Financial Lit Ch 12

a federal tax collected on the value of a person's property at the time of his or her death

estate tax

an amount of income that is not included in a person's gross income

exclusion

a deduction from a person's adjusted gross income for himself or herself, a spouse, and qualified dependents

exemption

A self-employed person is subject to a penalty if he or she

fails to make quarterly payments on time

determines whether a person has paid too much or too little in income taxes over the year.

income tax return

to take out Social Security and income tax payments from an employee's paycheck and send it to the Internal Revenue Service.

withhold

Form 1040A is the easiest tax form to complete.

FALSE

Property tax is the primary source of revenue for the federal government

FALSE

The amount of federal income tax an employer withholds to send to the IRS depends on your tax credits.

FALSE

You can deduct medical expenses up to 75% of your adjusted gross income.

FALSE

A tax audit is a detailed examination of your tax return by the IRS.

TRUE

A taxpayer must provide more than half of a dependent's support to claim him or her on the tax return.

TRUE

An excise tax is a tax on specific goods and services

TRUE

If you are self-employed, you must make estimated tax payments to the IRS throughout the year.

TRUE

a person's gross income after certain reductions such as contributions to an IRA or student loan interest

adjusted gross income

Some states collect a personal property tax on

automobiles

Earned income includes

bonuses from work

Which itemized deduction is subject to limitations

charitable contributions

Which amounts are included in your gross income?

deductions, exemptions, and reductions

The federal government collects a gift tax when

one person gives another land worth $20,000

any expense a person is allowed to subtract from his or her adjusted gross income to arrive at his or her taxable income

tax deduction

the total amount of taxes a person owes

tax liability

Earnings on a traditional IRA are

tax-deferred

The interest made from municipal bonds is usually

tax-exempt

the amount of income on which a person's income tax is computed.

taxable income