Taxes and Functions Unit Test

Front

What are common payroll deductions?

Back

Common payroll deductions include federal income taxes, FICA (Federal Insurance Contributions Act), health insurance premiums, and retirement contributions (e.g., 401(k)). Office supplies and equipment are NOT payroll deductions.

Front

How do you calculate net pay?

Back

Net pay is calculated by subtracting all deductions from gross pay. For example, if Kiki earns $300 and has $94 in deductions (401(k) $40, FICA $20, federal taxes $26, healthcare $8), her net pay is $300 - $94 = $206.

Front

What is the total tax due for an income of $195,000?

Back

For an income of $195,000, the total tax due is $36,876.

Front

What is a marginal tax bracket?

Back

A marginal tax bracket is the rate at which the last dollar of income is taxed. For example, if Jorge is in the 22% tax bracket, his marginal tax rate is 22%.

Front

What is an effective tax rate?

Back

The effective tax rate is the average rate at which an individual’s income is taxed, calculated by dividing total tax paid by total income. It is usually lower than the marginal tax rate.

Front

How do you calculate sales tax?

Back

Sales tax is calculated by multiplying the purchase amount by the sales tax rate. For example, if Winston spends $984 and the sales tax is 8.19%, the sales tax is $984 * 0.0819 = $80.69.

Front

What is the total cost including sales tax?

Back

To find the total cost including sales tax, add the sales tax to the original purchase price. For Winston, the total cost is $984 + $80.69 = $1,064.69.

Front

What is FICA?

Back

FICA stands for Federal Insurance Contributions Act, which is a payroll tax that funds Social Security and Medicare.

Front

What is a 401(k) plan?

Back

A 401(k) plan is a retirement savings plan that allows employees to save a portion of their paycheck before taxes are taken out.

Front

What is the difference between gross pay and net pay?

Back

Gross pay is the total amount earned before any deductions, while net pay is the amount received after all deductions are subtracted.