Personal Finance Courses: Taxes

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1.
Everyone will have to pay Social Security tax on all their income, no matter how much it is.
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False. The amount of earnings one must pay tax on is capped, though it usually changes every year.
2.
Having taxes withheld from your paycheck means you do not need to pay any more taxes.
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False. The taxes that are withheld from your paycheck are estimates of how much tax you must pay. Once you have filled out your tax return and determined the actual amount you owe, you will find that you owe more money or that you will get some money back.
3.
The federal tax rate you pay will vary depending on your age.
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False. It varies depending on your filing status.
4.
Many retirement plans are tax-deferred. This means that the earnings that build up in them are not taxed until you take them out.
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True. To be tax-deferred means that taxes are not levied until sometime later; in the case of retirement plans, that means when you finally take the money out.
5.
Tax adjustments, deductions and credits all have one thing in common. What is that?
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They reduce the amount of tax you have to pay. Adjustments, deductions and credits all reduce the amount of tax you have to pay. They all do this in different ways.