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Personal Finance Courses: Taxes

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1.

What type of tax increases as your income increases?

Choose wisely. There is only one correct answer.

Progressive tax

Regressive tax

Neither of the above

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

2.

Only employees pay Social Security taxes on their earnings.

Choose wisely. There is only one correct answer.

True

False

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

3.

Having taxes withheld from your paycheck means you do not need to pay any more taxes.

Choose wisely. There is only one correct answer.

True

False

False. The taxes that are withheld from your paycheck are estimates of how much tax you must pay. Once you have filled out your tax return and determined the actual amount you owe, you will find that you owe more money or that you will get some money back.

4.

What kind of retirement planning contributions can help you save money on filing your taxes currently?

Choose wisely. There is only one correct answer.

A health savings account

A traditional IRA

A Roth 401(k)

A traditional IRA. Contributions to a traditional IRA can help you save money on filing your taxes currently. Roth 401(k)s cannot, and health savings accounts are not retirement plans.

5.

Which of the following is true regarding tax credits?

Choose wisely. There is only one correct answer.

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.

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