accountant
A professional who prepares financial and tax reports, and who keeps, audits, and inspects financial records on individuals or business concerns.
deduction
An expense subtracted from adjusted gross income when calculating taxable income, such as for state and local taxes paid, charitable gifts, and certain types of interest payment. Also called tax deduction.
dependents
A person or persons who are financially supported by another person.
e-filing
The filing of taxes electronically (a paperless filing).
excise tax
A federal or state tax imposed on the manufacture and distribution of certain consumer goods. Examples of excise taxes include environmental taxes, communications taxes, and fuel taxes.
exemption
A direct reduction of taxable income for a specific reason, as allowed by the IRS, typically for financially supporting another person.
Free IRS Tax preparation Services
The IRS offers a Volunteer Income Tax Assistance (VITA) service, which provides free help to low-and moderate-income citizens in preparing their income tax returns and obtaining tax deductions and credits.
government budget
Federal, state, or local government’s planned expenditures and anticipated receipts for the upcoming year.
head of household
A tax filing status that can be used by a married or unmarried person who maintains a household for a dependent (or nondependent relative) and provides more than half of the dependent’s financial support.
instant refunds
Refund anticipation loans, often with very high interest, arranged by tax preparers for people who file their returns electronically.
Internal Revenue Service
The IRS is the federal agency responsible for administering and enforcing the Treasury Department’s revenue laws through the assessment and collection of taxes and related activities.
itemization
The process of listing deductible personal expenses paid during the year, such as medical and dental care, state and local income taxes, real estate taxes, home mortgage interest, and gifts to charity. Such a list would appear on Form 1040, Schedule A, Itemized Deductions.
itemized deduction
An incurred expense that reduces an individual’s taxable income, in accordance with IRS regulations. Examples include mortgage interest, state and local taxes, charitable gifts, and medical expenses.
progressive tax
A tax system in which those who earn higher incomes pay a higher percentage of their income than those with lower incomes. The individual income tax is one example.
proportional tax
A system in which all levels of income are taxed at the same rate, also called flat tax.
public goods
Goods or services provided by the government and not restricted by a person’s ability to pay for them.
refund
Money returned by the government to a taxpayer who paid in excess of the amount due.
regressive tax
A tax that takes a larger percentage of the income of low-income people than of high-income people.
revenue sharing
A share of tax funds provided by the federal government to state governments, or by state governments to local municipalities.
short form (tax)
Any shorter version of a standard tax form, most commonly the 1040-A or 1040-EZ tax return forms. These require fewer or no supplementary forms (schedules) be attached.
tariff
A tax imposed on a product when it is imported into a country.
tax return
A filed tax form. Also called return.
taxable income
The amount of income subject to income taxes found by subtracting exemptions and appropriate deductions (IRA contributions, alimony payments, unreimbursed business expenses, some capital losses, etc.) from adjusted gross income.
W-2 form
A tax form prepared by an employer and given to an employee to be filed with his/her 1040 form, listing wages earned during that year, federal and state taxes withheld, and Social Security tax information.
W-4 form
A form prepared by an employee for an employer indicating his or her allowances (exemptions) and Social Security number, that enables the employer to determine the amount of taxes to be withheld.
withholding
An amount of an employee’s income that an employer sends directly to the federal, state, or local tax authority as partial payment of that individual’s tax liability for the year. When a person starts a new job, he/she is required to fill out a W-4 form indicating his/her filing status and the number of allowances (exemptions) claimed.