Taxes

Question 1

What is income tax?

Answer 1

An income tax is a tax imposed on individuals or entities in respect of the income or profits earned by them. Income tax generally is computed as the product of a tax rate times the taxable income. Taxation rates may vary by type or characteristics of the taxpayer and the type of income.

Question 2

What are property / real estate taxes?

Answer 2

Real estate tax and property tax are the same thing. The IRS uses the term “real estate tax,” but most people call it “property tax.” Property (real estate) tax is charged on immovable property—land and structures that are permanently attached to the ground such as a house, building, or land.

Question 3

What is the distinction between federal and state income taxes?

Answer 3

Federal taxes are paid to the IRS to fund the Federal Government’s Budget.

A state income tax is a tax on income earned in that state. It is similar to a federal income tax, but state income tax generally funds state budgets rather than the federal government.

Question 4

What are tax refunds?

Answer 4

A tax refund is a reimbursement to taxpayers who have overpaid their taxes, often due to having employers withhold too much from paychecks. The U.S. Treasury estimates that nearly three-fourths of taxpayers are over-withheld, resulting in tax refunds.

Question 5

What are tax returns?

Answer 5

A tax return is a documentation filed with a tax authority that reports income, expenses, and other relevant financial information. On tax returns, taxpayers calculate their tax liability, schedule tax payments, or request refunds for the overpayment of taxes.

Question 6

Distinction between income tax returns vs income tax payments

Answer 6

Tax returns filed annually vs tax payments made throughout the year.

Question 7

What is a W-2 tax form?

Answer 7

A W-2 tax form shows important information about the income you’ve earned from your employer, amount of taxes withheld from your paycheck, benefits provided and other information for the year. You use this form to file your federal and state taxes.

Question 8

What are payroll tax deductions?

Answer 8

Payroll deductions are wages withheld from an employee’s total earnings for the purpose of paying taxes, garnishments and benefits, like health insurance. These withholdings constitute the difference between gross pay and net pay and may include: Income tax. Social security tax.

Question 9

Gross pay vs net pay distinction

Answer 9

Gross pay is what employees earn before taxes, benefits and other payroll deductions are withheld from their wages. The amount remaining after all withholdings are accounted for is net pay or take-home pay.

Question 10

What is the FICA tax? (Federal Insurance Contribution Act)

Answer 10

FICA imposes taxes to fund social security and medicaid taxes.
12.4% of the tax goes to Social Security
2.9% goes to medicare
amounting to a 15.3% tax rate. Both the employee and employer split this tax percentage; 7.65% for each

Question 11

What are FUTA taxes? (Federal Unemployment Tax Act)

Answer 11

FUTA imposes taxes to fund unemployment programs. These taxes are only imposed on employers; Businesses must fund unemployment benefits for each employee that they hire.

Question 12

What is a corporate tax?

Answer 12

A corporate tax, also called corporation tax or company tax, is a direct tax imposed on the income or capital of corporations or analogous legal entities. Many countries impose such taxes at the national level, and a similar tax may be imposed at state or local levels.

Question 13

What is a capital gains tax?

Answer 13

The capital gains tax is the levy on the profit that an investor makes when an investment is sold. It is owed for the tax year during which the investment is sold.

Question 14

What is a progressive income tax rate?

Answer 14

A system of taxation where the quantity of revenue you’re generating from your income determines the overall rate taxation that will be imposed upon said income; In other words, the greater amount of income you earn, the larger percentage of taxation you will be subservient to.

Question 15

What is a consumption tax?

Answer 15

A consumption tax is a tax levied on consumption spending on goods and services. The tax base of such a tax is the money spent on consumption. Consumption taxes are usually indirect, such as a sales tax or a value-added tax.

Question 16

What is a Value Added Tax?

Answer 16

Value-added tax (VAT) is a consumption tax on goods and services that is levied at each stage of the supply chain where value is added, from initial production to the point of sale. The amount of VAT the user pays is based on the cost of the product minus any costs of materials in the product that have already been taxed at a previous stage.

Question 17

What is a sale tax

Answer 17

A sales tax is a tax paid to a governing body for the sales of certain goods and services. Usually laws allow the seller to collect funds for the tax from the consumer at the point of purchase. When a tax on goods or services is paid to a governing body directly by a consumer, it is usually called a use tax.

Question 18

Definition of payroll

Answer 18

a list of a company’s employees and the amount of money they are to be paid.

Question 19

What types of deductions are established on your income?

Answer 19

Payroll tax, income tax, a partiality of your income to fund the health insurance premium

Question 20

What is a tax credit?

Answer 20

A tax credit is a provision that reduces a taxpayer’s final tax bill, dollar-for-dollar. A tax credit differs from deductions and exemptions, which reduce taxable income, rather than the taxpayer’s tax bill directly.

Question 21

What are tax exemptions?

Answer 21

A tax exemption is the right to exclude all or some income from taxation by federal or states governments. Most taxpayers are entitled to various exemptions to reduce their taxable income, and certain individuals and organizations are completely exempt from paying taxes.

