Personal Finance Courses: Taxes

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1.
There is one federal income tax rate that all taxpayers pay.
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False. As you earn more money, your rate increases.
2.
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.
3.
What is the name of the United States' tax collection agency?
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The Internal Revenue Service. The Internal Revenue Service is the agency that collects taxes for the United States.
4.
How do IRAs, 401k plans, health savings accounts and flexible spending accounts help lower your income taxes?
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You get to deduct the money you contribute to them from your income. When you deduct the contributions you make to them, there is less money for you to be taxed on.
5.
The difference between a tax deduction and a tax credit is that _______.
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A tax deduction reduces your taxable income, and a tax credit reduces your actual tax. When you do the math, you will find that tax credits get you more money back than tax deductions do.