Taxes Unit Vocabulary (NGPF)

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1040

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The standard Internal Revenue Service (IRS) form that individuals can use to file their annual income tax returns.

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1099

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A form that details all 'non-employee' compensation, including for specific jobs like freelancers or contractors.

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Audit

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An inspection of a filer's tax return by the IRS.

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Capital gain

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Profit from the sale of an asset, such as a stock or a bond, calculated by subtracting the price you initially paid from the price you then sold it for.

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Dependent

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Someone you financially support who can be 'claimed' on a tax return to reduce your taxable income and lower your taxes.

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Discretionary spending

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Spending by the federal government determined by legislative action and approved through votes by elected officials.

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Dividend

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Money from the profits of a company that is paid out to its shareholders, typically on a quarterly basis.

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Earned income

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Any income (wages/salary) that is generated by working.

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Effective tax rate

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The actual rate you pay on your taxes, as a percentage of your overall income.

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Federal Insurance Contributions Act (FICA)

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A federal law that requires an employer to withhold taxes from the wages they pay their employees; the funds go toward Social Security and Medicare.