Test your knowledge

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Personal information you will need to prepare your tax return includes _______.

Choose wisely. There is only one correct answer.

Your former address

Your Social Security number

Your parents' names

Your Social Security number. Personal information you will need to prepare your tax return includes your Social Security number.

Which type of account helps you pay for medical expenses while also saving you money on taxes?

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401k

Flexible spending account

IRA

Flexible spending account. A flexible spending account lets you set aside money from your pay, thus reducing the amount of income you will be taxed on.

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.

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.

Everyone will have to pay Social Security tax on all their income, no matter how much it is.

Choose wisely. There is only one correct answer.

True

False

False. The amount of earnings one must pay tax on is capped, though it usually changes every year.

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