Course Quiz - Financial Fitness Center

1.

Which of the following is true regarding tax credits?

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.

2.

What type of tax increases as your income increases?

Progressive tax

Regressive tax

Neither of the above

Progressive tax. Income tax is an example of a progressive tax.

3.

How do IRAs, 401k plans, health savings accounts and flexible spending accounts help lower your income taxes?

You get to deduct the money you contribute to them from your income.

Participating in one of these plans means you don't have to pay any taxes at all.

They don't actually help lower your income taxes.

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.

4.

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

True

False

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

5.

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

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.

Test your knowledge

Choose wisely. There is only one correct answer to each question.