Good2Know Glossary: Tax Time

It’s that time of year again. How well do you know your tax terminology? Keep this glossary from the IRS handy as you file.

Adjusted Gross Income

Total income reduced by certain amounts such as contributions made to a traditional IRA or for student loan interest payments.

Business Taxes

Taxes levied on businesses by federal, state, or local governments. These include (in addition to corporate income taxes on earnings and profits), unemployment insurance, worker’s compensation, contributions to social security, and Medicare insurance.

Credits

A direct reduction of tax owed. Credits are allowed for such purposes as childcare expenses, higher education costs, qualifying children, and earned income of low-income taxpayers.

Dependent

A person who relies on someone else for support. A taxpayer may claim an exemption for a dependent if certain conditions (dependency tests) are met. Taxpayers cannot claim themselves or their spouses as dependents.

Earned Income

Includes wages, salaries, tips, and net earnings from self-employment and other income received for personal services.

Exemption (Personal or dependency)

Amount that taxpayers can claim for themselves, their spouses, and eligible dependents.

Filing Status

Based on a taxpayer’s marital status and other factors. Determines the tax bracket and rate at which income is taxed, salaries, and self-employment earnings.

Form W-4 (Employee's Withholding Allowance Certificate)

A form that helps an employer determine how much to withhold from an employee’s paycheck for federal income tax purposes.

Gross Income

Money, goods, and property you received that must generally be reported on a tax return and may be included in taxable income.

Income Taxes

Taxes on income, both earned (for example, salaries, wages, tips, commissions) and unearned (for example, interest and dividends). Income taxes can be levied both on individuals and businesses.

Interest Income

Income a person receives from certain financial accounts or from lending money to someone else.

Personal Income Tax

A tax based on the amount of taxable income that people receive annually.

Property Taxes

Taxes on property, especially real estate. It can also be levied on boats, cars, recreational vehicles, and business inventories.

Tax Deductions

A part of a person’s or a business’s total expenditures that can be subtracted in determining taxable income.

Tax Liability

The amount of tax that must be paid. Taxpayers meet (or pay) their federal income tax liability through withholding, estimated tax payments, and payments made with the tax forms they file with the government.

Let Wachovia help you at tax time.