Understanding the Basics of Earned Income Credit, Standard

ACC 330 Module One Assignment Template Complete this template by replacing the bracketed text with the relevant information. TermDefinition Earned Income CreditEarned Income Credit can be found on Form 1040 - Line 27a and applied to low-income taxpayers as a "percentage of earned income with a phaseout of the credit at higher earned income amounts" (Cruz, Deschamps, Niswander, Schisler, & Prendergast, 2021, pg. 22). Standard DeductionA taxpayer may choose to file for the standard deductions provided per IRS parameters on Form 1040-line 12a. This is in lieu of itemized deductions, as a taxpayer cannot account for both options. This deduction is also subtracted from the income to determine taxable income (Cruz, Deschamps, Niswander, Schisler, & Prendergast, 2021, pg. 20). Marginal Tax Rate"The marginal tax rate represents the proportion of tax that a taxpayer pays on the last dollar (or, more accurately, thenext dollar) of taxable income" (Cruz, Deschamps, Niswander, Schisler, & Prendergast, 2021, pg. 18). Proportional Rate StructureIn this tax structure, the "taxrateremains the same regardless of the tax base" (Cruz, Deschamps, Niswander, Schisler, & Prendergast, 2021, pg. 17). It can also be referred to as the flat rate and the most common example in the United States are "state and local taxes levied on either property or sales" (Cruz, Deschamps, Niswander, Schisler, & Prendergast, 2021, pg. 17). Form 1040Form 1040 is the legal form distributed by the IRS in which "taxpayers report their income, deductions, tax liability, and other items to the federal government" and may be accompanied by other supporting documents such as Schedules. Taxpayers are legally required to fill this form out yearly and is subject to penalties based on the accuracy of the filing (Cruz, Deschamps, Niswander, Schisler, & Prendergast, 2021, pg. 20).