Taxes Flashcards
What is income tax?
An income tax is a tax imposed on individuals or entities in respect of the income or profits earned by them. Income tax generally is computed as the product of a tax rate times the taxable income. Taxation rates may vary by type or characteristics of the taxpayer and the type of income.
What are property / real estate taxes?
Real estate tax and property tax are the same thing. The IRS uses the term “real estate tax,” but most people call it “property tax.” Property (real estate) tax is charged on immovable property—land and structures that are permanently attached to the ground such as a house, building, or land.
What is the distinction between federal and state income taxes?
Federal taxes are paid to the IRS to fund the Federal Government’s Budget.
A state income tax is a tax on income earned in that state. It is similar to a federal income tax, but state income tax generally funds state budgets rather than the federal government.
What are tax refunds?
A tax refund is a reimbursement to taxpayers who have overpaid their taxes, often due to having employers withhold too much from paychecks. The U.S. Treasury estimates that nearly three-fourths of taxpayers are over-withheld, resulting in tax refunds.
What are tax returns?
A tax return is a documentation filed with a tax authority that reports income, expenses, and other relevant financial information. On tax returns, taxpayers calculate their tax liability, schedule tax payments, or request refunds for the overpayment of taxes.
Distinction between income tax returns vs income tax payments
Tax returns filed annually vs tax payments made throughout the year.
What is a W-2 tax form?
A W-2 tax form shows important information about the income you’ve earned from your employer, amount of taxes withheld from your paycheck, benefits provided and other information for the year. You use this form to file your federal and state taxes.
What are payroll tax deductions?
Payroll deductions are wages withheld from an employee’s total earnings for the purpose of paying taxes, garnishments and benefits, like health insurance. These withholdings constitute the difference between gross pay and net pay and may include: Income tax. Social security tax.
Gross pay vs net pay distinction
Gross pay is what employees earn before taxes, benefits and other payroll deductions are withheld from their wages. The amount remaining after all withholdings are accounted for is net pay or take-home pay.
What is the FICA tax? (Federal Insurance Contribution Act)
FICA imposes taxes to fund social security and medicaid taxes.
12.4% of the tax goes to Social Security
2.9% goes to medicare
amounting to a 15.3% tax rate. Both the employee and employer split this tax percentage; 7.65% for each
What are FUTA taxes? (Federal Unemployment Tax Act)
FUTA imposes taxes to fund unemployment programs. These taxes are only imposed on employers; Businesses must fund unemployment benefits for each employee that they hire.
What is a corporate tax?
A corporate tax, also called corporation tax or company tax, is a direct tax imposed on the income or capital of corporations or analogous legal entities. Many countries impose such taxes at the national level, and a similar tax may be imposed at state or local levels.
What is a capital gains tax?
The capital gains tax is the levy on the profit that an investor makes when an investment is sold. It is owed for the tax year during which the investment is sold.
What is a progressive income tax rate?
A system of taxation where the quantity of revenue you’re generating from your income determines the overall rate taxation that will be imposed upon said income; In other words, the greater amount of income you earn, the larger percentage of taxation you will be subservient to.
What is a consumption tax?
A consumption tax is a tax levied on consumption spending on goods and services. The tax base of such a tax is the money spent on consumption. Consumption taxes are usually indirect, such as a sales tax or a value-added tax.
What is a Value Added Tax?
Value-added tax (VAT) is a consumption tax on goods and services that is levied at each stage of the supply chain where value is added, from initial production to the point of sale. The amount of VAT the user pays is based on the cost of the product minus any costs of materials in the product that have already been taxed at a previous stage.
What is a sale tax
A sales tax is a tax paid to a governing body for the sales of certain goods and services. Usually laws allow the seller to collect funds for the tax from the consumer at the point of purchase. When a tax on goods or services is paid to a governing body directly by a consumer, it is usually called a use tax.
Definition of payroll
a list of a company’s employees and the amount of money they are to be paid.
What types of deductions are established on your income?
Payroll tax, income tax, a partiality of your income to fund the health insurance premium
What is a tax credit?
A tax credit is a provision that reduces a taxpayer’s final tax bill, dollar-for-dollar. A tax credit differs from deductions and exemptions, which reduce taxable income, rather than the taxpayer’s tax bill directly.
What are tax exemptions?
A tax exemption is the right to exclude all or some income from taxation by federal or states governments. Most taxpayers are entitled to various exemptions to reduce their taxable income, and certain individuals and organizations are completely exempt from paying taxes.
What are tax deductions?
Tax deduction is a reduction of income that is able to be taxed and is commonly a result of expenses, particularly those incurred to produce additional income. Tax deductions are a form of tax incentives, along with exemptions and credits.
Do income tax cuts for moderate and low income tax payers boost economic growth?
A working paper for the National Bureau of Economic Research found that tax cuts aimed at high-income earners have less economic impact that similarly sized cuts targeted at low and moderate income tax payers.
Do tax cuts on the rich proliferate economic growth?
Major reforms reducing taxes on the rich lead to higher income inequality but do not have any significant effect on economic growth or unemployment, according to new research by LSE and King’s College London.
