Ramsey Chapter 10 Lesson 4 Tax Filing

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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?

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

What is an audit?

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

What does a W-2 form summarize?

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

What is represented by the 1099-MISC form?

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

What is the 1040 form?

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

What does the IRS stand for?

<p>Internal Revenue Service.</p> Signup and view all the answers

What is the Head of Household status?

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

What is a Joint Return?

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

What does FICA stand for?

<p>Federal Insurance Contributions Act.</p> Signup and view all the answers

What is Income Tax Withholding?

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

Flashcards

What is the standard deduction?

A fixed dollar amount to subtract from your income before taxes are calculated.

What is a tax schedule?

A specific tax form used to report particular types of income or deductions.

What are itemized deductions?

A detailed list of eligible expenses claimed to lower your taxable income.

What is a tax credit?

A direct reduction of the amount of tax you owe.

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What is an audit?

An official review of a tax return by the IRS to verify accuracy.

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What does a W-2 form summarize?

Summarizes an employee's annual earnings and withholdings.

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What is represented by the 1099-MISC form?

Reports payments received from miscellaneous income sources.

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What is the 1040 form?

The standard income tax return form filed with the IRS.

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What does the IRS stand for?

Internal Revenue Service.

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What is Head of Household status?

A tax filing status for unmarried taxpayers supporting dependents.

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What is a Joint Return?

Combining income, exemptions, credits, and deductions of a married couple.

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What does FICA stand for?

Federal Insurance Contributions Act.

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What is Income Tax Withholding?

Income tax automatically deducted from an employee's paycheck.

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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.

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