Questions and Answers
Each year, taxpayers submit a(n) _____ to the IRS with the goal of getting as close to zero as possible.
tax return
Due to recent tax reforms, most tax filers can just take the _____ when filing their taxes.
standard deduction
The taxes you pay for snacks and other items at a gas station are an example of ____.
sales tax
_____ is money you make from working at your job.
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The 12-month period used for reporting financial activity is known as a(n) ____.
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An example of a(n) ____ is the taxes you pay on the fuel you purchase for your car at a gas station.
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If a long-lost relative or friend were to leave you a lot of money, you might have to pay a(n) ____.
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Planning to spend more money than you actually have coming in is called ____.
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_____ is money you make from your investments.
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The IRS may conduct a(n) _____ of a person's tax return to check the accuracy of the figures.
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Which form is used to calculate how much income tax is withheld from your pay?
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_________ is your total pay before taxes and withholdings are taken out.
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What percentage of their income should a self-employed person set aside for taxes?
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What federal payroll tax goes toward Social Security and Medicare?
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The total amount the U.S. owes to other countries and companies is called what?
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April 15 of every year—the usual deadline to file your taxes—is also called what?
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What types of taxes and deductions are factored into the difference between your gross pay and your net pay?
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Study Notes
Tax Returns and Deductions
- Taxpayers submit an annual tax return to the IRS aiming for a zero balance.
- Most filers can utilize the standard deduction due to tax reforms, simplifying the deduction process.
Types of Taxes
- Sales tax is applicable on everyday purchases, such as snacks at gas stations.
- Excise tax is levied on specific goods, like fuel, highlighting targeted taxation practices.
- An inheritance tax may arise when receiving significant assets from a deceased relative or friend.
Income Types
- Earned income refers to money generated from employment.
- Portfolio income is derived from investments, showcasing different income sources.
- Gross income represents total earnings before deductions, essential for tax calculations.
Financial Management
- Deficit spending occurs when planned expenditures exceed actual income, indicating poor financial planning.
IRS Processes
- The IRS may perform an audit on tax returns to verify accuracy, ensuring compliance with tax laws.
Tax Forms and Withholdings
- Form W-4 is crucial for determining the withholding amount from paychecks.
- For self-employed individuals, it is recommended to reserve 25-30% of income for taxes, reflecting the unique tax obligations of self-employment.
Federal Taxes
- The FICA tax includes contributions toward Social Security and Medicare, fundamental in funding these social programs.
- The national debt represents the total financial obligation the U.S. has towards other entities, critical for understanding national financial health.
Tax Deadlines and Payments
- Tax Day, typically April 15, is the deadline for filing tax returns, stressing the importance of timely compliance.
- Various taxes and deductions such as Social Security, Medicare, and federal income tax contribute to the disparity between gross and net pay, crucial for personal financial planning.
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Description
Test your knowledge of Chapter 10 in Personal Finance with this flashcard review. Each card covers essential terms and concepts, helping you understand key financial principles like tax returns and deductions. Perfect for reinforcing your learning before exams!
