H&R Block Ch. 1&2 question n answers 2023 passed

H&R Block Ch. 1&2Wage Compensation, usually financial, received by workers in exchange for their work. Adjusted gross income (AGI) Equals gross income, less reductions that are allowable, regardless of whether personal deductions are itemized. Credits Reductions of tax liablility allowed for various purposes to tax payers who meet the qualifications. Some are refundable some are non-refundable. Some credits may be carried to different years. Refundable credits Credits where the IRS will send the taxpayer a refund for any amount in excess of the tax liablity. Non-refundable credits These credits can only reduce tax liability to zero. Earned income Income from personal services as distinguished from income generated by property or other sources. Includes all amounts received as wages, tips, bonuses, other employee compensation, and self-employment income, whether in the form of money, serivices, or property. Exemption An amount ($3650 for 2009) allowed by law as a reduction of income that would otherwise be taxed. Federal Income Tax Withheld The amount taken out of income by the payer and submitted to the IRS as an advance payment of the taxpayer's federal income tax. Gross income Total worldwide income received in the form of money, property, or services that is subject to tax. Income The word (in it's broad sense) is the gain derived from capital, labor, or a combination of the two. It is distinguishable from the capital itself. Ordinarily for income tax purposes, this word is not used alone. Rather it is used within such discriptive terms as gross income, taxable money, adjusted gross income, all of which are defined elsewhere in this glossary. Medicare Part A The medicare tax taken out of an employer's wages, or the same tax paid by a self-employed person on net self-employed income. The medicare A tax rate is 1.45% of gross wages (2.9% for self-employed individuals). Social Security Tax withheld The employee's share of social security tax that was taken out of the employer's pay and submitted along with the employer's share to the IRS by the employer. Both the employee and the employer pay 6.2% of the first $106,800 of the employee's gross wages (for 2009). Social Security Wages Total wages paid to an employee that are subject to this tax. This amount does not include tips. Wages are also subject to medicare tax. Tax Liability The amount of total tax due the IRS after any credits and before taking into account any advance payments (withholding, estimated payments, etc.) made by the taxpayer. Taxable income Adjusted gross income less itemized deductions or the standard deduction, less allowable personal and dependent exemption amounts. This term is also used to refer to income tha is not exempt or excluded from taxation. For example, "Wages are taxable income, but gifts are not." Unearned income Taxable income other than that received for services performed (earned Income). Unearned income includes money received for the investment of money or other property, such as interest, dividends, and royalties. It also includes pensions, alimony, unemployment compensation, and other income that is not earned.