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HRB Study Terminology ( Latest 2024 / 2025 ) Actual Questions and Answers 100% Correct
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HRB Study Terminology ( Latest 2024 / 2025 ) Actual Questions and Answers 100% Correct
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HRB Study TerminologyBy ExamNavigator
, HRB Study Terminology
1. Adjusted Gross Income (AGI)
Answer: equals total income less reductions that areallowable, regardless of whether personal
deductions are itemized.
2. Deductions
Answer: Amounts that may be subtracted from income that is otherwisetaxable.
3. Earned Income
Answer: Income from personal services as distinguished from incomegenerated by property
or other sources. Earned income includes all amounts received as wages, tips, bonuses, other
employee compensation, and self-employment income, whether in the form of money,
services, or property.
4. Federal Income Tax Withheld
Answer: The amount taken out of income by the payer andsubmitted to the IRS as an advance
payment of the taxpayer's federal income tax.
5. Gross Income
Answer: Total worldwide income received in the form of money, property,or services that is
subject to tax.
6. Medicare Tax
Answer: The tax taken out of an employee's wages, or the same tax paidby a self-employed
person on net self-employment income. The payment of this tax contributes to the taxpayer's
medicare coverage under the U.S. social securitysystem. The current tax rate is 1.45% of gross
wages (2.9% for self-employed individuals). An additional medicare tax may apply if the
taxpayer's wages and compensation exceed a threshold amount.
7. Nonrefundable Credit
Answer: A credit which cannot exceed the taxpayer's tax liability.
8. Social Security Tax Withheld
Answer: The employee's share of this tax that was takenout of the employee's pay and
submitted along with the employer's share to the IRSby the employer. The employee pays 6.2%
and the employer pays 6.2% on certainemployee's gross wage thresholds.
9. Social Security Wages
Answer: Total wages paid to an employee that are subject to thistax. This amount does not
include tips. Wages are also subject to medicare tax.
10. Tax Liability
Answer: The amount of total tax due to the IRS after any credits and beforeconsidering any
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