Budgeting and Taxes - Study Guide

1. Mandatory government spending includes which of the following?

• Infrastructure and science
• Social Security and Medicare
• Healthcare and military
• Education and agriculture

2. What does the term "withholding" mean in reference to your paycheck?

• The amount of your paycheck that you are NOT being taxed on
• How much you are going to owe the government when you file your annual tax return
• How much you earn and includes salary, bonus and commissions
• How much is being taken out of your paycheck for things like taxes, employer sponsored health insurance, and retirement

3. When do you start paying income taxes?

• When you turn 18
• When you get a full-time job (part-time does not count)
• When you make more than the minimum income requirement
• When you are notified by the IRS that you are required to pay federal income taxes

4. Why is it important to be extremely careful when completing your 1040 form?

• Making a mistake will disqualify you from receiving future refunds
• The 1040 form determines whether you owe additional taxes or are entitled to receive a refund from the government
• Completing the 1040 incorrectly will mean the wrong amount of taxes will be withheld from your paychecks going forward
• Mistakes on your 1040 form make you ineligible for employment during the next year

5. If your only income is salary paid by your employer, which of these statements about filing your taxes is true?

• You need to file your tax return by the end of the calendar year (typically December 31st)
• If your employer takes out federal income taxes through payroll withholdings, you do not need to file a tax return
• You must file your tax return by the deadline (typically April 15th of the following year) or request an extension by that date
• You do not need to pay any income taxes until April 15th, so you should ask your company to wait until after that date to withhold any money

6. You are starting your first job and you are asked to complete some paperwork on your first day. Which form will determine how much money is withheld from your paycheck for taxes?

• W-4
• W-2
• I-9
• 1040

7. Which of the following paycheck withholdings puts money into a retirement investment fund that you will manage?

• Social Security
• Medicare
• 401(k) contribution
• Federal income taxes

8. When determining whether you NEED to file a federal tax return, each of these questions matters EXCEPT…

• How much income did you earn this year?
• What type of income did you earn this year?
• What state do you live in?
• Are you claimed as a dependent on anyone else's tax return?

9. Juanita has a part-time job that pays $12/hour and works about 50 hours every month. Her withholdings are Social Security (6.2%), Medicare (1.45%) and federal income tax (10%). What is her approximate net pay?

• $120
• $500
• $600
• $700

10. Which of the statements about this W-4 is TRUE?

• Mr. Khan is filing as married filing jointly
• Mr. Khan is requesting for an additional $50 to be withheld from his paycheck
• Mr. Khan submitted this W-4 two days after he started working at Little Company Inc.
• Mr. Khan’s paycheck will have less money withheld from his paycheck since he is claiming a dependent