Income and Employment Flashcards
W-4 Form
Employee’s tax withholding document setting forth tax withholding amounts for employer. Completed upon hiring by employee
!-9 Form
Shows employee’s identification and eligibility to work in the United States. Completed by an employee on the first day of the job. The employer has 3 days to submit.
1099 Form
Shows income as an independent contractor. Received by the end of taxable year. Used to file taxes
1040
Tax form. Must be filed by April 15th.
W-2 Form
Provides employee’s earnings and withholdings for the tax year. End of taxable year. Used to file taxes
Federal Income Tax
Tax on wages, dividends, and other compensations. Fund the federal governments, programs and entitlements.
State Income Tax
Tax on wages, dividends, and other compensation
Fund the state government, programs and entitlements - not every state has an income tax
Sales Tax
Tax on goods and services (only state and local - no national sales tax)
Easy to collect
Tax varies state to state (not every state has a sales tax)
Fund the state government programs and entitlements
Property Tax
Real Property (land and buildings)
Based on Assessed value of the house
Current tax rate is .89 per $100 of assessed value
Personal Property
Cars, boats, motorcycles
Must pay every 6 months
Property tax revenue is used to fund the schools
Social Security Tax
Split with employer ½
12.4%
Cap of $128,000
Funds the government’s retirement plan
Many live only on social security payments
Medicare Tax
Split with employer (employer pays ½)
Percentage withheld: 2.9%
No cap on this tax
Funds the government’s health care program for the elderly
Excise Tax
Regulation of goods and services
“Sin Tax”
Alcohol, tobacco, + gasoline
Either furthers social policies (discouraging smoking) or used to fund other necessary programs (roads and highways)
Inheritance Tax
Federal tax on assets worth more than $11.58 million after death. Some refer to this as the “Death Tax”. Funds federal programs
What taxes are considered “Payroll taxes”(4 of them)
Social Security Taxes
Medicare
Federal Income
State Income
Gross pay
The amount of money you make BEFORE tax deductions and other deductions
Net Pay
The amount of money you make AFTER tax deductions and other deductions
Withholding
What is taken out of your paycheck for taxes, employee sponsored health insurance and retirement.
Standard Deduction
The standard deduction is a specific dollar amount that reduces the amount of income on which you’re taxed
Itemized Deduction
Itemized deductions are specific types of expenses the taxpayer incurred that may reduce taxable income. Types of itemized deductions include mortgage interest, state or local income taxes, property taxes, medical or dental expenses in excess of AGI limits, or charitable donations.
Refund
The amount of money received when more taxes are withheld from your paycheck than you actually owe.
What forms of identification do you need to show when completing an I-9 form? (3 of them)
Passport or
Social Security Card and Driver’s License (U.S work visa)
Why is it important for both the employee and employer to know the difference between gross pay and net pay?
For the employee it’s important to understand that gross pay isn’t what you take home. Net pay is what you get and you need to budget off the net pay not the gross pay.
For the employer it’s important to know the difference so they can calculate how much money each employee will receive in their paycheck. Understanding gross pay vs. net pay can allow businesses to subtract the right amount of deductions for each pay period and ensure that the employees are not under or over paid.
Which government entity is typically responsible for assessing and collecting real property taxes?
Local Government
True or False? Personal property tax is assessed on cars and Real property tax is assessed on land and houses.
True
