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Glossary

bond A bond is a promise to repay the purchaser the original amount of money borrowed, along with interest on a specified date. The purpose is to raise money through borrowing. The federal government, states, cities, corporations, and other types of institutions sell bonds.

capital gain If you sell an asset for more than you paid for it originally, you will have a gain. Examples of assets that could produce a capital gain are: a piece of land, a government bond, or stock in a corporation.

certificate of deposit (CD) This is a type of savings account. You invest your money for a specific time period at a certain interest rate. Report any interest you earn on a CD on Form 40S, line 8c.

charitable checkoff A charitable checkoff is a box on the tax form for charities (groups organized for not-for-profit purposes). Five charities are listed on your Form 40S. You can choose to donate any part of your refund to any or all of those five organizations. Thirteen “other charities” are listed in the tax instruction booklet and on this Web site. You can choose to donate part or all of your Oregon refund to one of the “other charities” (Form 40S, lines 25–30).

credit A dollar for dollar reduction of tax you owe. For example, if you have a $50 credit, it will reduce the amount of tax you owe by $50 (Form 40S, lines 14–17).

deduction An amount that reduces your gross income. Gross income minus subtractions and deductions equals net taxable income. The most common tax deduction for you will be the standard deduction (Form 40S, line 10).

dependent A person who relies on someone else for support. The Internal Revenue Service provides five tests to determine if you qualify as the dependent of your parent/guardian. These five tests are:

    Test 1: Relationship: you are related to or you are a member of the household of your parent/guardian.

    Test 2: Joint return: you do not file a joint return with anyone.

    Test 3: Citizen: You are a citizen of the U.S., Canada, or Mexico; or you are a U.S. resident.

    Test 4: Income:

    • If you are under age 19 at the end of 2004, there is no limit on the amount of your income.
    • If you are under age 24 at the end of 2004 and a full-time student, there is no limit on the amount of your income.
    • For all others, income must be less than $3,100 to qualify as a dependent.

    Test 5: Support: your parent/guardian provides more than 50 percent of your support.

If you are a dependent, check box 7d on Form 40S.

dependent exemption credit Oregon allows a tax credit of $151 in 2004 for each dependent claimed on a tax return. If another person can claim you as a dependent, don’t check the “regular” box on Form 40S, line 6a.

direct deposit You may choose to have your refund directly deposited into your savings or checking account. Direct deposit of your tax refund is done via electronic means between the Oregon State Treasury and your bank (Form 40S, line 33).

dividends A distribution of earnings and profits of a corporation to people who own stock in that corporation. Caution: “dividends” from a savings and loan association or a credit union are really interest (Form 40S, line 8c).

earned income Wages, salaries, tips, and other income you receive for personal services you provide (Form 40S, line 8a).

exemptions Exemptions are claimed on individual income tax returns and represent a minimum amount of income protected from taxation. Exemptions for Oregon are as follows:

  • Personal exemptions: exemptions for a taxpayer and spouse. If someone else can claim you as a dependent, even if they don't, you cannot claim yourself as an exemption (Form 40S, line 6a).
  • Severely disabled exemption: an additional personal exemption for the taxpayer or taxpayer's spouse who is severely disabled. If you qualify for the severely disabled exemption, you may claim this exemption on your return. (Form 40S, line 6a–severely disabled). This is true even if you can be claimed as a dependent by your parent/guardian.
  • Child with a disability: an additional personal exemption for the taxpayer or taxpayer's spouse for dependent children who are age 17 or younger and who are disabled (Form 40S, line 6d).
  • Dependency exemption: exemption for a taxpayer's dependent such as a child (or children) parents, foster children, etc. (Form 40S, line 6c).

federal income tax The amount of money individuals pay each year to the federal government based on their income. Don’t confuse this with Oregon income tax.

federal income tax return The form you use to report your income and deductions to the federal government. The Internal Revenue Service (IRS) uses forms such as Form 1040EZ, Form 1040A, and Form 1040. Don’t confuse these forms with Oregon state income tax returns.

federal tax liability The amount of money you pay to the federal government for the year based on your income (federal Form 1040EZ, line 10; Form 1040A, line 36; or Form 1040, line 56). You can subtract your federal tax liability (up to $4,000) on your Oregon return (Form 40S, line 9). Caution: Don't confuse your federal tax liability with your federal tax withholding. They are not the same.

filing status Determined by your marital status on the last day of each year (December 31). Your tax rate and standard deduction are based on your filing status (Form 40S, boxes 1–5).

