee's salary toward social services such as social security and medicare

Social Security

federal program of disability and retirement benefits that covers most working people

deduction

money taken from your paycheck to cover things like taxes and health insurance

Wants

non essential purchases a person wants to feel happy, make life convenient, fit in with peers, etc

dependent

someone you financially support who can be "claimed" on a tax return to reduce taxable income and lower your taxes.

gross pay

the amount of money you earn before taxes and other expenses (deductions) are taken out.

Net Pay

the amount of money you take home after taxes and other expenses (deductions) are taken out.

withholding

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