MoneyU Glossary of Terms

MoneyU Glossary of Terms

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Individual U.S. Income tax return; generally required to be filed by April 15 to report income for the previous year. Form 1040 is the long form, which must be used by taxpayers who itemize deductions or have high incomes. Form 1040A is limited to those who have less than $50,000 of taxable income and limited income sources and do not itemize deductions. Form 1040EZ is the easiest to complete, but may be used only by single people claiming only themselves as a personal exemption, with income only from wages, salaries, and tips, and no more than $400 of interest income.

The 1040 form has several "schedules" with which individuals can declare their deductions, adjustments, and other sources of income. The 1040 form has two pages: the first page figures the income and also any adjustments to income; the second page of the 1040 form records taxes due, deductions, credits, and payments already made toward one's tax liability. A 1040 form can be amended by filling out a 1040X form.


401K Plan

A 401K plan is established by your employer as a way for you to save money for your retirement. It's generally funded with money from your paycheck (before it's taxed by the government) and sometimes, from matching contributions from your employer. This total amount is deposited into a mutual fund. That money, plus any future financial growth from investing, isn't taxed until you take the money out.


529 college savings plan

An investment account that provides tax benefits to help accumulate funds for education. It provides tax-free earnings when properly used.

529 prepaid tuition plan

A deposit account that provides tax benefits to help accumulate funds for education. It provides protection against the rising cost of tuition.