| Term | Definition |
|---|---|
| W-4 | A federal tax form filled out by an employee to indicate the amount that should be withheld from his/her paycheck for taxes. |
| Gig economy | A flexible market that allows you to work short-term independent jobs. |
| Net pay | Take home pay; the amount of a paycheck after all taxes and deductions have been taken out of your paycheck. |
| Taxes | Money paid to the Federal, State, and Local governments for schools, parks, roads, emergency services, etc. |
| Withholding (tax withheld) | Tax payments taken out of an employee’s pay before he or she receives it. |
| Filing status | Describes your tax-filing group which is based on your marital status (single, married filing separately, married filing jointly). |
| Personal allowances | Items or exemptions you can claim on your W-4 form that reduce the amount of tax taken out of your paycheck. |
| Gross pay | The total amount of an employee’s earnings before deductions are taken out. |
| FICA (Federal Insurance Contributions Act) | Money that goes to Social Security and Medicare programs. |
| Deductions | Money taken out of a paycheck to pay for employee benefits like insurance or retirement plans. |
| W-2 | A form that tells you how much you’ve made and how much you’ve paid in taxes in the last year; you will use this to fill out your tax return. |
| Standard deduction | An amount of money set by the IRS that is not taxed. |
| Taxable income | Income on which tax must be paid; total income minus exemptions and deductions. |
| 1040 | A tax form filled out by an individual and filed with the IRS that determines the amount of income tax owed in a single year. |
| Routing number | A nine-digit bank code used in the US on the bottom left of checks used to identify the financial institution (bank). |
| Account number | The number that identifies a particular bank account. |
| Benefits | Compensation in forms other than direct payment (health insurance, paid time off, disability insurance, retirement plan). |
| Health insurance | Provides money to pay for health care for illness or injury. |
| Disability insurance | Money that replaces some of your lost income if you are injured or sick and can’t work. |
| Retirement savings plan | An account into which employees contribute a portion of their earnings to save for their retirement; employers may match these contributions. |
| Associate’s Degree | 2 year college degree from a community college, university, college, or technical school. |
| Bachelor’s Degree | An academic degree which usually takes four years to earn and is awarded by a college or university. |
| Sales Tax | A tax on purchases or services (not based on income). |
| Paid Time Off | A benefit that provides employees with pay for time when they are not working. |
| Education and lifetime earnings | Generally, the more education you receive, the higher your lifetime earnings will be. |
| Net pay | The amount of money you’re paid after all taxes and deductions are taken out of your paycheck. |
| Gross pay | The amount of money you earn before taxes are subtracted. |
| W-4 form | A form used to inform your employer of how much federal income tax to withhold from your paychecks. |
| W-2 form | A form that tells you how much you’ve earned and how much taxes you’ve paid in the last year. |
| W-2 form | A form that tells you how much taxes you’ve paid in the last year based on how much you’ve earned. |
| Taxes | Money paid to the government to fund schools, government departments, roads, and emergency services. |
| Tax laws | Laws that differ between states and require everyone to file federal taxes, but each state has its own tax laws. |
| Tax preparation software | A tool that can help prepare and file taxes by posing questions to collect necessary information. |
| W-2 or 1099 form | Forms that report income which needs to be used to file taxes. |
| Why is it useful to have your bank account and routing numbers when using tax preparation software? | To indicate where tax refunds should be sent. |
| Deductions and credits | Can reduce what you owe in taxes each year, so it’s important to claim all eligible ones. |
| Benefits | Healthcare, paid time off, disability insurance, and matching contributions to a retirement account are all types of benefits available from your employer. |
| Financial institution | A place to manage money that typically offers features such as savings and checking accounts, loans, and credit cards. |
| Investment products/trading | Not a common feature of a financial institution. |
| Which of the following is NOT a common feature of a financial institution? | Access to investment advice |
| Which of the following statements about check cashing companies is TRUE? They charge high fees. | True |
| Which of the following financial institutions typically have the highest fees? | Check cashing and payday loan companies |
| Which of the following statements about check cashing companies is FALSE? | They charge low fees. |
| Which type of bank account typically offers the least (if any) interest? Checking account | True |
| Savings accounts typically offer more interest than what type of account? Checking account | True |
| Which type of bank account is best for everyday transactions? Checking Account | True |
| A savings account that compounds interest daily will earn a higher return than a savings account that pays simple interest daily. | True |
| Which savings account will earn you the least money? One that earns simple interest monthly. | True |
| Which savings account will earn you the most money? One that compounds interest daily. | True |
| Which of the following statements about savings accounts is FALSE? | Savings accounts allow an unlimited amount of withdrawals each month. |
| Which of the following statements about savings accounts is FALSE? | Savings accounts don’t usually require a minimum balance. |
| Which of the following statements about savings accounts is FALSE? | Savings accounts don’t usually pay interest on the money you deposit. |
| Which of the following statements is TRUE? If there is a mistake on your bank account, you should contact your financial institution immediately. | True |
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