Personal Finance- H&R Block Budget Challenge Week #8 Income Tax and Forms Vocabulary correctly answered 2023

Personal Finance- H&R Block Budget Challenge Week #8 Income Tax and Forms VocabularyW4 Form completed by an employee to indicate his or her tax situation to the employer. It informs the employer the amount of tax to withhold from an employee's paycheck Student Loan Interest An income tax deduction for interest paid on a qualified student loan Payroll Tax Social security and Medicare taxes imposed on employers and employees, usually calculated as a percentage of the salaries that employers pay their staff Form W2 Form sent to employees at the end of the year. It reports an employee's annual wages and the amount of taxes withheld from his or her paycheck Home Mortgage Interest An income tax deduction on a home loan (in some circumstances) Form 1099-MISC Form issued to independent contractors to report various types of incomes Sales Tax Tax on sales of certain goods and services Tax Bracket An income range taxed at a set tax rate. Income is measured after adjustments, deductions, and exemptions. [Note for discussion: Because federal income taxes are progressive (rates increase as income increases) taxpayers do not pay the tax at the highest bracket rate on all of their income] Federal Income Tax Progressive tax collected by the IRS on the annual earnings of individuals and other entities Tax Credit Amount of money a taxpayer can subtract from the amount of tax they owe to the government Tax Deduction Reduction of taxable income that lowers the overall tax liability Tax Fraud Occurs when an individual or business entity willfully and intentionally falsifies information on a tax return in order to limit the amount of tax liability Estimated Tax Periodic advance payment of taxes which are based upon the amount of income tax that is earned each quarter Exempt Income Types or amounts of income not subject to federal income tax Effective Tax Rate The average rate of tax that is paid on all income calculated by dividing the total tax liability by total income subject to tax Gift Tax A tax on the transfer of property by one individual to another while receiving nothing, or less than full value, in return. This tax is applied to the donor. Short Term Capital Gains Tax A capital gain realized by the sale or exchange of a capital asset that has been held for exactly one year or less; taxed at the taxpayer's top tax rate. Long Term Capital Gains Tax A capital gain from a qualifying investment owned for longer than 12 months and then sold. The amount of an asset sale that counts toward a capital gain is the difference between the sale value and the taxpayer's investment in the asset Forms of Taxable Income These are all examples of this: employee compensation [in most cases: wages, salaries, commissions, fees, tips, and many fringe benefits,] business and investment income. Schedule C Form for the self-employed to report how much money was made or lost in the business. The form is titled "Profit or Loss from a Business [Sole Proprietorship]." 1040 EZ A faster and easier IRS tax filing form alternative to the 1040 income tax form, meant for taxpayers with less complex tax situations Allocated Tips Tips the employer assigned in addition to the tips the employee reported receiving for the year