Form 1099-INT Summarizes the amount of interest income you received during the year. You should receive a separate Form 1099-INT for each account on which you received more than $10 interest income for the year. This form is mailed to you in January of each year (Form 40S, line 8c).

Form W-2 (Wage and tax statement) A summary of all of your paystubs from each employer for the year. You will receive a separate W-2 from each employer you worked for in 2004. If you don't receive your Form W-2 by February 15, 2005, find out what to do (Form 40S, line 8a).

Form W-2 also tells you how much money was taken out of (withheld from) your paychecks for 2004. Money is withheld for federal income taxes, Oregon income taxes, Social Security taxes, and Medicare taxes.

Form W-4 (Employee's Withholding Allowance Certificate) Tells your employer how much federal and state withholding to take out of your wages. You must complete this form when you start a new job or if you want to change your withholding.

income Generally, money you receive for your labor, your business, or investments you have made (Form 40S, lines 8a–8c).

income tax An amount of money individuals pay each year based on their income (Form 40S, line 13).

interest-bearing checking account A checking account on which you earn money. Most checking accounts are not interest-bearing.

interest income Money a bank (or other organization) pays you when you leave your money on deposit with them (savings account, interest-bearing checking account, certificate of deposit, etc.) (Form 40S, line 8c).

Internal Revenue Service (IRS) Federal revenue agency. The IRS administers federal tax law. Your federal income taxes support services for all Americans. Don’t confuse the IRS with the Oregon Department of Revenue.

Oregon Department of Revenue (DOR) State of Oregon revenue department. DOR administers state tax law and collects state taxes. Your state income taxes support services provided to Oregonians. Don’t confuse DOR with the IRS.

Oregon income tax Amount of money individuals pay each year to the Oregon state government based on their income (Form 40S, line 19).

Oregon income tax return The form you use to report your income and deductions to the state government. The Oregon tax return, Oregon Form 40S (also known as the “short” form), is the form we guide you through on this Web site. Oregon also has Forms 40 (the “long” form), 40P (for part-year residents) and 40N (for nonresidents). Don’t confuse these forms with your federal income tax return.

Oregon tax liability The amount of money you pay to the Oregon state government for the year based on your income (Form 40S, line 19).

paystub You receive a paystub from your employer each time you get a paycheck. It is a summary of how much you were paid and how much you paid in taxes each pay period.

refund An amount of money returned to you. If you had too much tax withheld from your paycheck during the year, the overpayment will be returned to you if you file a tax return (Form 40S, line 23).

savings account A type of account with a bank, a savings and loan association, or a credit union that pays you interest.

standard deduction Reduces your income that is taxed. The amount is based on your filing status, age, earned income, and whether you are blind (Form 40S, line 10). Use this simple worksheet to compute your standard deduction.

Standard deduction worksheet for single dependents

1.

Add box 16 (state wages) from all of your W-2s and enter here.

1. $

______

2.

Additional amount (this is a set amount).

2. $

250

3.

Add lines 1 and 2.

3. $

______

4.

Minimum standard deduction amount.

4. $

800

5.

Enter the larger of line 3 or line 4.

5. $

______

6.

Standard deduction for a single individual.

6. $

1,720

7.

Enter the smaller of line 5 or line 6.

7. $

______

8.

If you are blind, enter $1,200. If you are not blind, enter -0-.

8. $

______

9.

Add lines 7 and 8 and enter the total here. This is your standard deduction. Enter this amount on Form 40S, line 10.

9. $

______

tax return The form you use to report your income and deductions to the government. You will most likely need an Oregon income tax return and a federal income tax return.

tax to pay The amount of money you need to pay when you file your tax return. If you have tax to pay, you did not have enough tax withheld from your paycheck during the year (Form 40S, line 24).

taxable income Amount of money on which you are taxed. (Form 40S, line 12.)

unearned income Income that is not earned income. Examples of unearned income include interest, dividends, welfare benefits, Social Security, alimony, and child support.

unemployment benefits Benefits paid through governmental and nongovernmental plans to certain people who are out of work (Form 40S, line 8b).

withholding The amount of money your employer takes out of your paycheck (your wages) for items such as state and federal income tax, Medicare, and Social Security. For your Oregon tax return, you need only the Oregon state income tax withheld (Form W-2(s), box 17; and Form 40S, line 20).


Where Tax Dollars Go

Common Questions

Glossary

Form W-4 Information

Parent and Teacher Information

Test Scenarios for Students

Understanding Federal Taxes

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