BSAD Test 2

The text lists these companies as the two most popular providers of online tax software.

...H&R Block and TurboTax

What is the standard deduction?

A set amount on which no taxes paid -EX: As of 2014, single people receive a standard deduction of 6,200....old and blind people receive more

What is the annual percentage rate (APR)?

APR: is the percentage cost of credit on a yearly basis •APR is your key to comparing costs, regardless of the amount of credit or how much time you have to repay it.

How many states do not have a state Income tax?

All but seven( Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming).....in most states the tax rate ranges from 1 to 10 percent

What is the difference between the marginal income tax rate and the average tax rate?

Average tax rate is based on the total tax due Marginal Tax rate: the rate used to calculated tax on the last( and next) dollar of taxable income

4.) How does a rent to own center work?

Rent-to-own: is defined as stores that lease products to consumers who can own the item if they complete a certain number of monthly or weekly payments

. Debt-to-income ratio. What is the general rule of thumb here?

•Calculated by dividing your monthly debt payments by your net monthly income •Experts suggest that you spend no more than 20% of your net income on consumer credit payments....20% is the max but less is even better

4. What is a cash advance?

•Is a loan billed to your credit card, you can obtain a cash advance with your credit card at a bank or an ATM

. What is the definition of liquidity?

•Liquidity: allows you to withdraw your money on short notice without a loss of value or fees

Close-end credit

One-time loans that the borrower pays back in a specified period of time and in payments of equal amounts

2. What are the 4 types of taxes?

Sales Tax Excise Tax: imposed by federal and state government on specific goods and services, such as gas, cigs, alc. Real Estate Property tax: based on alue of land and buildings Estate Tax: imposed on the value of a persons property at time of death inheritance tax: levie on the value of property bequeathed by a deceased person

Disadvantages of Credit

• Temptation to overspend • Mis-use can lead to long-term financial problems, damage family relationships • Paying for purchases over a period of time is more costly than paying for them with cash

What is the annual percentage yield? How does it work?

•Annual Percent Yield: as the percentage rate expressing the total amount of interest that would be received on a 100$ deposit based on the annual rate and frequency of compounding for a 365-day period. APY reflects the amount of interest a saver should expect to earn

What should you do to combat data theft?

•Asking your bank or credit card issuer to send you a new card with a new number is the best way to nip potential theft •What if I decide to not get a new card? Keep close tabs on your bank or credit card account, log in daily for the first couple months •You can put a freeze on your credit reports as a preventive measure.

8. What does compounding mean?

•Compound: refers to interest that is earned on previously earned interest

8. How can you improve your credit score?

•Get copies of your credit report •Pay your bills on time •Understand how your credit score is determined •Learn the legal steps to take to improve your credit report •Beware of credit-repair scams

What are the 4 frequent mistakes when managing daily money needs?

•Overspending because of impulse buying and overusing credit •Having insufficient liquid assets to pay current bills •Using savings or borrowing to pay for current expenses •Failing to put unneeded funds in an interest-earning savings account or investment plan

Advantages credit.

Advantages: •Permit the purchase of goods even when funds are low •Retailers will accept returns without a receipt •Provide shopping conveniences •Safe: shopping without a lot of cash •50 day float time: the time lag between the purchase and when the lender deducts the balance from your account •Accidental death insurance...up to 250k •Auto rental collision damage...up to 50k •Roadside assistance

What does FICO stand for and what are FICO Scores?

Fair Issac Corporation •FICO scores: a number generally between 350 and 850 that rates how risky a borrower is. The higher score, the less risk you pose to creditors.

open-end credit

A lie of credit in which loans are made on a continuous basis and the borrower is billed periodically for at least partial payment

Who must file an income tax return

Every citizen or resident of the United States and Every US citizen who is a resident of Puerto Rico is required to file a federal income tax return if his or her income is above a certain amount

3. What is Adjusted Gross Income? How is it computed?

Gross income after certain deductions have been made - used to compute various income tax deductions,such as medical xpenses

What is a money market fund?

Money Market Fund: a savings-investment plan offered by investment companies, with earnings based on investments in various short-term financial instruments

1. What is Tax Freedom Day?

Tax Freedom day came in Mid-April. This means that the time that elapsed from Jan 1 until mid-April represents the portion of the year people work to pay their taxes

6. What is income tax withholding?

The withhold amount is based on the number of exemptions and the expected deductions claimed EX: A married person with children would have less withheld than a single person with the same salary, since the married person will owe less tax Exemption: is a deduction from adjusted gross income for yourself, your spouse, and qualified dependents

6. What is a certificate of deposit? How does it differ from a regular savings account?

•Certificate of Deposit: is a savings plan requiring that a certain amount be left on deposit for a stated time period(ranging from 30 days to 5 years or more) to earn a specific rate of return •Different because most institutions impose a penalty for early withdrawal

What does co-signing a loan mean

•Co-signing a loan means that you agree to be responsible for loan payments if the other party fails to make them. •If you co-sign a loan and the borrower does not pay the debt, you may have to pay up to the full amount of the debt as well as any late fees or collection costs.

What are Credit Reports & Credit Bureaus?

•Credit reports are records of your complete credit history.....your records are collected and maintained by credit bureaus •Credit Bureaus: is an agency that collects information on how promptly people and businesses pay their bills. The three major Credit Bureaus: Experian, TransUnion, and Equifax

What is a debit card and what is a prepaid debit card?

•Debit Card: or Cash Card, activates ATM transitions is also used for purchases. A debit card contrasts with a credit card, since you are spending your own funds rather than borrowing addition money. •Prepaid Debit Card: fastest growing payment method, "Loading" prepaid debit cards may occur by cash, check, direct deposit, online transfer.

What does FDIC stand for? How much does it insure per depositor per financial institution?

•Federal Deposit Insurance Corporation •Up to 250,000 per depositor per insured financial institution

5.) What is a payday loan? How does it work?

•Payday loan: Referred to as Cash Advances, Check advance loan, postdated check loans, •Desperate borrowers pay annual interest rates of as much as 780 percent and more to obtain needed cash from payday loan companies. Most common it is workers who become trapped by debts or poor financial decisions

How does the minimum monthly payment work?

•This is the smallest amount you can pay and remain a borrower in good standing lenders will often encourage you to make the minimum payment because it will take longer to pay the loan off.