Basics of Taxes
What is the difference between "Gross Pay" and "Net Pay"?
Gross Pay is the total money earned before deductions; Net Pay is the "take-home" pay after taxes and deductions are removed.
At what specific point in employment do you fill out a W-4 form?
When you are hired/start a new job
By what deadline date must your employer send to you your W-2 form each year?
January 31st
What is the primary purpose of Form 1040?
To calculate your actual federal income tax liability and determine if you get a refund or owe money.
Why is a tax refund not "free money" from the government?
It is an interest-free loan you gave the government by letting them over-withhold your pay.
Which federal agency is responsible for collecting taxes and enforcing tax laws?
The IRS (Internal Revenue Service).
What is the main purpose of a W-4 form?
To tell your employer how much federal income tax to withhold from your paycheck.
Who creates and sends the W-2 form to you?
Your employer.
What is a "Standard Deduction"?
A fixed dollar amount that reduces the amount of income you can be taxed on.
True or False: If your parents claim you as a dependent on their taxes, you cannot file your own tax return. Explain your answer.
False. You can still file your own tax return to claim a refund; you simply must check the box stating that someone else can claim you as a dependent.
What is the deadline day to file your federal tax return in a normal calendar year?
April 15th
If you want more money taken out of your paycheck for taxes so you don't owe later, what should you adjust on your W-4?
Request an additional withholding amount (Step 4c of the form).
What information does Box 1 on your W-2 provide?
Your total taxable wages, salaries, or tips earned at that job for the year.
If your total tax liability is $1,200 but you paid $1,500 through paycheck withholdings, what will you receive from the IRS?
A tax refund of $300.
What information do you need from your W-2 to put on Line 1z (Wages, salaries, tips) of Form 1040?
The amount listed in Box 1 of your W-2
What happens if you do not file your taxes on time?
You may face late-filing or late-payment penalties and interest charges
Under what condition can a teenager legally write "Exempt" on their W-4 form?
If they earned less than the standard deduction threshold for that tax year and expect to owe zero income tax.
What information does Box 2 on your W-2 provide?
The total amount of federal income tax withheld from your paychecks over the year.
If your total tax liability is $800 but your employer only withheld $600 from your paychecks, what is your financial obligation to the IRS?
You owe the IRS $200
Name two pieces of personal identification information required at the top of Form 1040.
Your Name and Social Security Number (SSN).
What does the acronym "FICA" stand for on your paycheck stub?
Federal Insurance Contributions Act (funds Social Security and Medicare).
Who fills out the W-4: the employer or the employee?
The employee
If you work three different jobs in one year, how many W-2 forms should you expect to receive and from whom?
Three (one from each employer)
What is the only way to get back taxes that were mistakenly or unnecessarily withheld from your paycheck?
You must file a tax return Form 1040.
Why should you keep copies of your W-2s and tax returns for at least 3 years after filing?
To provide proof of income or payment in case of an IRS audit or when applying for financial milestones like student loans or mortgages.