Questions and Answers
What explains the difference between income and taxable income?
Income is what a person earns, while taxable income reflects deductions subtracted for relevant expenses.
In addition to federal income tax, many people also pay what?
State income tax.
A federal payroll tax that supports retired workers is known as what?
Social security tax.
Which type of tax funds city programs?
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What types of information does a W-2 form contain? (Select all that apply)
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What does the diagram show about tax revenue?
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If a home is valued at $250,000 and the property tax rate is 2 percent, how much will the owners pay in property taxes?
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Why does the document ask about dependents?
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Property taxes are based on what?
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What is the 1040 form used to collect?
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How much money can be saved by buying a $1,000 television in New Hampshire given Massachusetts has a sales tax of 6 percent?
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What do federal and state taxes shown on a paycheck stub indicate?
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Social security and Medicare are classified as what?
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Most state and local income taxes are either ______.
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Study Notes
Income and Taxable Income
- Income refers to total earnings, while taxable income accounts for deductions related to expenses.
Types of Taxes
- Individuals typically pay both federal and state income taxes.
- Social Security tax is a federal payroll tax that provides benefits for retired workers.
- Local income tax is levied to fund city-specific programs.
W-2 Form Information
- A W-2 form details total earnings and the amount withheld for taxes during the year.
Federal Income Tax Revenue
- Most federal tax revenue is derived from individual income and payroll taxes.
Property Taxes
- Property taxes are calculated based on the assessed value of a property; for a $250,000 property with a 2% tax rate, the tax owed is $5,000.
- The number of dependents claimed can reduce overall tax liability.
Tax Forms and Worksheets
- The 1040 form is utilized for reporting federal taxes.
- Personal allowances worksheets inquire about dependents to help lower taxable income.
Sales Tax Comparisons
- Buying a $1,000 television in New Hampshire (no sales tax) versus Massachusetts (6% sales tax) saves $60.
Paycheck Deductions
- Paycheck stubs indicate the withholding of both federal and state taxes from employee earnings.
Payroll Taxes
- Social Security and Medicare are classified as payroll taxes, funded through employee earnings.
State and Local Taxes
- State and local income taxes are generally structured either as progressive or flat tax systems.
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Description
This quiz covers fundamental concepts of income and taxation, including the definitions of income and taxable income, types of taxes individuals may encounter, and relevant tax forms such as the W-2 and 1040. It emphasizes key aspects such as property taxes and how deductions can affect tax liability.
