Unit 5 Study Guide

What is a W-4 Form used for?

It is a withholding certificate that determines how much pay should be deducted for taxes.

What are exemptions in tax terms?

Situations that keep people or organizations from paying taxes on some or all of their income.

Who is considered a dependent?

A child or relative who relies on someone for support.

What are deductions in relation to taxes?

Expenses that a person can claim to reduce their taxable income.

What defines a Head of Household?

An unmarried person with dependents.

What are premiums?

Payments people make for insurance.

What does health insurance do?

Helps to cover medical care.

What is the Affordable Care Act?

A federal program that provides assistance in finding health insurance.

What is Medicare?

A government-run health insurance program for seniors.

What is Medicaid?

A government-run health insurance program for lower income people.

What are retirement accounts designed for?

Long-term investments intended to pay money to people when they are older and no longer working.

What does it mean if an investment is sheltered?

Investment money that is not taxed.

What are pensions?

Retirement accounts established for workers by their employers.

How does a 401(k) plan work?

It's a retirement plan where money is automatically deducted from paychecks and often matched by employers, taxed only upon withdrawal after retirement.

What is a 403(b) plan?

A retirement plan for public schools and nonprofits; it's an annuity that pays a fixed amount per month.

What is an Individual Retirement Account (IRA)?

A retirement program that can be offered by employers or can be personally invested in.

What distinguishes a Traditional IRA?

Contributions are tax-deductible, but withdrawals are taxed.

What is a ROTH IRA?

Contributions are taxed, but withdrawals after age 59 ½ are tax-free.

What are Flexible Savings Accounts for Healthcare used for?

Money used to pay for medical expenses not covered by health insurance.

What is a 529 Plan?

A savings plan for college expenses.

What are union dues?

Fees paid for membership in a union.

What are involuntary deductions?

Mandatory deductions from a paycheck like FICA.

What are pre-tax deductions?

Deductions that reduce taxable income as they are taken out before taxes.

What are post-tax deductions?

Deductions taken out after taxes, like a ROTH IRA.

What is a surplus in government finances?

When government raises more funds in taxes than it spends.

What defines a deficit?

When government spends more money than it receives through taxes.

What type of spending does Congress control?

Discretionary spending, which accounts for 35% of the federal budget.

What does mandatory spending include?

Items like Social Security, Medicare, interest on federal debt, and entitlement programs.

Why is mandatory spending expected to increase?

Due to the aging population and growing national debt.

What does economic development provide?

Grants, reimbursements, and loans for businesses creating jobs.

What does infrastructure development cover?

Repairing and building roads, airports, bridges, and public transportation.

What does education funding provide?

Money for various educational programs.

What is the purpose of the General Welfare Cooperative Extension Service?

To help with nutrition, health, gardening, conservation, and support for farmers.

What is the role of the Board of Elections?

To efficiently carry out the election process for local counties.

What do emergency management agencies focus on?

Public safety and handling natural disasters.

What do jails and prisons provide?

Housing for those accused or convicted of crimes.

What is tax assessment?

Assessing property value within a county for tax purposes.

What is the purpose of social services?

To support families in crisis, investigate child abuse, and assist with mental illness.

What are taxes primarily used for?

To pay for government goods and services.

What is a public good?

A service that cannot prevent citizens from using it and can be used simultaneously by many.

Give an example of a public assistance program.

Supplemental Nutrition Assistance Program (SNAP), which helps the poor buy food.

What is the purpose of public assistance programs?

To help keep society stable.

What does deregulation mean?

Stopping or decreasing government regulation of an economic activity.

What are two positives of deregulation?

Creates competition and lowers prices.

List four negatives of deregulation.

Less workplace safety, harmful manufacturing practices, unfair labor policies, and civil rights abuses.

What is the purpose of Social Security?

To provide income for individuals who are retired or unable to work.

What does Medicare provide?

Healthcare for individuals receiving Social Security.

What is the FICA tax rate for Social Security and Medicare?

6.2% for Social Security and 1.45% for Medicare.

What are excise taxes?

Taxes on specific products used to pay for the costs of those products or discourage use.

What are estate taxes?

Taxes on the value of a person's estate after they die.

What are corporate taxes?

Taxes placed on business profits.

What is the income tax?

A tax imposed on income earned by individuals.

What is the capital gains tax?

Tax paid on profit from the sale of investments.

What characterizes a progressive tax?

Tax paid at varying rates depending on income level.

What is the gas tax rate for federal taxes?

18.3 cents per gallon for gas and 24.3 cents for diesel.

What is the state income tax rate?

4.99% on wages and other sources of income.

What characterizes a flat tax?

A tax paid at the same rate regardless of income level.

What is the state sales tax rate?

4.75% for state and 2-2.75% for county sales tax.

What is the local tax in NC?

Property tax, used to support local government.

What are some common fees we pay?

Fees for registering a business, civil lawsuits, car registration renewals, camping, and tuition.