H&R Block Ch. 1&2
Wage - answer Compensation, usually financial, received by workers in exchange for
their work.
Adjusted gross income (AGI) - answer Equals gross income, less reductions that are
allowable, regardless of whether personal deductions are itemized.
Credits - answer Reductions of tax liability 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 - answer Credits where the IRS will send the taxpayer a refund for
any amount in excess of the tax liablity.
Non-refundable credits - answer These credits can only reduce tax liability to zero.
Earned income - answerIncome 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 - answerAn amount ($3650 for 2009) allowed by law as a reduction of
income that would otherwise be taxed.
Federal Income Tax Withheld - answerThe 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 - answerTotal worldwide income received in the form of money, property,
or services that is subject to tax.
Income - answerThe 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 - answerThe 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 - answerThe 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 - answerTotal 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 - answerThe 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 - answerAdjusted 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 - answerTaxable 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.
Resident Alien - answerA citizen of another country who lives in the United States
and /or has resident status by law or visa, or passes the substantial presence test. (See
IRS Publication 519)
Non-Resident Alien - answerA person who is NOT a US citizen and does NOT live in
the US or lives in the US under a non resident visa, or does not meet the substantial
presence test. (See IRS Publication 519)
Schedules and Forms - answerOfficial IRS documents used to report various types of
incopme, deductions, and credits. Totals determined on each schedule or form are
entered on the appropriate line of Form 1040A or Form 1040 or occasionally on another
schedule. Schedules and Forms are part of the return and are submitted to the IRS
along with form 1040A, Form 1040, and for 1040NR.
Statements - answerMay or may not be official IRS forms. They are attached to a return
to explain various types of income, deductions, and credits reported on a schedule or
directly on forms- 1040EZ, 1040A, 1040, 1040NR, or 1040PR.
Worksheets - answerNOT sent to the IRS with the return. Useful when compiling
information kept with taxpayer's copy of return.
E-File Tip - answerThe instructions in most IRS publications say to round the total, but
when filing electronically, the amounts from each source document must be rounded.
Wage - answer Compensation, usually financial, received by workers in exchange for
their work.
Adjusted gross income (AGI) - answer Equals gross income, less reductions that are
allowable, regardless of whether personal deductions are itemized.
Credits - answer Reductions of tax liability 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 - answer Credits where the IRS will send the taxpayer a refund for
any amount in excess of the tax liablity.
Non-refundable credits - answer These credits can only reduce tax liability to zero.
Earned income - answerIncome 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 - answerAn amount ($3650 for 2009) allowed by law as a reduction of
income that would otherwise be taxed.
Federal Income Tax Withheld - answerThe 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 - answerTotal worldwide income received in the form of money, property,
or services that is subject to tax.
Income - answerThe 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 - answerThe 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 - answerThe 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 - answerTotal 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 - answerThe 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 - answerAdjusted 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 - answerTaxable 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.
Resident Alien - answerA citizen of another country who lives in the United States
and /or has resident status by law or visa, or passes the substantial presence test. (See
IRS Publication 519)
Non-Resident Alien - answerA person who is NOT a US citizen and does NOT live in
the US or lives in the US under a non resident visa, or does not meet the substantial
presence test. (See IRS Publication 519)
Schedules and Forms - answerOfficial IRS documents used to report various types of
incopme, deductions, and credits. Totals determined on each schedule or form are
entered on the appropriate line of Form 1040A or Form 1040 or occasionally on another
schedule. Schedules and Forms are part of the return and are submitted to the IRS
along with form 1040A, Form 1040, and for 1040NR.
Statements - answerMay or may not be official IRS forms. They are attached to a return
to explain various types of income, deductions, and credits reported on a schedule or
directly on forms- 1040EZ, 1040A, 1040, 1040NR, or 1040PR.
Worksheets - answerNOT sent to the IRS with the return. Useful when compiling
information kept with taxpayer's copy of return.
E-File Tip - answerThe instructions in most IRS publications say to round the total, but
when filing electronically, the amounts from each source document must be rounded.
