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Terms to Know for Filing Taxes CFM – Mr. Gault Name _______________________________ Date ___________ Tax A sum of money demanded by a government for its support or for specific facilities or services, levied upon incomes, property, sales, etc. W-4 Form A form completed by an employee to indicate his or her tax situation (exemptions, status, etc.) to the employer. The W-4 form tells the employer the correct amount of tax to withhold from an employee's paycheck. W-2 Form The form that an employer must send to an employee and the IRS at the end of the year. The W-2 form reports an employee's annual wages and the amount of taxes withheld from his or her paycheck. 1099 Form Interest and dividend payments of $10 or more 1040EZ Form The 1040EZ is an alternative to the Internal Revenue Service's (IRS) 1040 income tax form and offers a faster and easier way to file taxes, meant for taxpayers with rudimentary tax situations. IT-201 Form Resident Income Tax Return for Full-Year State Residents Only Federal Income Tax Withheld Money that employers withhold from employees' paychecks for the US government. State Income Tax Withheld Money that employers withhold from employees' paychecks for the NYS government. Filing Status (give examples) Your filing status is used to determine your filing requirements, standard deduction, eligibility for certain credits, and your correct tax. If more than one filing status applies to you, choose the one that will result in the lowest amount of tax. There are five filing statuses: Single, Married Filing Jointly, Married Filing Separately, Head of Household, and Qualifying Widow(er) with Dependent Child. Dependent A person, other than the taxpayer or the taxpayer's spouse, for whom an exemption can be claimed. To be your dependent, a person must be your qualifying child or qualifying relative. Standardized deductions A deduction that reduces the amount of income on which you are taxed. You cannot take the standard deduction if you claim itemized deductions. Your standard deduction consists of the basic standard deduction amount based on your filing status and additional standard deduction amounts for age and blindness. Itemized Deductions Deductions allowed on Schedule A (Form 1040) for medical and dental expenses, taxes, home mortgage interest and investment interest, charitable contributions, casualty and theft losses, and miscellaneous deductions. They are subtracted from adjusted gross income in figuring taxable income. Itemized deductions cannot be claimed if the standard deduction is chosen. Wages, Salaries, Tips etc. … Money that is paid or received for work or services, as by the hour, day, or week to be reported as income for the year. Taxable Interest Income a person receives from certain financial accounts or from lending money to someone else. Dividends A distribution of money or other property made by a corporation to its shareholders out of its earnings and profits. Alimony Payment to a spouse or former spouse under a divorce or separation instrument. The payments do not have to be made directly to the ex-spouse. The person paying alimony can subtract it as an adjustment to income; the person receiving alimony must treat it as income Child Care Expenses A nonrefundable credit that allows taxpayers to claim a credit for paying someone to care for their qualifying Dependents under the age of 13 or Spouses or dependents who are unable to care for themselves. Business Income/Loss Money made by your business that either netted a profit or a loss Capital Gain/Loss When a capital asset is sold (house, artifacts), the difference between what you paid for the asset and the amount it is sold for is a capital gain or a capital loss. IRA Individual Retirement Account – money set aside to be used once you retire. This money is usually put into a specific investment like 401k funds. Pensions/Annuities A regular payment made during a person's retirement from an investment fund to which that person or their employer has contributed during their working life Real Estate Property consisting of land or buildings Public Employee 414(h) Retirement Contributions A monetary contribution to a retirement plan. Adjusted Gross Income Total income reduced by certain amounts such as contributions made to a traditional IRA or for student loan interest payments that an individual pays federal and state taxes on. Tax Credit A direct reduction of the taxpayer's liability. Credits are allowed for such purposes as child care expenses, higher education costs, qualifying children, and earned income of low-income taxpayers. Exemptions Amount that taxpayers can claim for themselves, their spouses, and eligible dependents. The total is subtracted from adjusted gross income before tax is figured on the remaining income (taxable income). Taxable Income Gross Income minus any adjustments to income, any allowable exemptions, and either itemized deductions or the standard deduction. Tax Tables A table or chart displaying the amount of tax due based on income received. The tax rate may be shown as a discrete amount, a percentage rate, or a combination of both. Tax tables are used by individuals, companies and estates for both standard income and capital gains.