Question 22

What are tax deductions?

Answer 22

Tax deduction is a reduction of income that is able to be taxed and is commonly a result of expenses, particularly those incurred to produce additional income. Tax deductions are a form of tax incentives, along with exemptions and credits.

Question 23

Do income tax cuts for moderate and low income tax payers boost economic growth?

Answer 23

A working paper for the National Bureau of Economic Research found that tax cuts aimed at high-income earners have less economic impact that similarly sized cuts targeted at low and moderate income tax payers.

Question 24

Do tax cuts on the rich proliferate economic growth?

Answer 24

Major reforms reducing taxes on the rich lead to higher income inequality but do not have any significant effect on economic growth or unemployment, according to new research by LSE and King’s College London.

Question 25

Internal Revenue Service

Answer 25

The Internal Revenue Service (IRS) is the revenue service for the United States federal government, which is responsible for collecting taxes and administering the Internal Revenue Code, the main body of the federal statutory tax law.

Question 26

Audit

Answer 26

an official inspection of an individual’s or organization’s accounts, typically by an independent body:

Question 27

Credit

Answer 27

the ability of a customer to obtain goods or services before payment, based on the trust that payment will be made in the future:

Question 28

Tax evasion

Answer 28

the illegal nonpayment or underpayment of tax

Question 29

What are the consequences of tax fraud?

Answer 29

Tax fraud, along with its sibling tax evasion, is a criminal offense that can result in harsh consequences. If you don’t fulfill your legal responsibility to pay taxes, the IRS could hit you with a variety of civil or criminal sanctions, from fines and penalties to prison sentences.

Question 30

Financial Claim

Answer 30

A financial claim: entitles a credit or to receive a payment, or payments, from a debtor in circumstances specified in a contract between them

Question 31

What happens to debt after 7 years?

Answer 31

Seven years is the length of time that many negative items can be listed on your credit report, as defined by the Fair Credit Reporting Act. This includes things like late payments, debt collections, charged-off accounts, and Chapter 13 bankruptcy. Certain other negative items, like some judgments, unpaid tax liens, and Chapter 7 bankruptcy, can remain on your credit report for more than seven years.

Question 32

Debt Discharge

Answer 32

A debt discharge occurs when a debtor qualifies through bankruptcy court.

When debt is discharged, a lender can no longer make attempts to collect the debt and the debtor is no longer responsible for paying it back.

Question 33

Section 8 housing

Answer 33

the payment of rental housing assistance to private landlords on behalf of low-income households in the United States.

Question 34

Temporary Assistance for Needy Families TANF

Answer 34

providing cash assistance to indigent American families through the United States Department of Health and Human Services.[2] TANF is often simply referred to as welfare.

The TANF program, emphasizing the welfare-to-work principle, is a grant given to each state to run its own welfare program and designed to be temporary in nature and has several limits and requirements. The TANF grant has a maximum benefit of two consecutive years and a five-year lifetime limit and requires that all recipients of welfare aid must find work within two years of receiving aid, including single parents who are required to work at least 30 hours per week opposed to 35 or 55 required by two parent families. Failure to comply with work requirements could result in loss of benefits. TANF funds may be used for the following reasons: to provide assistance to needy families so that children can be cared for at home; to end the dependence of needy parents on government benefits by promoting job preparation, work and marriage; to prevent and reduce the incidence of out-of-wedlock pregnancies; and to encourage the formation and maintenance of two-parent families.

Question 35

Medicaid

Answer 35

Medicaid in the United States is a federal and state program that helps with healthcare costs for some people with limited income and resources.

Question 36

Supplemental Nutrional Assistance Program

Answer 36

In the United States, the Supplemental Nutrition Assistance Program (SNAP),[1] formerly known as the Food Stamp Program, is a federal program that provides food-purchasing assistance for low- and no-income people.

Question 37

Supplemental Security Income

Answer 37

a federal program in the United States that provides additional income for older adults and people with disabilities that have little to no income.

Question 38

What is the difference between 1099 form and W2 form?

Answer 38

1099s and W-2s are tax forms. A 1099-MISC is used to report payments made to independent contractors (who cover their own employment taxes). A W-2 form, on the other hand, is used for employees (whose employer withholds payroll taxes from their earnings).

Question 39

What is the 1040 tax form?

Answer 39

Form 1040 is the standard individual tax filing form distributed by the Internal Revenue Service. Taxpayers use this form to file for returns or payments.

Question 40

Market Distortion

Answer 40

In neoclassical economics, a market distortion is any event in which a market reaches a market clearing price for an item that is substantially different from the price that a market would achieve while operating under conditions of perfect competition and state enforcement of legal contracts and the ownership of private property. A distortion is “any departure from the ideal of perfect competition that therefore interferes with economic agents maximizing social welfare when they maximize their own”.

Question 41

Form 4070

Answer 41

Form 4070 is used by employees who are compensated by tips to report those tips to their employers.