Podcast
Questions and Answers
What type of income is earned from personal services?
What type of income is earned from personal services?
- Unearned income
- Taxable income
- Earned income (correct)
- Gross income
What is the total gross income of Mary Moore?
What is the total gross income of Mary Moore?
- $95,750 (correct)
- $94,250
- $95,000
- $750
What is an example of unearned income?
What is an example of unearned income?
- Tips from a restaurant
- Salary from a local bank
- Interest from a certificate of deposit (correct)
- Bonuses from a job
What type of income includes social security benefits?
What type of income includes social security benefits?
What is the main difference between earned and unearned income?
What is the main difference between earned and unearned income?
What is included in taxable income?
What is included in taxable income?
What is the definition of gross income?
What is the definition of gross income?
Who has the legal right to receive social security benefits?
Who has the legal right to receive social security benefits?
What is included in the gross income of the recipient?
What is included in the gross income of the recipient?
What is the classification of dividends that must meet certain requirements and are taxed at lower capital gain rates?
What is the classification of dividends that must meet certain requirements and are taxed at lower capital gain rates?
What is the term for an amount received for the use of money that is to be repaid in full at a specified time or on demand?
What is the term for an amount received for the use of money that is to be repaid in full at a specified time or on demand?
What type of income is a fixed sum payable to a person at specific intervals for a specific period of time or for life?
What type of income is a fixed sum payable to a person at specific intervals for a specific period of time or for life?
What type of income is not taxable as ordinary income?
What type of income is not taxable as ordinary income?
What is not considered a true dividend for tax purposes?
What is not considered a true dividend for tax purposes?
What is the term for a person who has died?
What is the term for a person who has died?
What is included in gross income, but not earned income?
What is included in gross income, but not earned income?
What is the main difference between the wages subject to Social Security tax and those subject to Medicare tax?
What is the main difference between the wages subject to Social Security tax and those subject to Medicare tax?
What is the purpose of Box 6 on the W-2 form?
What is the purpose of Box 6 on the W-2 form?
What type of benefits are typically entered in Box 10 of the W-2 form?
What type of benefits are typically entered in Box 10 of the W-2 form?
Why might an employee have a portion of computed tips allocated to them in Box 8?
Why might an employee have a portion of computed tips allocated to them in Box 8?
What is the additional Medicare tax rate withheld from wages exceeding a certain threshold?
What is the additional Medicare tax rate withheld from wages exceeding a certain threshold?
What is the purpose of Box 7 on the W-2 form?
What is the purpose of Box 7 on the W-2 form?
What type of retirement plan is reported in Box 11 of the W-2 form?
What type of retirement plan is reported in Box 11 of the W-2 form?
How are tips reported on the W-2 form if the employee's wages are insufficient to collect the required Social Security tax?
How are tips reported on the W-2 form if the employee's wages are insufficient to collect the required Social Security tax?
Study Notes
Income
- Income includes money received for the investment of money or other property, such as interest, dividends, capital gains, rents, and royalties, also known as "investment income."
- It also includes pensions, alimony, unemployment compensation, social security benefits, and other income that is not from performing services.
Earned vs. Unearned Income
- Earned income: income from personal services, including wages, tips, bonuses, and self-employment income.
- Unearned income: taxable income other than that received for services performed, including interest, dividends, and royalties.
Social Security Benefits
- Social security benefits may be included in taxable income.
- Benefits are included in the taxable income of the person who has the legal right to receive the benefits.
Income Examples
- Mary Moore's $95,000 salary is earned income, while her $750 interest from a certificate of deposit is unearned income.
- Total gross income is the sum of earned and unearned income.
Tax Terms
- Alimony payments: payments made by one spouse to the other spouse or former spouse under a written separation or divorce instrument.
- Annuity: a fixed sum payable to a person at specific intervals for a specific period of time or for life.
- Dividend: a stockholder's share of the profits of a corporation, classified as either ordinary or qualified dividends.
- Interest received: an amount received for the use of money that is to be repaid in full at a specified time or on demand.
Tax Forms
- Box 6: Medicare tax withheld, including the total amount withheld for both Medicare tax and additional Medicare tax.
- Box 7: Social Security tips, including all tips reported by the employee, even if the employee's wages were insufficient to collect the required Social Security tax on the tips.
- Box 8: Allocated tips, including amounts allocated to employees of food or beverage establishments, which may be taxable but are not included in boxes 1, 3, 5, or 7.
- Box 10: Dependent care benefits, usually tax-free benefits provided by employers to help employees pay for child and dependent care expenses.
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Description
This quiz covers the different types of income, including investment income, pensions, alimony, and other sources of income.
