Taxes & Fundamentals Unit 1 Test Review

Each of these is a common payroll deduction EXCEPT...

• Office supplies and equipment

• Federal income taxes

• FICA

• Health insurance plan

Answer explanation

Office supplies and equipment are not payroll deductions; they are typically business expenses. In contrast, federal income taxes, FICA, and health insurance are standard deductions from employee paychecks.

• $206

• $254

• $300

• $394

Answer explanation

Kiki's gross pay is 15 hours x $20/hour = $300. Total withholdings are $40 + $20 + $26 + $8 = $94. Net pay is $300 - $94 = $206, which is the correct answer.

Tags

CCSS.6.NS.B.3

Which expenditures make up the greatest share of state spending?

• Education and health care

• Transportation and corrections

• Low-income assistance and pensions

• Environmental programs and parks

Answer explanation

Education and health care typically account for the largest portion of state budgets, as they encompass significant funding for schools, universities, hospitals, and health services, reflecting their priority in public spending.

4. Lamar made $92,000 as a data analyst his first year out of college. He calculated his above-the-line deductions to be $5,500, his itemized deductions to be $7,000, and the standard deduction is $12,950. What deductions is Lamar allowed to take that will minimize his taxes owed?

• He can take all three for $25,450 in deductions

Answer explanation

Lamar can only take the higher of his itemized deductions ($7,000) or the standard deduction ($12,950). Therefore, he should take the above-the-line deduction ($5,500) and the standard deduction for a total of $18,450.

Tags

CCSS.7.NS.A.1D

• Has to pay $177 in taxes owed

• Will receive a refund of $177

• Will pay $177 less in taxes next year since she overpaid this year

• Should speak to her employer to get the $177 in extra taxes that they withheld

Answer explanation

Maricela owes $2,493 in taxes but had $2,670 withheld. The difference is $177, meaning she overpaid and will receive a refund of that amount.

Tags

CCSS.7.NS.A.1C

Which statement best describes the difference between being paid a wage versus being paid a salary?

• 1. A wage is an hourly rate below $20 per hour, while a salary is an hourly rate above $20 per hour

• A wage is paid based on how many hours you work, while a salary is a fixed amount paid regardless of the number of hours

• A wage is paid every two weeks, while a salary is paid monthly

• A wage is paid to part-time employees, while a salary is paid to full-time employees

Answer explanation

The correct choice highlights that a wage is based on hours worked, while a salary is a fixed amount, regardless of hours. This distinction is key in understanding how compensation structures differ.

Who should consider completing a W-4 form?

• Aaliyah, who wants to enroll in her company’s 401(k) program for the first time

• Bruno, who just adopted a baby and wants to adjust his tax withholdings

• Carter, who is considering a career change and wants to update his resume

• Denise, who doesn’t like her company’s health insurance plan options

Answer explanation

Bruno should complete a W-4 form to adjust his tax withholdings after adopting a baby, as this change affects his tax situation. The other options do not relate to tax withholding adjustments.

Which of the following is true about state taxes?

• The federal government determines state tax rates

• States can levy property taxes and sales taxes, but not income taxes

• Sales tax rates are the same in all states, but income tax rates are different

• The largest state programs funded by state taxes are education and healthcare

Answer explanation

The correct choice highlights that state taxes primarily fund education and healthcare programs, which are indeed the largest expenditures for most states, unlike the other options that misrepresent state tax structures.

Payroll taxes are different from income taxes in all of the following ways, EXCEPT...

• a. Payroll taxes are regressive, while income taxes are progressive

• b. Payroll taxes are based on your wages and salary, while income taxes are based on all your forms of income

• c. Payroll taxes fund the Social Security and Medicare programs, while income taxes fund government programs more broadly

• d. Payroll tax rates scale upward with income, while income taxes are a flat rate across all earning levels

Answer explanation

Choice d is correct because payroll tax rates are generally flat up to a certain income level, while income taxes are progressive, meaning they increase with higher income levels.

The graph shows a hypothetical tax rate as a function of income. Which of the following statements about the graph is true?

• The tax is progressive

• The tax is regressive

• The tax is proportional

• The tax collects the same dollar amount from all earners

Answer explanation

The tax is proportional because it applies the same percentage rate to all income levels, meaning that as income increases, the tax amount increases at a constant rate.

Tags

CCSS.8.EE.B.5