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

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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.

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

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True

False

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

What type of tax increases as your income increases?

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Progressive tax

Regressive tax

Neither of the above

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

Tax adjustments, deductions and credits all have one thing in common. What is that?

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Everyone gets them.

You have to work for someone else to get them.

They reduce the amount of tax you have to pay.

None of the above

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.

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

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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.

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