PF_Chapter7 Flashcards
Revenue
Money collected by the government in the form of taxes
Ability-to-pay principle
Individuals with high incomes should pay more taxes than people with low incomes
Progressive taxes
Taxes that take a larger share of income as the amount of income grows (ex. Federal income taxes)
Regressive taxes
Taxes that take a smaller share of income as the amount of income grows (ex. Sales tax)
Proportional taxes
Taxes for which the rate stays the same, regardless of income (ex. Property taxes)
Excise taxes
Sales taxes imposed on gasoline, cigarettes, alcoholic beverages, air travel, and telephone service.
Internal Revenue Service
Agency of the Department of Treasury with the main functions of collecting income taxes and enforcing tax laws
Congress
Has the power to levy taxes
Tax brackets
Taxable income ranges that determine tax rates
Deficit
When the government spends more money than it receives in revenue
Voluntary compliance
Means all citizens are expected to prepare and file tax returns on their own accord without force
Audit
An examination of your tax returns
Filing status
Describes your tax-filing group based on your marital status
Exemption
An amount you may subtract from your income for each person who depends on you income to live
Dependent
A person who lives with you and for whom you pay more than half of his or her living expenses
Gross income
All the taxable income you receive
Earned income
Money you earned from working
Unearned income
Money you received from passive activity (other than working)
Adjusted gross income
Amount of income after adjustments have been subtracted from gross income
Itemized deductions
Expenses you can subtract from adjusted gross income to determine your taxable income
Standard deductions
A stated amount that you may subtract from adjusted gross income instead of itemizing your deductions
Taxable income
The income on which you will pay tax
Tax credit
An amount subtracted directly from the tax owed
15-Apr
Deadline to file taxes
1040EZ
You can use this tax form if you are single or married filing jointly, claim no dependents, and make less than $100,000
1040A
You can use this tax form if you earn less than $100,000 and you can take more deductions than with 1040EZ
