Income Tax Fundamentals
tax liability - Answer-Total amount of tax a person owes.
estate tax - Answer-Is tax collected on the value of a person's property at the time of his or her death.
inheritance tax - Answer-A tax collected on the property left to you by a person in his or her will.
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Income Tax Fundamentals
tax liability - Answer-Total amount of tax a person owes.
estate tax - Answer-Is tax collected on the value of a person's property at the time of
his or her death.
inheritance tax - Answer-A tax collected on the property left to you by a person in his
or her will.
income tax - Answer-Tax paid to the state, federal, and local governments based on
income earned over the past year.
income tax return - Answer-A form on which a taxpayer reports how much money he
or she received from work and other sources, and the exact taxes that are owed.
exclusion - Answer-Income that is not subject to taxes.
adjusted gross income - Answer-Gross income after calculating certain reductions to
income.
taxable income - Answer-Income on which tax must be paid; total income minus
exemptions and deductions.
tax deduction - Answer-An expense that you are allowed to subtract from your
adjusted gross income to figure your taxable income.
standard deduction - Answer-An amount of money set by the IRS that is not taxed.
itemized deduction - Answer-A specific expense, such as medical expense, that you
deduct from your adjusted gross income.
exemption - Answer-A deduction from adjusted gross income for the taxpayer, the
spouse, and qualified dependents.
tax credit - Answer-An amount of money that can be subtracted directly from owed
taxes.
allowance - Answer-An adjustment to the tax withheld from a paycheck.
extension - Answer-An extended deadline for filing an income tax return.
tax audit - Answer-A reveiw of a tax return by the IRS in which the taxpayer must
show proof of all deductions, expenses, and income.
excise tax - Answer-A tax on specific goods and services (such as gasoline, air
travel, and telephone service) collected by federal and state governments.
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