Personal Finance Literacy (Madura/Casey/Roberts)



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Unit 5 Paying Taxes

**Highlight ALL Answers.**

Tax Basics

1) The total amount of money a worker earns in a pay period is his or her ________.

A) gross pay

B) net pay

C) adjusted gross income

D) capital gain

2) The total amount of money a worker takes home in a pay period is his or her ________.

A) gross pay

B) net pay

C) adjusted gross income

D) capital gain

4) Public programs such as national defense, public schools, Social Security, and fire and police protection are all paid for through ________.

A) tax revenue

B) capital gains

C) itemized deductions

D) real estate taxes

5) In general, which type of tax is typically used to fund local schools?

A) sales tax

B) real estate tax

C) payroll tax

D) income tax

6) Federal income taxes, state income taxes, and Social Security withholdings are all ________.

A) income/payroll taxes

B) real estate taxes

C) sales taxes

D) capital taxes

7) Which of the following would LEAST likely be included on an employee's pay stub?

A) the employee's gross pay for the pay period

B) the employee's total tax owed for the year

C) the amount withheld from the employee's gross pay for FICA and other payroll taxes

D) the employee's net earnings for the year

8) The ________ is the government body that enforces federal tax laws and collects the taxes.

A) United States Congress

B) Bureau of Labor

C) Commerce Department

D) Internal Revenue Service

9) You would use a 1040 or a 1040EZ to ________.

A) pay local taxes

B) pay sales taxes

C) file a tax return

D) receive an estimated tax payment

10) Taxes are figured based on your earnings during which of the following time periods?

A) each month

B) each quarter

C) the calendar year

D) every two years

11) The deadline for filing your federal tax return each year is ________.

A) January 1st

B) December 15th

C) March 15th

D) April 15th

True/False

12) The total amount of money a worker earns is not the same as the total amount of money that worker receives as "take-home pay."

14) Individuals pay a variety of taxes to the government, but businesses do not.

16) Real estate taxes are relatively constant from state to state and even city to city.

17) Everyone pays at least some tax each time he or she is paid.

18) Workers who are self-employed need to pay regular estimated taxes instead of payroll taxes.

19) Workers who earn an income below a certain amount are not required to file a federal tax return.

Match each description to its corresponding term.

A) real estate tax

B) net pay

C) tax return

D) sales tax

E) gross pay

F) payroll tax

G) tax

21) tax paid as part of the purchase price of an item

22) the total amount of money an individual takes home during a pay period

23) money for the government withheld from an individual's paycheck

24) any money collected by a government from its citizens for the purpose of operating the government

25) the total amount of money an individual earns in a pay period

26) an annual report of all information related to your income taxes

27) a tax paid to the government based on the value of the property an individual owns

Match each description or example to its corresponding type of taxes.

A) sales taxes

B) real estate taxes

C) payroll taxes

28) primarily used to fund local schools

29) include federal and state income taxes

31) collected by merchants and sent to the government

32) are not paid in the same way by people who are self-employed

33) imposed by many states but not by the federal government

34) include FICA payments

Short Answer

37) Austin is looking at the information on his pay stub. His only tax withholding was $ 15.30 for FICA. If Austin's net pay was $184.70, what was his gross pay?

Understanding Payroll Taxes: Highlight correct answer.

1) ________ are also known as FICA.

A) Medicare and Social Security taxes

B) Federal income taxes

C) Real estate taxes

D) Local taxes

2) An employer matches employees' contributions to ________ and sends the total amount to the government.

A) federal income taxes

B) state income taxes

C) local taxes

D) FICA taxes

3) In general, the more money a person earns, the ________ he or she must pay taxes.

A) lower the rate is at which

B) higher the rate is at which

C) more frequently

D) less frequently

True /False

5) FICA stands for Federal Income Commercial Assessment.

6) FICA withholdings may be listed as OADSI on some pay stubs.

8) There is a cap on the amount of wages subject to the Medicare and Social Security taxes.

9) A self-employed worker may pay double in FICA tax what a payroll worker pays.

10) The tax rate a person must pay is not affected by the person's total earned income.

Identify whether each of the following describes Social Security, Medicare, or both.

A) both Social Security and Medicare

B) Medicare

C) Social Security

13) a tax of 6.20% of your salary

14) a tax of 1.45% of your salary

15) the amount of salary taxed is capped at a certain level

16) FICA tax

17) a government health insurance program

18) benefits for older Americans

Short Answer/Math Practice

20) In 2008, Keesha's mother earned a salary of $130,000. How much Medicare tax was withheld from her paycheck?

21) In 2008, Keesha's mother earned a salary of $130,000. How much Social Security tax was withheld from her paycheck?

Filing Taxes

3) Shortly after the end of the year, you will receive a ________ form summarizing all of your relevant income and tax withholding information from each employer you worked for during the year.

A) 1040

B) 1040EZ

C) W2

D) 1099-MISC

5) AGI stands for ________.

A) annual gross income

B) adjusted gross income

C) American gross income

D) annual generated income

9) Accurate completion of your tax return will show whether you underpaid your taxes and need to pay additional income tax or if you overpaid and will receive a(n) ________.

A) exemption

B) deduction

C) capital gain

D) refund

Tax Forms

a) W-2

b) W-4

c) 1040 EZ

1. Allowances documented for Federal Tax withholdings

2. Summary of overall earning and taxes paid

3. Document used to file taxes

|Jimmy Joe Billy Bob |Emp. #: 987654 |SSN: 123-45-6789 |

|Pay Period: 2/15/06 – 2/28/06 |Total Hrs: 80 |Check #: 999 |

| Current | YTD |

|Gross Pay: $1,589.50 |$2,1458.25 |

|Deductions: | |

|Insurance $15.00 |$202.50 |

|FICA $42.00 |$567.00 |

|Federal $254.32 |$3433.32 |

|State $90.27 |$1218.65 |

|401K $150.00 |$2025.00 |

| | |

|Net Pay: $1,037.91 |$13,728.29 |

1. How long was the pay period? ___________________

2. How many hours did Jimmy work during this pay period? ___________

3. How many overtime hours did Jimmy work during this pay period? _____

4. What percent of Federal Income Tax does Jimmy pay? ____________

5. What percent of State Income Tax does Jimmy pay? _____________

6. How much does Jimmy make an hour? ______________

7. What is the amount of current total deductions taken from Jimmy’s gross pay? _______

8. What percent of Jimmy’s current total pay is taken out as a deduction? ____________

9. Which of the deductions from his pay are not required by law (i.e. Optional)?

______________________________________________________________________

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