Pre-tax dollars that are contributed to a tax-deferred savings plan (e.g. 401(k) and some IRAs) that you do not have to pay income tax on until withdrawal at a future date.
The value assigned to an asset, generally its purchase price plus the amount of subsequent deposits, that is used to determine a capital gain or capital loss for tax purposes.
Includes salary, bonus, tips, etc. Earned income does not include rental income. All earned income is taxed as ordinary income at income tax rates.
Taxes for Social Security and Medicare that are paid for by both the employee and the employer. If you are self-employed, you are responsible for the full employer and employee shares of FICA taxes.
Can be Single, MFJ, MFS, Head of Household, or Qualifying Widow(er).
Individuals qualify for this status if they have a dependent, are unmarried, and pay for more than half of all household expenses.
The taxpayer will get the higher of their standard deduction or their itemized deduction. This is calculated on Schedule A of the tax return and includes real estate taxes, charitable gifts, investment interest expenses, unreimbursed business expenses, and more.
Married filing jointly. This filing status means both individuals in the couple elect to use the same status and file their returns together. These taxpayers combine gross income and deductions.
Married filing separately. Both individuals in the couple elect to file separate tax returns.
Income from rental properties, direct participation programs (partnerships), and other means in which the recipient is not actively involved.
Includes income from capital gains, dividends, and interest, and investments. This type of income is taxable at federal, state, and local levels for all bonds and securities.
A filing status that allows you to keep the benefits of an MFJ status for two years after the death of your spouse. Qualifying widow(er)s must have a dependent to use this status.
Filing status for unmarried individuals who cannot be considered Head of Household.
Taxpayers get one standard deduction per person. Taxpayer’s deduction increases for being over the age of 65 and if they or their spouse is blind.
Document given to an employee by an employer that reports earnings from wages and includes all income tax, social security tax, and Medicare tax withheld
The form an employee uses to tell their employer how much to withhold
Independent contractors may (or may not) be asked to fill out a W-9 by the company that hires them. This forms signifies that the company that hires the independent contractor is not responsible for withholding taxes from your payments.
A profitable investment position that has yet to be cashed in, such as a winning stock position that remains open. A gain becomes realized once the position is sold for a profit.
An unprofitable investment position that has yet to be cashed in, such as a losing stock position that remains open. A loss becomes realized once the position is sold.
Deduction of federal and state income taxes, Social Security taxes, and other items, such as union dues and health insurance premiums, from a worker’s paycheck.
US Individual income tax return form
Individual tax form that is slightly more difficult to complete than the 1040EZ. This is available for those who don’t itemize; whose taxable income is less than $50,000; and whose income is only from wages, salaries, tips, interest, and ordinary dividends, capital gains, taxable scholarship and fellowship grants, pensions, annuities and IRAs, unemployment income, and social security.
Simplest form of the 1040, for those under age 65 with no dependents, no itemized deductions, and taxable income less than $50,000.
Tax return form for trust and estates
Reports earnings from independent contracting work. A company must send a contractor a 1099 if they paid $10+ in broker payments or royalties; paid $600+ to an attorney; or paid $600+ in rent, prizes, awards, or services.
CFP® certification is a voluntary certification granted in the United States by Certified Financial Planner Board of Standards, Inc. It is recognized in the United States and a number of other countries for its (1) high standard of professional education; (2) stringent code of conduct and standards of practice; and (3) ethical requirements that govern professional engagements with clients. Individuals who become certified are required to complete continuing education.
The glossary terms displayed on our website are solely for information purposes. Nothing contained herein should be considered as investment advice. The terminology and definitions provided on our website derive from third-party sources believed to be reliable and accurate at the time the information was retained. Morris Financial Concepts, Inc. is not responsible for errors or omissions in the material on third party websites and does not necessarily approve of or endorse the information provided. For questions or to report in known material inaccuracies, please contact us.