Questions and Answers
What are withholdings and deductions?
Expenses that are taken out of your paycheck
The tax on the purchase of goods or services is called _____________.
Consumption tax
The money you earn hourly for your time and effort at work is called your _____________.
Wages
What does the Form W-4 estimate?
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Every American who earns an income must file a _________ each year.
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When you make ____ money, you will pay _____ in taxes.
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If you work and earn money, you will have to pay taxes.
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When you buy clothes or check out at the grocery store, you will pay _____________.
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A fixed, annual rate of pay that doesn't change by working more or fewer hours is called ____.
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When someone says they need to file their taxes, they're talking about filling out a ________.
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What is the main IRS form that most Americans use to file their taxes?
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Property tax, inheritance tax, estate tax, and gift tax are all examples of __________.
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There are two general types of taxes. Taxes on the money you _________ and taxes on the money you ___________.
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When you buy specific items like cigarettes, alcohol, airline tickets or gas, you will pay _________.
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Renting out property or selling content on a blog are examples of ______________.
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The deadline for filing your income tax return usually falls on _________.
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Which individuals are most likely to need help from a tax professional?
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Only a few states have inheritance tax.
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Net income is also called your _________.
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When you pay taxes on a purchase, the seller gets to keep that money.
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You can produce ____________ by buying and selling stocks, bonds, mutual funds, and real estate.
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Those who properly fill out their Form W-4 shouldn't have too much or too little taxes withheld.
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Using online tax software or hiring a tax professional are both good options depending on your situation.
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Wealth taxes are often dependent on _________, so it's a good idea to understand the tax rules ___________.
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Government deficit spending is a good thing because it lowers the amount of taxes that need to be collected.
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Consumption tax pays for things everyone gets to enjoy, like...
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Getting a big tax refund is not necessarily a good thing.
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What is the total tax a person or business has to pay called?
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Always keep your filed taxes for at least three years in case the IRS decides to ______ your tax return.
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Giving to a nonprofit organization can help lower your taxable income.
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Each year, taxpayers submit a _________ to the IRS with the goal of getting as close to zero as possible.
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Due to the 2018 tax reforms, most tax filers can just take the __________ when filing their taxes.
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The taxes you pay for snacks and other items at a gas station are an example of ________.
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_______ 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 _________.
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An example of an __________ 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 an ___________
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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 an ___________ 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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What is the total amount the U.S. owes to other countries and companies called?
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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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What's the difference between gross pay and net pay?
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Study Notes
Key Tax Terms
- Withholdings and Deductions: Expenses deducted from paychecks.
- Consumption Tax: Tax on goods or services purchased.
- Wages: Hourly earnings from work.
- Federal Tax Return: Required annual filing for all income-earning Americans.
- Tax Liability: Total taxes owed by individuals or businesses.
Tax Forms and Filing
- Form W-4: Estimates required tax based on individual circumstances.
- Form 1040: The main IRS form used for filing taxes.
- Tax Day: April 15, the standard deadline to file income tax returns.
Types of Income and Taxes
- Salary: Fixed annual pay unaffected by hours worked.
- Net Income: Also known as take-home pay; income after taxes and deductions.
- Earned Income: Money received from employment.
- Portfolio/Investment Income: Earnings from investments such as stocks and real estate.
Tax Concepts
- Sales Tax: Tax paid on retail purchases, such as clothing and groceries.
- Excise Tax: Specific taxes on products like alcohol and tobacco.
- Wealth Taxes: Include property tax, inheritance tax, estate tax, and gift tax.
Tax Responsibilities and Reporting
- Tax Return Purpose: Citizens aim to accurately report to the IRS and avoid over- or under-withholding.
- Audits: The IRS may audit tax returns to verify accuracy.
- Deficit Spending: Spending more than earned, potentially leading to government debt.
Special Considerations
- Self-Employed Tax Assistance: Individuals working for themselves often need professional tax help.
- Tax Refunds: A large refund isn’t necessarily beneficial, as it may indicate overpayment.
- State Tax Nuances: Tax laws vary by state, so it's important to understand local regulations.
Deductions and Exemptions
- Standard Deduction: Simplifies tax filing by allowing taxpayers to take a fixed deduction.
- Tax-Deductible Donations: Contributions to non-profit organizations can reduce taxable income.
Important Percentages
- Self-Employment Tax Setting: It’s advisable for the self-employed to set aside 25-30% of income for taxes.
Economic Concepts
- National Debt: Total money owed by the U.S. to lenders, including other countries and institutions.
- Fiscal Year: A 12-month accounting period for financial reporting.
Studying That Suits You
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Description
Test your understanding of financial terminology with these flashcards from Chapter 10 of the Ramsey Classroom curriculum. Learn key concepts such as withholdings, deductions, consumption tax, and wages to enhance your financial literacy.
