midterm - chapter 16

Question 1

tax used to pay fro healthcare for age 65+

Answer 1

medicare tax

Question 2

tax based on the value of items received from a deceased person

Answer 2

inheritance tax

Question 3

tax on personal income; a major source of revenue for federal and state governments

Answer 3

income tax

Question 4

the difference between a person’s assets and liabilities

assets - liabilities = _____

Answer 4

net worth

Question 5

Why do we pay taxes?

Answer 5

to help finance government projects like roads, schools, libraries, police department, etc

Question 6

form filled out by the employee so that the employer will withhold the correct federal income tax fromt he employee’s paycheck

Answer 6

W-4 form

Question 7

payments made by self-employed people and paid directly to the government quarterly

Answer 7

estimated payments

Question 8

a financial statement that reports net wages and other income along with spending for a period, such as for a month

Answer 8

cash flow statement

Question 9

actual spending is less than budgeted amount

Answer 9

budget surplus - spent less than budgeted so have extra money left over

Question 10

What type of taxes are in ‘taxes on wealth’ category?

Answer 10

• estate tax - based on person’s property at death
• inheritance tax - based on items received from deceased person
• gift tax - tax on any property or cash received as a gift

Question 11

a tax deduction for the taxpayer, a spouse, and each dependent (child)

Answer 11

exemption

Question 12

costs that occur on a regular basis and are for the same amount each time

Answer 12

fixed expenses

Question 13

shows personal assets, personal liabilities and a person’s net worth/owner’s equity

Answer 13

personal balance sheet

Question 14

tax form that reports income and deductions to determine the amount of taxes owed or amount of refund

Answer 14

1040 form

Question 15

tax based on the value of a person’s property at death

Answer 15

estate tax

Question 16

a charge imposed by a government to finance public services

Answer 16

tax

Question 17

your expenditures; money spent on all needs and wants

Answer 17

cash outflows

ex. rent/mortgage, food, clothing, utilities, telephone, entertainment, etc

Question 18

a state or local tax on goods and services that is collected by the seller

Answer 18

sales tax

Question 19

due date to file your federal income tax return

Answer 19

april 15

Question 20

What type of taxes are in ‘taxes on earnings’ category?

Answer 20

• social security tax
• income tax

Question 21

What are the 5 characteristics of an effective budget?

Answer 21

1. must be realistic
2. should be flexible
3. should be evaluated regularly
4. must be well planned and clearly communicated
5. should have a simple format

Question 22

What type of taxes are in ‘taxes on property’ category?

Answer 22

• real estate property tax - tax on land and buildings, helps pay for schools
• personal property tax - tax on boats, cars and trucks

Question 23

costs that differ each time and may not be as easy to estimate

Answer 23

variable expenses

Question 24

What determines how much a person pays in taxes?

Answer 24

is related to where you live, how much money you earn and how you spend and save your money

Question 25

tax based on the value of personal property such as boats, cars and trucks

Answer 25

personal property tax

Question 26

examples of personal assets

Answer 26

* money in bank - checking or savings * investments * furniture * clothing * automobiles * jewelry * rare coins * etc

Question 27

What are the 6 purposes of a budget?

Answer 27

1. Live within your income 2. Make wise buying decisions 3. Avoid credit problems 4. Plan for financial emergencies 5. Develop money management skills 6. Achieve your financial goals

Question 28

* form provided by the employer to the employee * it reports wage and salary info for the employee as well as the amount of federal, state and other taxes withheld fromt he employee's paycheck

Answer 28

W-2 form

Question 29

an amount that reduces your taxable income

Answer 29

tax deduction

Question 30

tax based on immovable property - land and structures - that are permanently attached to the ground such as houses, buildings, barns, etc

Answer 30

real estate property tax

Question 31

tax on gifts of any kind (property and money) when the value of the gift exceeds a certain dollar amount

Answer 31

gift tax

Question 32

amount that reduces taxable income

Answer 32

tax deduction ex. standard deduction or itemized deductions (medical expenses, property taxes, mortgage interest, etc)

Question 33

any difference between actual spending and budgeted amount

Answer 33

budget variance

Question 34

What type of taxes are in 'taxes on purchases' category?

Answer 34

* sales tax - tax on everything you buy except food and clothing * excise tax - imposed on specific goods and services, ex. gas

Question 35

total income - tax deductions = taxable income taxable income x tax rate = \_\_\_\_\_\_

Answer 35

final taxes owed

Question 36

a charge imposed by a government to finance public services

Answer 36

tax

Question 37

* the amount on which taxes are calculated * Gross Income - Tax Deductions = \_\_\_\_\_\_

Answer 37

taxable income

Question 38

What are the 8 common budget categories?

Answer 38

1. savings 2. food 3. clothing 4. househoold 5. transportation 6. health and personal care 7. recreation and education 8. gifts and contributions

Question 39

actual spending is greater than budgeted amount

Answer 39

budget deficit - spent more money then you were supposed to

Question 40

US government agency that collects taxes and enforces the internal revenue laws

Answer 40

IRS - Internal Revenue Service

Question 41

the day to day financial activities associated with using limited income to satisfy your unlimited needs and wants

Answer 41

money management

Question 42

detailed plans for the financial needs of individuals, families and businesses; allows you to meet your personal goals with a system of saving and wise spending

Answer 42

budget

Question 43

examples of personal liabilities

Answer 43

* credit card balances * car loans * personal loans * home mortgage * etc

Question 44

tax used to finance retirement and disability benefits

Answer 44

social security tax

Question 45

What are the 4 major tax categories?

Answer 45

* taxes on purchases * taxes on property * taxes on wealth * taxes on earnings

Question 46

the money you have available to spend as a result of workign or from other income such as interest earned

Answer 46

cash inflows ex. take home pay/net pay, interest income

Question 47

determines the amount of tax a taxpayer is required to pay for a year

Answer 47

federal income tax return

Question 48

a tax imposed on specific goods and services; built in to the price

Answer 48

excise tax

Question 49

What are the 4 steps in a personal budget process?

Answer 49

1. set financial goals 2. plan budget categories 3. maintain financial records 4. evaluate your budget

Question 50

a 'pay as you go' system in whcih an employer deducts income tax from the earnings of workers

Answer 50

withholding