Chapter 1 Flashcards
Gross income equals gross income less reductions that are allowable, regardless of whether personal deductions are itemized
Adjusted Gross Income
A direct reduction of tax liability allowed for various purposes to taxpayers who meet the qualifications
Credits
Amounts that may be subtracted from income that is otherwise taxable
Deductions
Income from personal services
Earned Income
$4,050 allowed by law as a reduction of income that would otherwise be taxed
Exemption
Amount taken out of income by the payer and submitted to the IRS as an advance payment of the taxpayers federal income tax
Federal Income Tax Withheld
Total worldwide income received. Money, property, or services that is subject to tax
Gross Income
Broad sense - gain derived from capital, labor, or a combination of the two
Income
Insurance for qualifying individuals who are 65 or older or disabled
Medicare Part A
(6.2% of first $127,200) Employees share of tax taken out of pay and submitted along with the employers share to the IRS
Social Security Tax Withheld
Total wages (not including tips) paid to an employee - also subject to Medicare tax
Social Security Wages
Amount of total tax due after any credits and before taking into account any advance payments made by the taxpayer
Tax Liability
AGI less itemized deductions or the standard deduction, less allowable personal and dependent exemption amounts
Taxable Income
Taxable income other than that received for services performed. Interest, dividends, royalties, pensions, alimony, unemployment.
Unearned Income
