FinLit Taxes Test

When should you receive your W-2 form from your employer?

By January 31

Pros and cons of hiring a tax professional:

Pro: minimize errors Con: costs a lot

Who is legally responsible to fill out a 1040?

- Your earned income was more than $12,950 or - Your unearned income was more than $1,150 or - Your gross income (total of your earned and unearned income) was more than the larger of: - $1,150 or - Your earned income plus $400 - if you are self-employed

What is the percentage for Medicare?

1.45%

What is the amount of the self-employment tax (SECA)?

15.3%

What percentage of people reported filing their federal taxes for free?

25%

What is the percentage for Social Security?

6.2%

What are Pre-Tax Deductions and Contributions?

Contributions taken out of your paycheck BEFORE taxes are calculated on your income

The federal income taxes that are withheld from your paycheck are used to pay for what?

Discretionary spending

Medicare and Social Security are mandatory spending categories funded by which type of taxes that are withheld from your paycheck?

FICA

TRUE or FALSE: Only U.S. citizens can be claimed as a dependent for tax purposes.

False

What is the difference between gross pay and net pay?

Gross pay is before taxes and deductions are subtracted; Net pay is your take-home pay

What are two examples of Employer Contributions?

Health insurance and 401(k)

Pros and cons of tax preparation websites:

Pro: quicker returns, easy to use, cheaper than cpa, e-filing Con: you have to pay for it

Pros and cons of old-fashioned paper filing:

Pro: you are in charge Con: longer to file, errors possible, could get lost in the mail

Miguel has been working at his job for 3 years and already filled out a W-4 when he was first hired. This year, he just got married and is planning on filing his taxes jointly with his spouse. What should he do?

Request to fill out a new W-4 from his employer

When filling out a W-4 form, in what situation would a teen want to claim exemption from federal income taxes being withheld from their paycheck?

They don't make enough money.

Which if the following statements is true? a. A dependent could be an elderly parent who lives with and depends on his or her child. b. A person claimed by another can still qualify as head of household. c. The more allowances, the more income withheld for taxes from each check. d. A dependent must be a spouse or your child who relies on you financially.

a. A dependent could be an elderly parent who lives with and depends on his or her child.

If you're unmarried and pay more than half the costs of keeping up a home for yourself and a qualifying individual, which of the following boxes should you select? a. Head of Household b. Single or Married filing separately c. Married filing jointly d. Divorced

a. Head of Household

What are two important items detailed in your W-2 form? (select two correct answers) a. Wages, tips, and other compensation b. Number of dependents you will claim c. Federal and state taxes withheld from your earnings d. Additional money you want withheld from your paycheck

a. Wages, tips, and other compensation c. Federal and state taxes withheld from your earnings

Which of the following statements is true? a. You must fill out a W-4 each time you start a job and make changes when needed. b. The W-4 form helps you start a mandatory savings account with your employer. c. If no one can claim you as a dependent, you don't have to complete a W-4 form. d. Once you have completed the W-4 proving you are exempt, you don't have to complete it again.

a. You must fill out a W-4 each time you start a job and make changes when needed.

Wages are: a. found by multiplying an hourly pay rate by the number of hours worked. b. a payment people receive for providing natural resources in the market. c. an annual amount paid monthly or bi-monthly for a specified number of hours worked. d. government fees on business and individual income, activities, products or property.

a. found by multiplying an hourly pay rate by the number of hours worked.

Completing the W-4 correctly is important because: a. the goal is for your employer to withhold enough from your check to cover your taxes. b. the W-4 is voluntary and the government relies on people being honest. c. all parts of the W-4 are mandatory. d. claiming too few allowances will result in owing the government at tax time.

a. the goal is for your employer to withhold enough from your check to cover your taxes.

A W-4 Form is: a. used by employers to determine the amount of income tax to withhold from employees' earnings. b. the form taxpayers must fill out if they paid more income tax than necessary and want a refund. c. a form employers must provide to employees shortly after year-end to report annual income and withholding for the employee's tax return. d. a printed statement of the amount that an employee is paid.

a. used by employers to determine the amount of income tax to withhold from employees' earnings.

All of the following options are benefits we receive as a result of government spending EXCEPT... a. Health and retirement benefits for seniors b. Credit card debt forgiveness c. National parks maintenance d. Public school education

b. Credit card debt forgiveness

You will need to include all of the following information on a W-4 form EXCEPT... a. Name and address b. Earned income from previous job c. Social Security number d. Marital status

b. Earned income from previous job

Which of the following people is/are legally required to file a tax return? a. Amanda, who can be claimed as a dependent and earned $850 last year b. Greg, who can be claimed as a dependent and earned $13,200 last year c. Jason, who cannot be claimed as a dependent and earned $1,500 last year d. Erin, who cannot be claimed as a dependent and earned $14,000 last year

b. Greg, who can be claimed as a dependent and earned $13,200 last year d. Erin, who cannot be claimed as a dependent and earned $14,000 last year

Gross pay is: a. the amount earned over a lifetime. b. the amount earned before deductions or taxes are taken out. c. the amount received after deductions and taxes have been taken out. d. computed by multiplying the number of hours by the hourly rate of pay, then subtracting federal and state income taxes.

b. the amount earned before deductions or taxes are taken out.

Which of the following statements about the W-4 form is TRUE? (select all that apply) a. The purpose of the form is to provide employees with reported wage and salary information b. This form is given to employees every January c. This form is given to employees on their first day on the job d. The purpose of the form is to let employers know how much money to withhold from an employee's paycheck for taxes

c. This form is given to employees on their first day on the job d. The purpose of the form is to let employers know how much money to withhold from an employee's paycheck for taxes

All of the following people should receive W-2 forms EXCEPT... a. Edgar, who works 10 hours/week cleaning pools for $15/hour at WeCleanPools b. Melinda, who works 40 hours/week at a local ice cream shop during the summer c. Marcus, who is on salary as a sales representative at a shoe store, working full-time d. Serena, who is a freelance wedding photographer

d. Serena, who is a freelance wedding photographer

The FICA tax is used to fund: a. highways, national parks and national defense. b. state highways, state parks, state troopers and public education. c. street lights, fire and police protection and public education. d. Social Security and Medicare.

d. Social Security and Medicare.

Who pays FICA taxes? a. Employees pay the FICA tax. b. Employers pay the FICA tax. c. The government pays the FICA tax on behalf of workers. d. a and c only e. a and b only

e. a and b only

What is the purpose of taxes?

to fund the government