taxes test

what are taxes?

mandatory financial charge or levy imposed on an individual or legal entity by the government to support government spending

what is net pay?

the amount of money an employee receives after all deductions have been subtracted from their gross pay

what is gross pay?

the total amount of money an employee earns before taxes and deductions are taken out

what is a tax refund?

reimbursement to taxpayers that overpaid their taxes, often because employers withhold too much of paycheck

what is a dependent?

a qualifying child or relative who relies on you for financial support

what is withholding?

the income an employer takes out of an employee’s paycheck and remits to the federal, state, and/or local governments

when do you start paying taxes for earned/unearned income?

february-april

besides taxes, what other withholdings come out of your paycheck?

medical and dental benefits, 401K retirement plans, and life insurance

when is tax day?

april 15th

when are you required to start filing taxes?

when your income is over the filing requirement

what are the benefits of using tax filing software?

simple questions to guide you, accurate math calculations, can save you money

when would you get a refund on taxes?

when you overpay on your taxes, often due to having employers withhold too much from paychecks

what happens if you work in two different states?

your federal tax return isn’t affected, but you’ll owe different state taxes

what is a W-2 form?

it reports an employee’s income from the prior year and how much tax the employer withheld, is sent out in January

what is a W-4 form?

tells you the employee’s filing status, multiple job adjustments, credits, other income, deductions, and withholdings from employee’s pay

what is a I-9 form?

U.S. department of homeland security form that employers use to verify the identity and employment eligibility of new hires in the U.S.

what is a 1040 form?

it’s what individual taxpayers use to file their taxes with the IRS

how does inflation impact your purchasing power?

it decreases your purchasing power

what are examples of what the government spends out tax dollars on?

roads, public school, government spending, social security, military

formula for taxable income

gross income - deductions

formula for income tax liability

taxable income x tax rate

formula for tax due

income tax liability - tax credits