Font size
WorksheetsStudy Guide: Understanding Taxes & Your Pay Stub
Total questions: 53
Worksheet time: 27mins
What are taxes?
Optional payments made to the government by individuals and businesses
Mandatory payments made to the government by individuals and businesses
Payments made only by businesses
Payments made only for healthcare
Which type of tax is deducted from your paycheck?
Sales Tax
Property Tax
Income Tax
Payroll Tax
Fill in the blank: ________ tax is added to the price of goods and services and is seen at checkout in stores.
Sales
Income
Property
Excise
Which type of tax is billed annually or monthly for owning a house or land?
Property Tax
Income Tax
Sales Tax
Excise Tax
Payroll tax is used to fund which programs?
Social Security and Medicare (FICA taxes)
Unemployment insurance and food stamps
Public schools and libraries
Highway construction and maintenance
Which type of government spending is required by law and continues unless changed by Congress?
Discretionary Spending
Mandatory Spending
Who pays taxes?
Anyone who earns an income, including part-time workers and students
People who make purchases (sales tax)
Homeowners and landowners (property tax)
Only full-time workers
What is gross pay?
Total earnings before any deductions
What you actually take home after taxes
Money removed before tax is calculated
Money your employer adds on your behalf
What is net pay?
Total earnings before any deductions
What you actually take home, after taxes and other deductions
Money removed before tax is calculated
Money your employer adds on your behalf
Pre-Tax Deductions are _________?
Money removed before tax is calculated (e.g. health insurance)
Money added after tax is calculated
A type of bonus given to employees
Money deducted after tax is calculated
Employer Contributions are _________.
Money your employer adds on your behalf (e.g. 401(k), insurance)
Taxes you pay to the government
Fees charged by banks for services
Bonuses given for good performance
Federal Income Tax is based on your ________ and tax bracket.
earnings
age
location
marital status
FICA Tax pays for _________
Social Security and Medicare
Unemployment Insurance
State Income Tax
Property Tax
State Income Tax depends on _________.
where you live
your favorite color
the weather
your age
On what date do your earnings start counting for the tax year according to the Tax Cycle (Yearly Timeline)?
Dec 31
Jan 1
October
Late Jan – Feb
According to the Tax Cycle (Yearly Timeline), what forms do you need to fill out anytime you get a job?
W-4 (tax withholding form) and I-9 (eligibility)
W-2 and 1040EZ
1099 and Schedule C
W-2 and 1098-T
What is the last day of the tax year according to the Tax Cycle (Yearly Timeline)?
Dec 31
Jan 1
Mar 31
Jun 30
Employers send you a W-2 form showing how much you earned and paid in taxes during which period?
Jan 1
Dec 31
Late Jan – Feb
October
What is Tax Day according to the Tax Cycle (Yearly Timeline)?
First day your earnings start counting
Last day to file your tax return or request an extension
Deadline to file for those who requested an extension
Last day of the tax year
If you requested an extension, when is the deadline to file your taxes according to the Tax Cycle (Yearly Timeline)?
(a)
Why does understanding taxes matter? It helps you _________.
read your pay stub
bake a cake
ride a bicycle
paint a picture
Which of the following is a reason why understanding taxes matters?
Helps you read your pay stub
Increases your salary
Reduces your expenses
None of the above
Understanding taxes keeps you from being surprised by ________.
deductions
holidays
weather
birthdays
One benefit of understanding taxes is that it encourages _________
financial responsibility
reckless spending
avoiding all payments
ignoring government rules
What is the flat tax rate that applies to all taxable income in Michigan, regardless of income level?
3.5%
4.25%
5.6%
2.4%
Each taxpayer in Michigan can claim a personal exemption of $____, reducing their taxable income.
5,600
4,000
3,500
6,200
Which Michigan city is mentioned as imposing additional local income taxes?
Detroit
Lansing
Ann Arbor
Grand Rapids
What is the local income tax rate for residents in Detroit?
1.2%
2.4%
4.25%
5.6%
What is the local income tax rate for non-residents working in Detroit?
1.2%
2.4%
4.25%
5.6%
Employers withhold state income tax directly from employee paychecks.
True
False
Deductions from Michigan state income tax are based on which of the following?
Gross income
Number of exemptions claimed on the MI-W4 form
Any pre-tax deductions (e.g., retirement contributions)
Federal tax rate
What is sales tax? Sales tax is _________.
A tax added to the price of goods and services at the point of sale
A discount given on all purchases
A fee paid for using public transportation
A charge for opening a bank account
Who pays sales tax? Sales tax is paid by _________?
Consumers (buyers)
Producers (sellers)
Government officials
Bankers
Who collects sales tax? collect sales tax and send it to the government.
Retailers
Customers
Banks
Manufacturers
Where does sales tax go? Sales tax goes to ________ to fund public services.
state and local governments
private companies
foreign governments
individual citizens
What is the Michigan state sales tax rate?
6%
5%
7%
8%
Which of the following items are tax-exempt in Michigan?
Electronics
Prescription medicine
Some groceries
Medical devices
B, C, and D only
What is the role of a W-2 form in the tax filing process?
It reports the amount of sales tax paid by an individual.
It provides a summary of wages and taxes withheld for an employee.
It is used to claim deductions for business expenses.
It is a form used to apply for a tax refund.
Which of the following is an example of a payroll tax?
Sales tax
Social Security tax
Capital gains tax
Estate tax
What is the purpose of withholding taxes from an employee's paycheck?
To ensure employees receive a larger refund at the end of the year
To prepay the employee's income tax liability
To cover the cost of employee benefits
To fund the employer's business operations
How does a payroll tax differ from an income tax?
Payroll tax is only paid by employers, while income tax is paid by employees.
Payroll tax is used to fund specific programs like Social Security, while income tax funds general government operations.
Payroll tax is a flat rate, while income tax is always progressive.
Payroll tax is only applicable to self-employed individuals.
Taxes based on the payroll of a business
payroll
payroll register
payroll taxes
tax base
Payroll taxes consist of income taxes, Social Security, Medicare, and unemployment taxes.
True
False
A federal tax paid for hospital insurance
Medicare tax
Social Security tax
Federal Income tax (FICA)
Tax base
Imagine you're helping Elijah with his first paycheck! Payroll taxes include income taxes, Social Security, Medicare, and unemployment taxes. Is this true?
True
False
What is the role of a W-2 form in the tax filing process?
It reports the amount of sales tax paid by an individual.
It provides a summary of wages and taxes withheld for an employee.
It is used to claim deductions for business expenses.
It is a form used to apply for a tax refund.
Imagine you're helping Elijah with his first paycheck! Payroll taxes include income taxes, Social Security, Medicare, and unemployment taxes. Is this true?
True
False
A federal tax paid for hospital insurance
Medicare tax
Social Security tax
Federal Income tax (FICA)
Tax base
Payroll taxes consist of income taxes, Social Security, Medicare, and unemployment taxes.
True
False
Taxes based on the payroll of a business
payroll
payroll register
payroll taxes
tax base
How does a payroll tax differ from an income tax?
Payroll tax is only paid by employers, while income tax is paid by employees.
Payroll tax is used to fund specific programs like Social Security, while income tax funds general government operations.
Payroll tax is a flat rate, while income tax is always progressive.
Payroll tax is only applicable to self-employed individuals.
What is the purpose of withholding taxes from an employee's paycheck?
To ensure employees receive a larger refund at the end of the year
To prepay the employee's income tax liability
To cover the cost of employee benefits
To fund the employer's business operations
Which of the following is an example of a payroll tax?
Sales tax
Social Security tax
Capital gains tax
Estate tax
