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Personal Finance ch4
| Question | Answer |
|---|---|
| What is the definition of income? | Money an individual or business earns or receives as the result of economic activity. |
| Which of the following is an example of earned income? | Wages from a job. |
| How is overtime pay calculated according to the Fair Labor Standards Act (FLSA)? | At least 50% more than an employee’s normal wage. |
| What type of income is a commission? | Earned income |
| Which of the following is not considered unearned income? | Wages from a part-time job. |
| Which form of income is primarily received from government programs? | Transfer payments |
| What distinguishes unearned income from transfer payments? | Transfer payments are usually received from the government. |
| Which type of income would a person receive from renting out an apartment? | Passive income |
| If a person earns a salary of $75,000 per year and is paid semi-monthly, how much is paid each pay period? | $3,125.00 |
| What is a bonus in the context of employee compensation? | A lump sum payment to an employee based on achieving certain performance-oriented goals. |
| What is a common form of income for self-employed individuals? | Earnings from freelancing. |
| What is the primary source of income for governments? | Taxes |
| Which of the following is NOT funded by taxes? | Private company profits. |
| What type of tax is applied to the income generated by an individual or business? | Income tax |
| What does FICA stand for? | Federal Insurance Contributions Act |
| What is the total FICA tax rate for self-employed individuals? | 15.3% |
| Which type of tax is collected at the point of sale? | Sales tax |
| What is a progressive tax system? | A tax system where tax rates increase as income increases |
| What type of tax is typically not levied on essential goods such as food, clothing, and medicine? | Sales tax |
| Which tax typically funds public services like schools, roads, and emergency medical services? | Property tax |
| Which of the following taxes is only imposed on employers and not employees. | Unemployment tax |
| What is the primary purpose of the Federal Unemployment Tax Act (FUTA)? | To provide temporary financial assistance to unemployed workers |
| Which tax is assessed using a progressive system in the United States? | Income tax |
| What are payroll deductions? | Amounts withheld from an employee’s total earnings |
| What is another term for total earnings? | Gross pay |
| Which of the following is a voluntary deduction? | Retirement plan contributions. |
| Which of these is a pre-tax deduction? | Health insurance premiums |
| What percentage of an employee's earnings is currently withheld for Social Security tax? | 6.20% |
| What is the purpose of a Form W-4? | To claim withholding allowances |
| What is the effective tax rate? | The taxes owed divided by gross income |
| What amount is deducted from earnings for Medicare tax on the first $200,000 of income. | 1.45% |
| Why might an employee choose to have voluntary deductions? | To benefit from employer-provided benefits |
| What information does a pay stub typically include? | Total earnings, deductions, and net pay |
| What is the main purpose of a pay stub? | To detail an employee’s total earnings and deductions |
| Which deduction is calculated first when determining taxable income? | Pre-tax deductions |
| What tax is withheld at a rate of 6.20%? | Social Security tax |
| What is the primary purpose of filing a tax return? | To report income, claim deductions and credits, and settle taxes owed or refunded |
| Which form is used by employers to report an employee's annual compensation and tax-related withholding amounts? | Form W-2 |
| Which filing status is used by single individuals who support a dependent and pay more than half the cost of keeping up a home? | Head of Household |
| What is a tax credit? | A direct reduction in the amount of taxes owed by a taxpayer |
| Which document summarizes income from wages, salaries, and tips? | Form W-2 |
| When is the tax filing deadline for individuals and businesses in the United States? | April 15th |
| Which form is used to report interest income from banks? | Form 1099-INT |
| What should you do if you need more time to file your tax return? | File for an extension |
| What does Adjusted Gross Income (AGI) represent? | A taxpayer’s total income for the year minus specific eligible deductions |
| What is the deadline for employers to deliver Form W-2 to employees? | January 31st |
| What type of income is reported on Form 1099-NEC? | Payments made to non-employees for services |
Created by:
Jack T