Everything About Taxes Flashcards
(34 cards)
Write the calculation for general tax liability?
How does graduated tax liability work?
A progressive tax system which consists of tax brackets where tax rates increase according to the amount of your income
Know the three government institutions that levy taxes
- Federal
- State
- Local
Know the primary purposes for levying taxes
- To fund public operations provided by government
- To encourage or discourage behavior of citizens (for example: cigarettes have tax because unhealthy)
List the types of taxes associated with production tax
Production Tax
Consumption Tax
Wealth Tax
Define production tax
Production tax comprises four different arenas, income, social security, medicare, and capital gains.
Define income tax
a tax under production taxes, taxed at the federal, state, and local level
Define Social Security
Social insurance program, taken out of income at about 6.2%
Define Medicare
federal health insurance program for the elderly, taken out of active income at about 2.9%
Capital Gains
- tax based on passive income, from the sale of an asset
Define consumption tax
A tax on the purchase of any good or service. No federal level, state level.
Excise tax
Tax a government puts on goods to discentivize people from using it, such as tobacco or alcohol or ; you need a license to sell
Wealth tax
a tax imposed on an individual’s net wealth. Done when an estate is passed to someone and the value is above a certain amount.
What is indiana’s sales tax
7%
Know the type of Tax the US government uses for income tax
progressive
Explain the concept of a regressive tax (flat tax) and examples.
Same tax rate, regardless of income.
Taxes lower income earners at a higher rate, and higher income earners at a lower rate
Examples: social security and medicare
Explain the process associated with paying taxes - use the term witholding and identify the government form (W-4) uesd to define withholding
When you get a new job, your employer will hand you a certificate of withholding, which will instruct them how to withhold taxes from your paycheck for federal, state, and local governments. January 31, 2023 your employer issues a W2– wage and tax form, tells you how much tax was actually paid. In April 15, you will need to file your taxes using the W2 form.
What is the w-4 form
A withholding certificate that an employee fills out to instruct the employer what to withhold from their paycheck in taxes
What is the w-2 form?
contains important information that you need to complete your tax return.
Explain the difference between a tax refund and owing money.
Tax refund happens when you overpay, and a liability happens when you underpay
Share definitions and examples of ADEC - the test will focus mostly on Deductions and Credits
Adjustments, Deductions, Exemptions, and Credit
- two forms of deductions: standard and itemized
- Credit is dollar for dollar (foreign tax credit)
Both deductions and credit is below the line
Understand what AGI means.
Adjusted Gross income, the income after you take out adjustments and exemptions
Understand the difference between the standard deduction and itemized deduction.
standard deduction is set by the federal reserve yearly, while itemized deductions are a list of deductions that you can take out manually
Life situations that significantly shift tax liabilities.
Death of a spouse or child
Getting married
Getting Divorced
Having a Child
