Ramsey Chapter 10 Lesson 4 Tax Filing

Questions and Answers

What is the standard deduction?

A tax credit available for all taxpayers

The total amount of taxable income

A form used exclusively by employers

The dollar amount people can subtract from their income before the tax is calculated (correct)

What is a tax schedule?

A special tax form to report certain types of income or deductions.

What are itemized deductions?

A list of all eligible expenses that can be claimed to decrease taxable income.

What is a tax credit?

An amount of money a taxpayer can subtract from the taxes they owe. Signup and view all the answers

What is an audit?

An official IRS inspection of a tax return to make sure the income and deductions are accurate. Signup and view all the answers

What does a W-2 form summarize?

An employee's earnings and withholdings for the year sent to the taxpayer by the employer. Signup and view all the answers

What is represented by the 1099-MISC form?

Shows the sum of payments received from miscellaneous income (outside regular job). Signup and view all the answers

What is the 1040 form?

An income tax return form filled out by an individual and filed with the IRS. Signup and view all the answers

What does the IRS stand for?

Internal Revenue Service. Signup and view all the answers

What is the Head of Household status?

Special status for unmarried taxpayers who support other people besides themselves and their children. Signup and view all the answers

What is a Joint Return?

A return combining the income, exemptions, credits, and deductions of a husband and wife. Signup and view all the answers

What does FICA stand for?

Federal Insurance Contributions Act. Signup and view all the answers

What is Income Tax Withholding?

Income tax deducted from an employee's gross pay. Signup and view all the answers

Study Notes

Key Tax Terms and Definitions

Standard Deduction: A fixed dollar amount subtracted from total income, reducing taxable income.
Tax Schedule: A specific form for reporting various income types or deductions for tax purposes.
Itemized Deductions: A detailed list of deductible expenses that lower taxable income, offering potential for a larger tax benefit compared to the standard deduction.
Tax Credit: A direct reduction in the amount of tax owed, resulting in overall tax savings for the taxpayer.

Tax Forms and Their Purposes

W-2 Form: Summarizes an employee's total earnings and tax withholdings for the year, provided by the employer to the employee for filing taxes.
1099-MISC Form: Reports miscellaneous income received outside of traditional employment, detailing non-employee compensation.
1040 Form: Primary income tax return form for individuals to report income details and calculate taxes owed for the year.

Tax Administration and Processes

IRS (Internal Revenue Service): The federal agency tasked with overseeing tax collection and enforcement, ensuring compliance with tax laws.
Audit: A rigorous examination by the IRS assessing the accuracy of a taxpayer's reported income and deductions.

Tax Filing Statuses

Head of Household: A specific filing status for unmarried individuals supporting others, allowing for potential tax advantages.
Joint Return: A tax return that combines the financial details of married couples, offering shared credits and deductions.

Employment Tax Information

FICA: A mandatory payroll tax shared between employers and employees, funding Social Security and Medicare programs.
Income Tax Withholding: The practice of deducting estimated income tax from an employee's paycheck, ensuring tax is prepaid throughout the year.

Description

This quiz covers key terms related to filing income taxes as outlined in Chapter 10, Lesson 4 of the Ramsey textbook. It includes important concepts such as standard deduction, tax schedule, and itemized deductions, helping you understand how to manage your taxes effectively.