Test your knowledge

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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.

Only employees pay Social Security taxes on their earnings.

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True

False

False. Employers pay the same amount on behalf of their employees, according to how much the employees pay.

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.

When you take time to engage in tax planning, you can save yourself money you would otherwise pay to the government in taxes.

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True

False

True. When you take the time to engage in tax planning, you can save yourself money you would otherwise pay to the government in taxes.

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