Everfi Lesson 2: Taxes, Income and Employment

Associate's Degree

2 year college degree from a community college, university, college, or technical school

1040

A tax form filled out by an individual and filed with the IRS that determines the amount of income tax owed in a single year

Bachelor's Degree

An academic degree which usually takes four years to earn and is awarded by a college or university

benefits

Compensation in forms other than direct payment (health insurance, paid time off, disability insurance, retirement plan)

personal allowances

Items or exemptions you can claim on your W-4 form that reduce the amount of tax taken out of your paycheck

health insurance

Provides money to pay for health care for illness or injury

Paid Time Off

a benefit that provides employees with pay for time when they are not working

gig economy

a flexible market that allows you to work short-term independent jobs

W-2

a form that tells you how much you've made and how much you've paid in taxes in the last year; you will use this to fill out your tax return

Sales Tax

a tax on purchases or services (not based on income)

standard deduction

an amount of money set by the IRS that is not taxed

filing status

describes your tax-filing group which is based on your marital status (single, married filing separately, married filing jointly)

taxable income

income on which tax must be paid; total income minus exemptions and deductions

taxes

money paid to the Federal, State, and Local governments for schools, parks, roads, emergency services, etc.

Deductions

money taken out of a paycheck to pay for employee benefits like insurance or retirement plans

FICA (Federal Insurance Contributions Act)

money that goes to Social Security and Medicare programs

disability insurance

money that replaces some of your lost income if you are injured or sick and can't work

routing number

nine digit bank code used in US on bottom left of checks used to identify the financial institution (bank)

withholding (tax withheld)

tax payments taken out of an employee's pay before he or she receives it

account number

the number that identifies a particular bank account

gross pay

the total amount of an employee's earnings before deductions are taken out

net pay

take home pay; the amount of a paycheck after all taxes and deductions have been taken out of your paycheck

W-4

A federal tax form filled out by an employee to indicate the amount that should be withheld from his/her paycheck for taxes.

retirement savings plan

an account into which employees contribute a portion of their earnings to save for their retirement; employers may match these contributions