Consumer Economics Chapter 10 Test

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Withholdings and deductions are . . .

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 WW-4 estimate?

How much tax you'll owe based on your personal situation.

Every American who earns an income must file a _________ each year.

Federal tax return

When you make ____ money, you will pay _____ in taxes.

More; more

If you work and earn money, you will have to pay taxes.

True

When you buy clothes or check out at the grocery store, you will pay _____________.

Sales tax

A fixed, annual rate of pay that doesn't change by working more or fewer hours is called ____.

salary

When someone says they need to file their taxes, they're talking about filling out a ________.

Federal tax return

What is the main IRS form that most Americans use to file their taxes?

Form 1040

Property tax, inheritance tax, estate tax, and gift tax are all examples of __________.

Wealth tax

There are two general types of taxes. Taxes on the money you _________ and taxes on the money you ___________.

Earn; spend

When you buy specific items like cigarettes, alcohol, airline tickets or gas, you will pay _________.

Excise tax

Renting out property or selling content on a blog are examples of ______________.

Passive income

The deadline for filing your income tax return usually falls on _________.

April 15

Which of the following is most likely to need the help of a tax professional?

Self-employed people

Only a few states have inheritance tax, which . . .

Requires you to pay tax on an asset you receive when someone passes away

Net income is also called your ____________.

take-home pay

When you pay taxes on a purchase, the seller gets to keep that money.

false

You can produce ____________ by buying and selling stocks, bonds, mutual funds, and real estate.

Portfolio/investment income

Those who properly fill out their Form W-4 shouldn't have too much or too little taxes withheld.

true

Using online tax software or hiring a tax professional are both good options depending on your situation.

true

Wealth taxes are often dependent on _________, so it's a good idea to understand the tax rules ___________.

Where you live; in your state

Government deficit spending is a good thing because it lowers the amount of taxes that need to be collected.

false

Consumption tax pays for things everyone gets to enjoy, like . . .

Parks, libraries, and zoos

Getting a big tax refund is not necessarily a good thing.

true

What is the total tax a person or business has to pay called?

tax liabilityAlways keep your filed taxes for at least three years in case the IRS decides to ______ your tax return.

Always keep your filed taxes for at least three years in case the IRS decides to ______ your tax return.

audit

Giving to a nonprofit organization can help lower your taxable income.

true

What can you do to make tax season easier?

To make tax season easier, you can use online tax software, hire a tax professional with the heart of a teacher, file early, and file electronically while using direct deposit.

Why is receiving a large refund not always a good thing?

It is not always a good thing because your tax refund should not be over $100. This means you did not have the correct withholding. Instead of the government holding onto it, you could have invested the money. It isn’t free money, it is yours.

What is the difference between gross and net income?

Gross income is the money you make before any taxes and deductions. Net income is the remaining money after taxes and deductions. It is also called the tax-home pay. Your budget should use the net income.

Why shouldn’t people let tricky tax situations get in the way of being generous?

You shouldn’t let a tricky tax situation get in the way of generosity because generosity should come from a place of love and abundance. If the tax situation is really messy, you can budget for a tax professional to help you do your taxes and find loopholes. Generosity is about giving, and taxes shouldn’t hold you back, especially since there are so many ways to get help.

What are earned, passive, and invested incomes?

Earned income is money you make from working, typically a salary or wages. Passive income is earned from investments like real estate (renting a house) or mutual funds. It is making money from something you own without selling. Invested income is often capital gains from investing. This involves selling for more than what you paid.