Financial Lit C6 Income Tax

flat tax system

• tax rates are the same for all; also called proportional tax

• tax rates vary based on income levels

• only applies to corporate taxes

• a tax system with multiple rates for different income brackets

tax

• an amount of money required to be paid to the government

• a type of investment

• a form of insurance

• a penalty for late payment

constraint

• A limitation on a set of outcomes in math.

• An equation that has no solutions.

• A variable that can take any value.

• A method to solve complex problems.

Flexible Spending Account (FSA)

• money withheld and placed into account(s) to pay for certain medical expenses, childcare, and prenatal care

• a type of savings account for retirement

• a government program for low-income families

• a loan for purchasing a home

Federal Insurance Contributions Act (FICA)

• A federal tax for Medicare only

• Another name for Social Security (taxes)

• A state tax for unemployment insurance

• A tax on corporate profits

tax liability

• the amount of taxes a person is responsible for paying

• a tax refund received from the government

• the total income earned by an individual

• the percentage of income that is taxed

property tax

• a tax on something you own (for example, land or a house)

• a fee for public services provided by the government

• a tax on income earned from investments

• a charge for the maintenance of public roads

tax-deferred contributions

• money withheld and placed in qualified accounts (like certain retirement accounts); taxes are not paid until the money is withdrawn

• immediate tax payments on contributions made to retirement accounts

• contributions that are taxed at a higher rate upon withdrawal

• funds that can be accessed without any tax implications

progressive tax system

• tax rates remain constant regardless of income

• tax rates decrease as income increases

• tax rates increase as income increases

• tax rates are the same for everyone

Form W-4

• Employees Withholding Allowance Certificate, which directs an employer how much income tax to withhold

• Tax Return Form for Self-Employed Individuals

• Application for Employer Identification Number

• Form for Reporting Foreign Bank Accounts