Financial Management Chapter 7 - Federal Income Tax

proportional taxes

Flat taxes for which the tax rate remains the same regardless of income

dependent

A person who lives with you and for whom you pay more than half of his or her living expenses

standard deduction

A stated amount you can subtract from adjusted gross income if you do not itemize deductions

voluntary compliance

A system in which all citizens are expected to prepare and file income tax returns of their own accord without force

Gross income

All taxable income you receive, including wages, salaries, and tips

tax credit

An amount subtracted directly from the tax owed

exemption

An amount you may subtract from your income for each person who depends on your income to live

audit

An examination of your tax return and records by the IRS

itemized deductions

Expenses listed on Schedule A that you can subtract from adjusted gross income to determine taxable income

adjusted gross income

Gross income less adjustments

tax brackets

Income tax ranges from 10 to 35 percent based on income

Progressive taxes

Taxes that take a larger share of income as the amount of income grows

taxable income

The amount on which you will pay income tax

tax evasion

Willful failure to pay taxes

Filing status

Your tax-filing group based on your marital status

revenue

incoming funds

Regressive taxes

taxes that take a smaller share of income as the amount of income grows