Understanding Taxes Quiz

Aiden is curious about how the government funds its activities. He asks his teacher, "What is the primary purpose of taxes?"

• To fund public services

• To pay government salaries

• To increase inflation

• To control population

Answer explanation

The primary purpose of taxes is to fund public services, such as education, healthcare, and infrastructure, which benefit society as a whole. Other options do not capture the main role of taxes.

Jeb is reviewing his tax documents for the year. Which tax form should he look at to find his total income and taxes withheld?

• W-4

• W-2

• 1040

• 1099

Answer explanation

The W-2 form is used by employers to report total income earned by an employee and the taxes withheld from their paycheck. It provides essential information for filing income tax returns.

Coral is planning her finances for the year. What is the deadline for her to file her taxes?

• March 15

• April 15

• May 15

• June 1

Answer explanation

The deadline for filing taxes in the United States is April 15 each year. This date is set by the IRS and is the standard deadline for individual tax returns.

Aleena is working as a freelance graphic designer. Which tax form does she need to fill out for her independent contractor work?

• W-4

• W-2

• 1040

• 1099

Answer explanation

Independent contractors and freelancers use the 1099 form to report income earned from their services. Unlike W-2, which is for employees, 1099 is specifically designed for non-employee compensation.

Ryan is reviewing his finances and wants to know: What does a tax deduction do?

• Reduces taxable income

• Directly lowers tax owed

• Increases tax refunds

• Eliminates taxes

Answer explanation

A tax deduction reduces taxable income, which in turn lowers the amount of income that is subject to tax. This can lead to a lower overall tax bill, but it does not directly lower the tax owed or eliminate taxes.

What is an example of discretionary government spending?

• Social Security

• Medicare

• Military

• Medicaid

Answer explanation

Discretionary government spending refers to expenditures that are not mandatory. The military budget is an example of this, as it is determined through annual appropriations, unlike Social Security, Medicare, and Medicaid, which are mandatory programs.

Shalique is reviewing her paycheck and notices that too little tax is withheld. What happens in this scenario?

• You owe taxes

• You get a refund

• No effect

• Government pays you

Answer explanation

If too little tax is withheld from your paycheck, you will owe taxes when you file your return. This means you may have to pay the difference to the government, making 'You owe taxes' the correct answer.

Ary is trying to reduce his tax liability this year. He is considering two options: a tax credit and a tax deduction. Which option would be better for him?

• Tax deduction

• Tax credit

• Neither

• Both are equal

Answer explanation

A tax credit directly reduces the amount of tax owed, while a tax deduction reduces taxable income. Therefore, a tax credit is generally better for reducing tax liability.

Julius just started a new job and needs to fill out some paperwork. What does the W-4 form determine?

• Your total income

• Your tax withholding

• Your tax refund

• Your state tax

Answer explanation

The W-4 form is used to determine your tax withholding, which affects how much tax is taken from your paycheck. It does not directly determine your total income, tax refund, or state tax.

Evan is reviewing his paycheck and notices that too much tax is withheld. What happens?

• You owe taxes

• You get a refund

• You have no taxes

• Nothing changes

Answer explanation

If too much tax is withheld from your paycheck, you will receive a refund when you file your tax return. This means you paid more taxes than you owed, and the excess amount will be returned to you.