Understanding Paycheck Deductions Quiz

What is the term for the amount of money you actually receive after tax withholding and other deductions are taken out of your paycheck?

• Gross income

• Pretax deduction

• Withholding allowance

• Net income

What are the payroll taxes taken from a paycheck used for?

• To fund state and local income tax

• To pay for national programs such as defense

• To provide medical benefits to people age 65 or older

• To provide retirement and disability benefits

What is the total amount of payroll taxes for an employee who earns $1,000 in their paycheck, given the Social Security tax rate of 6.20 percent and Medicare tax rate of 1.45 percent?

• $100.00

• $85.00

• $93.25

• $76.50

What is the purpose of Form W-4: An Employee’s Withholding Allowance Certificate?

• To calculate the total number of allowances claimed

• To report the employee's retirement contributions

• To determine the amount of tax withheld from the paycheck

• To provide information about the employee's gross income

How does the number of withholding allowances impact the amount of federal income tax withheld from a paycheck?

• The amount of tax withheld is fixed regardless of the number of allowances claimed

• As the number of allowances increases, the amount of tax withheld increases

• As the number of allowances increases, the amount of tax withheld decreases

• It has no impact on the amount of tax withheld

What is the purpose of the W-4 form for an employee?

• To report the employee's retirement contributions

• To calculate the total number of allowances claimed

• To determine the amount of tax withheld from the paycheck

• To provide information about the employee's gross income

What is the term for deductions taken from an employee's paycheck that reduce the amount of earnings they need to pay taxes on?

• Gross income

• Withholding allowances

• Net income

• Pretax deductions

What is the net income for an employee who earns $1,500 per paycheck and has the following deductions: Social Security tax of $93.00, Medicare tax of $21.75, income tax of $141.00, and retirement contribution of $75.00?

• $1,300.00

• $1,500.00

• $1,425.75

• $1,169.25

What happens to the tax money withheld from an employee's paycheck?

• It is used to fund the employee's health benefits

• It is sent to the federal and state government

• It is sent to the employee's retirement account

• It is kept by the employer

What is the purpose of the tax revenue collected from paycheck deductions?

• To provide public goods and services for the benefit of the community

• To fund the employee's retirement account

• To pay for the employee's health benefits

• To cover the employer's payroll expenses