Chapter 2- Business

Overtime pay is typically_______________ times the regular pay rate.

1 1/2

Form________________________ is a short tax return form designed for single and joint filers with no dependents or itemized deductions.

1040EZ

Katrina bought new shoes for $55.00, jeans for $29.99, and a new blouse for $27.79. Sales tax in her area is 7 percent. What was the total charge for her purchases?

120.67

During the year, Justin received gross wages of $30,800 reported on his Form W-2 and taxable interest of $230 reported on a Form 1099-INT. He can claim one exemption (assume $10,150 per exemption). What will be his taxable income reported on line 6 of Form 1040-EZ?

20,880

A salesperson receives a base salary of $1,200 per month plus a commission of 6 percent on each sale. The following sales were made this month: Sale 1 $6,500 Sale 2 $10,320Sale 3 $700Sale 4 $1,180Sale 5 $29,000 Calculate this month's total earnings.

4062

Michael worked 42 hours last week. His regular pay is $10.00 per hour. He is paid 1 1/2 times his regular pay for overtime hours (in excess of 40 hours). What was his gross pay?

430

Bonita worked 48 hours last week. Her hourly rate is $12.50. She is paid 1 1/2 times her regular rate for overtime hours. She has the following deductions taken from her gross earnings: ∙ federal income tax withheld at the rate of 10%∙ Social Security tax withheld at the rate of 6.2%∙ Medicare tax withheld at the rate of 1.45%∙ health insurance premiums of $25.00 What is Bonita's net pay?

510.27

Explain the difference between direct taxes and indirect taxes and provide two examples of each type.

Direct taxes are when you pay taxes and receive benefits as a taxpayer and also people who don't pay; for example public goods like police protection and public education are direct benefits. Indirect means you benefit when others receive government assistance. Examples of this are government services and free vaccinations.

Which of the following statements regarding Social Security tax is correct?

Employers and employees each pay half of the Social Security tax.

Employee benefits do not increase disposable income.

False

Employees who work for wages are paid a fixed amount per week.

False

Gambling winnings are a form of earned income and therefore are subject to income tax.

False

Receiving payments from the Social Security fund after retirement is an indirect benefit from paying taxes.

False

Social Security payments, unemployment benefits, and workers' compensation are examples of in-kind payments.

False

Tips received by a person for performing a service are not subject to federal income taxes.

False

When filing taxes, you may claim an exemption for each of your dependents but not for yourself.

False

Workers are taxed on most of the benefits they receive from employers.

False

Why might an employer offer employees a profit-sharing plan in addition to normal salary and benefits?

It will motivate workers to strive for more and be better

________pay is the amount you take home after deductions have been subtracted.

Net

Explain the purpose of the health flexible spending account (Flex 125 plan) and the health savings account (HSA), and explain how the two accounts differ.

The purpose of the health savings account is to set aside money for medical expenses that aren't covered by insurance including deductibles and co-payments. The health flexible spending account is an account set up by employers to set money aside for qualified medical expenses. The main difference is that with a health flexible spending account forfeited at the end of the year if not used.

Employers with more than 50 employees are required by law to offer health insurance to employees.

True

Interest and dividends are forms of unearned income that are taxable.

True

Salaried workers usually do not keep time cards or count hours worked and do not receive overtime pay.

True

Sales taxes are a form of indirect tax.

True

To qualify for employer reimbursement for education expenses, the employee often has to agree to work for the company for a set period of time.

True

With a 401(k) plan, employees can avoid paying income tax on money placed in the account until it is withdrawn.

True

With e-filing, refunds may be received much more quickly than when a paper tax return is filed.

True

________________is an insurance plan that provides coverage for an employee who suffers an injury or illness resulting from job-related duties.

Workers' compensation

An example of a perk is

all of these

Which of the following is true of public goods?

all of these are characteristics of public goods

A property tax is based on the property's

assessed value

________________are forms of compensation in addition to salary or wages.

benefits

A(n)______________ is a person who depends on you for more than half of his or her support.

dependent

_____________income refers to the money that a person has available to spend or save after taxes are paid.

disposable

All of the following are examples of earned income except

dividends

Which of the following is considered to be a progressive tax?

federal income tax

The form used to report taxable income a worker received during the calendar year is

form W-2

List seven items that may be deducted from an employee's pay.

health insurance, life insurance, 401(k)/retirement plans, dental insurance, federal income tax, social security tax, and medicare tax

What are government transfer payments and how are the payments made?

indirect benefit and the payments are funded through taxes

Which of the following is not an optional deduction from your pay?

medicare tax

The lowest pay rate allowed by law for each regular hour of work is the___________________.

minimum wage

Define unearned income and provide an example.

money from other sources and is not earned through labor/working. An example of an unearned income is interest.

What are cafeteria-style benefits?

plans where employees can choose from different benefits because of their needs

All of the following are examples of pay without work except

profit sharing

With a(n) ______________________plan, an employee may receive a bonus of a specified percent of his or her salary if the business meets or exceeds its financial goals.

profit-sharing

List three types of taxes that are based on wealth.

property tax, estate tax, and gift tax

Sales taxes are known as ________________taxes because they take a larger percentage of income from lower-income people than from higher-income people.

regressive

Explain how taxpayers benefit directly from paying taxes.

the money that they pay in taxes go to schools, roads, transportation, etc. which all benefit the taxpayer

List three reasons why benefits are important to workers.

they aren't tax on their benefits, it helps them save money, and it allows them to be more flexible

All of the following are examples of unearned income except

tips