2F: Factors that Impact Income

What is the primary purpose of income tax?

• To fund public services and government operations

• To encourage savings

• To penalize high earners

• To reduce inflation

Which IRS form is typically used by individuals to file their annual income tax return?

• Form 1040

• Form W-2

• Form 1099

• Form 940

What is the difference between gross pay and net pay?

• Gross pay is after taxes, net pay is before taxes

• Gross pay includes bonuses, net pay does not

• Gross pay is before deductions, net pay is after deductions

• Gross pay is the same as net pay

Which of the following is considered a deduction from gross pay?

• Base salary

• Bonus

• FICA

• Gross pay

What does FICA stand for?

• Federal Insurance Contributions Act

• Federal Income Collection Agency

• Financial Investment and Contribution Act

• Federal Insurance and Collection Act

Which tax is specifically designed to ensure that individuals and corporations pay at least a minimum amount of tax?

• Sales tax

• Excise tax

• Alternative minimum tax

• Income tax

How does a bonus typically affect an employee's gross pay?

• It decreases the gross pay

• It has no effect on gross pay

• It increases the gross pay

• It only affects net pay

Which of the following is NOT a type of tax mentioned in the text?

• Income tax

• Property tax

• Excise tax

• Sales tax

What is the primary purpose of Medicare tax?

• To fund retirement benefits

• To provide health insurance for individuals over 65

• To support public education

• To reduce national debt

Which of the following is a simple procedure to calculate net pay?

• Add all deductions to gross pay

• Subtract all deductions from gross pay

• Multiply gross pay by tax rate

• Divide gross pay by number of deductions