Finance Chapter 6 Final Test

Front

Another name for take-home pay is

Back

net pay

Front

Which of the following statements about taxes is true?
Options:
Only the federal government has the right to tax a person's income.
Any taxes collected by the government are returned to the person when they file their income tax return.
Taxes are the major source of revenue for the government.
Taxes can only be taken out of a person's income when they have a full-time job.

Back

Taxes are the major source of revenue for the government.

Front

From the following, select the tax that is matched with its correct explanation: Payroll tax: money deducted from a person's salary that is sent to the government by the employer.

Back

Payroll tax is money deducted from a person's salary that is sent to the government by the employer.

Front

If a person is self-employed and earns $70,000 annually, the person

Back

must pay estimated income taxes every quarter.

Front

The purpose of the IRS is to

Back

enforce tax laws and carry out the federal tax system.

Front

A person completes their federal 1040EZ form and sees that they paid total quarterly estimated taxes of $12,000. But the calculations show that they should have only paid $9,500 in taxes. What will happen if they send the IRS this completed form with the necessary supporting documents?

Back

They will receive a federal tax refund of $2,500.

Front

Juanita and Jessica work at the same company. Each is married and earns $75,000 per year. Juanita is paying more in taxes than Jessica. What two factors can help to explain why this is true?

Back

Juanita does not have any children and does not itemize deductions; Jessica itemizes deductions and has three children.

Front

Which of the following statements about adjusted gross income is true? It will always be higher than a person's gross income., It is the amount used to determine what a person actually has to pay in taxes., It will decrease when a person takes a deduction for real estate taxes, contributes to charities, and interest on a mortgage., It is the amount used to determine if a person gets a refund for paying Social Security taxes.

Back

It is the amount used to determine what a person actually has to pay in taxes.

Front

Which of the following statements about taxes and financial planning is true? It makes sense for everyone to use the services of a tax professional in order to avoid paying additional taxes., It is not really possible to reduce the taxes a person has to pay., Using a tax planner does not really make sense until a person is earning more than $85,000 a year., In most cases it is possible for people to reduce their tax liability by adjusting their financial plan.

Back

In most cases it is possible for people to reduce their tax liability by adjusting their financial plan.

Front

A person looks over their pay stub and sees that in addition to paying state and federal personal income taxes, they are paying other personal taxes such as Social Security and Medicare. They are only age 20, so they are sure that their employer has made a mistake since Social Security and Medicare are for old people, and the money should be returned to them. Are they right?

Back

No. The money they are contributing to Social Security and Medicare is paying the benefits for today's older people.