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.
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.
3.
There is one federal income tax rate that all taxpayers pay.
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False. As you earn more money, your rate increases.
4.
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 had too much taken out. When you do your taxes in the spring, you will find out how much you will get back.
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.