Tax Basics
The purpose of the Internal Revenue Services (IRS)
What is to enforce the tax laws enacted by Congress & collect the taxes?
The difference between Social Security & Medicare
What is Social Security provides payments to eligible retirees & disabled people, & Medicare provides health care coverage to mostly older Americans & some younger disabled people?
A capital gain is ___. Provide an example of a specific capital gain.
What is capital gains occur when you sell an asset for more than you paid for it? Example?
It is important to know the difference between gross pay & net pay because __.
What is because net pay is what is available to you to spend, save, & invest?
When you pay $1.05 for a $1 item at a convenience store, you are paying ___ tax.
What is sales tax?
The difference between gross pay & net pay
What is net pay is equal to gross pay minus the deductions?
The agency that administers the federal tax laws
What is the Internal Revenue Service (IRS)?
Factors that make tax rules so complicated
What is the various rules designed to encourage certain behaviors that have evolved over the years?
Some types of payments you might receive that would not be included in gross income
What are insurance reimbursements, child support payments, & moving expenses paid by your employer?
An example of how one person might be eligible for more than one filing status
What is a married person could file a joint return with their spouse or file as "married filing separately?"
___ pay taxes.
What is individuals & businesses?
The purpose of a tax return
What is to formally report your tax information to the IRS?
Brief description of how your filing status is determined
What is in most cases the IRS determines your filing status, but in come cases you may choose the filing status that provides you with the lowest tax liability?
The federal government allows certain itemized deductions because ___.
What is the federal government wants to encourage certain behaviors like charitable contributions?
A standard deduction ___.
What is a fixed amount that all people are allowed to deduct for tax purposes?
One way FICA taxes differ from the federal income tax
What is part of FICA withholdings are capped & not withheld above certain income levels?
Two programs funded by FICA
What are Social Security, Medicare, & Medicaid?
The difference between gross income and adjusted gross income
What is adjusted gross income is calculated by reducing gross income by certain allowable deductions?
It is important to understand the tax consequences of your financial decisions because ___.
What is Corbin's gross income for 2022 if his salary is $21,050 & he receives $420 in interest income for the year?
What is $21,050 + $420 = $21,470?
Who is likely to pay lower taxes for the same level of income: a homeowner who pays $1,000/month on a mortgage loan or a renter who pays $1,000/month in rent?
Who is the homeowner because mortgage interest is tax deductible?
Amber's starting salary for her new job will be $35,500/year. How much will she pay to the Social Security system for her first year assuming total FICA withholdings of 7.65%?
What is $35,500 x 0.0765 = $2,715.75?
Hiring a tax advisor might be a good investment because ___.
What is because tax codes are very complex & a good tax advisor can save you money because of their knowledge?
Samantha's employer withheld $4,245 from her paycheck for federal taxes. After calculating her tax liability, she discovered she will only have to pay $3,211 this year. Will she get a tax refund &, if so, how much?
What is yes, the refund will be $4,245 - $3,211 = $1,034?
Joseph's standard deduction filing single is $5,800 for 2020. However, he paid $6,200 in mortgage interest & contributed $1,100 to charity. Should Joseph itemize or take his standard deduction? Explain.
What is Joseph should itemize because his itemized deductions of $6,200 + $1,100 = $7,300, which is larger than his standard deduction of $5,800.