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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

False

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.

If you had more income tax taken out of your paycheck than you actually owe in taxes, what can you expect to happen?

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You will get a refund.

You will owe more taxes.

The government will call it even.

You will get a refund. You had too much taken out. When you do your taxes in the spring, you will find out how much you will get back.

Retired workers receive more in benefits from Social Security than they contributed to it during their working years.

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True

False

True. They receive more; this is a big advantage during one's retirement years.

Which of the following is true regarding tax credits?

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A tax credit reduces your taxable income as reported on Form 1040.

A tax credit reduces the actual tax you owe.

For most taxpayers, the standard tax credit will be larger and more valuable than itemizing your credits.

A tax credit reduces the actual tax you owe. Within limits, a dollar of credit reduces your tax by a dollar.

There is one federal income tax rate that all taxpayers pay.

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True

False

False. As you earn more money, your rate increases.

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