Financial Lit Chapter 5.1 Vocab

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  • 1/10 Questions

    The two insurances you contribute to under FICA are

    • Social security and medicare
    • Social security and dental
    • Medicare and dental
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Financial Lit Chapter 5.1 Vocab - Quiz
About This Quiz

Vocabulary quiz on words dealing with taxes and your paycheck

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  • 2. 

    The law that requires workers and their employers to contribute to Social Security and Medicare is

    • The Federal Insurance Contributions Act

    • The Federal Insurance Constitution Act

    • The Federal Isurance Congratulations Act

    Correct Answer
    A. The Federal Insurance Contributions Act
    Explanation
    The correct answer is the Federal Insurance Contributions Act. This law mandates that both employees and employers make contributions to Social Security and Medicare. It ensures that workers receive benefits upon retirement, disability, or death, and helps fund the healthcare program for elderly and disabled individuals. The Federal Insurance Constitution Act and the Federal Insurance Congratulations Act are not valid laws and do not pertain to the requirement of contributions to Social Security and Medicare.

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  • 3. 

    The federal agency that collects income taxes is called

    • Internal Registrars Service

    • Internal Refund Service

    • Internal Revenue Service

    Correct Answer
    A. Internal Revenue Service
    Explanation
    The correct answer is Internal Revenue Service. The Internal Revenue Service (IRS) is the federal agency responsible for collecting income taxes in the United States. They are responsible for enforcing tax laws, providing taxpayer assistance, and processing tax returns.

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  • 4. 

    The form that provides information to your employer to determine the proper amount of taxes to withhold from your paycheck is called

    • Form W-2

    • Form W-4

    • Form 1040EZ

    Correct Answer
    A. Form W-4
    Explanation
    The form that provides information to your employer to determine the proper amount of taxes to withhold from your paycheck is called Form W-4. This form is filled out by employees and includes details such as filing status, number of allowances, and any additional withholding amounts. It helps the employer calculate the correct amount of federal income tax to withhold from the employee's wages. Form W-2, on the other hand, is a document provided by the employer to the employee at the end of the year, summarizing the employee's earnings and the taxes withheld. Form 1040EZ is a simplified tax form for individuals with no dependents and basic tax situations.

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  • 5. 

    The amount you earn before taxes are withheld is called

    • Withholding

    • Gross income

    • Net income

    Correct Answer
    A. Gross income
    Explanation
    Gross income refers to the total amount of money that a person earns before any taxes or deductions are taken out. It includes all forms of income such as wages, salaries, bonuses, tips, and any other sources of income. This is the amount that an individual or business earns before any expenses or deductions are subtracted. Gross income is important for determining an individual's tax liability and for calculating certain financial ratios or eligibility for certain benefits or programs.

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  • 6. 

    A share of workers' earnings paid to the government by workers and their employers is called

    • A payroll tax

    • An income tax

    • FICA

    Correct Answer
    A. A payroll tax
    Explanation
    A share of workers' earnings paid to the government by workers and their employers is called a payroll tax. This tax is specifically levied on the wages and salaries of employees and is used to fund various government programs and social security benefits. It is different from income tax, which is based on an individual's total income, and FICA, which is a specific type of payroll tax that funds Social Security and Medicare programs in the United States.

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  • 7. 

    The amount of pay you receive after withholdings are subtracted is called

    • Withholding

    • Gross income

    • Net income

    Correct Answer
    A. Net income
    Explanation
    Net income refers to the amount of pay an individual receives after all withholdings, such as taxes and deductions, have been subtracted from their gross income. It represents the actual take-home pay that an individual receives and is the amount that they can use for personal expenses or savings.

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  • 8. 

    Employer deductions from employee's earnings to pay employees' taxes are called

    • Allowances

    • Net income

    • Withholdings

    Correct Answer
    A. Withholdings
    Explanation
    Employer deductions from employee's earnings to pay employees' taxes are called withholdings. This term refers to the amount of money withheld from an employee's paycheck by the employer for the purpose of paying federal, state, and sometimes local taxes. These withholdings are then remitted to the appropriate tax authorities on behalf of the employee. By deducting taxes directly from an employee's earnings, employers ensure that the correct amount of taxes is paid throughout the year, rather than the employee having to pay a large sum at the end of the year.

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  • 9. 

    This tax you pay on income you receive is called

    • A payroll tax

    • An income tax

    • FICA

    Correct Answer
    A. An income tax
    Explanation
    The correct answer is an income tax. An income tax refers to the tax that individuals pay on the income they receive. It is a direct tax imposed by the government on the earnings of individuals or entities, based on their income or profits. This tax is typically calculated as a percentage of the taxable income and is used to fund various government programs and services. FICA, on the other hand, stands for Federal Insurance Contributions Act and refers specifically to the taxes deducted from employees' paychecks to fund Social Security and Medicare programs.

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  • 10. 

    A number that reduces the amount of tax withheld from your pay is called

    • A deduction

    • An allowance

    • Subtraction

    Correct Answer
    A. An allowance
    Explanation
    An allowance is a number that reduces the amount of tax withheld from your pay. It is a specific amount that you can claim on your tax return to lower your taxable income. By claiming allowances, you can adjust the amount of tax that is withheld from your paycheck, allowing you to have more take-home pay throughout the year. This is different from a deduction, which is an expense that you can subtract from your taxable income to reduce your overall tax liability. Subtraction, on the other hand, is a general term that refers to the act of deducting or taking away a certain amount from something.

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  • Current Version
  • Mar 21, 2023
    Quiz Edited by
    ProProfs Editorial Team
  • Nov 18, 2010
    Quiz Created by
    Alice Gallagher

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