Chapter 7 Review
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Transcript of Chapter 7 Review
_____________ taxes are taxes that take a larger share of income as the amount of income grows.
Progressive
___________ taxes are taxes that take a smaller share of income as the amount of income grows.
Regressive
What does IRS stand for? Internal Revenue Service
Child support is _________ for the person paying it.
Not deductible
List an example of a progressive tax.
Federal income tax
Alimony is _________ for the person receiving it.
Taxable
_________ is the largest source of government revenue.
Income tax
Some types of spending may be subtracted from gross income. The amount after these deductions is your _________________.
adjusted gross income
The income on which you will pay tax.
Taxable income
_________ are taxes imposed on specific goods and services.
Excise taxes
The Constitution provides that “all bills for raising revenue shall originate in the ________________ .”
House of Representatives
Interest income is reported on a ______. Your bank mails you this form if you have taxable interest from a savings account.
1099
Child support is _______ for the person receiving it.
Not taxable
An agency of the Department of Treasury headquartered in Washington, D.C.
IRS
An example of an excise tax.
Cigarettes or gasoline
A __________ is a person who lives with you and who receives more than half his or her living expenses from you.
Dependent
Alimony is ________ for the person receiving it.
Taxable
All taxable income you receive, including wages, tips, salaries, interest, dividends, unemployment compensation, alimony, workers’ compensation benefits, and so forth.
Gross income
The U.S. income tax system is based on ___________, which means that all citizens are expected to prepare (or have prepared) and file income tax returns.
voluntary compliance
Failure to pay taxes is called ________.
Tax evasion
Form _____ lists all income you receive through employment.
W-2
An examination of a tax return by the IRS.
Audit
____________ are taxes for which the rate stays the same regardless of the amount on which the tax is imposed.
Proportional taxes (flat taxes)
You must file a tax return by _______ of the year after you earned income.
April 15th
Where the taxpayer sits down with the auditor to answer questions and produce records.
Office audit
The IRS asks the taxpayer to respond to specific questions or produce evidence of deductions or other entries on the tax return.
Correspondence audit
Explain why the federal income tax is considered a progressive tax.
The tax rate increases as income increases. (tax brackets)
Last year Jill worked at Menards, McDonald’s, and babysat 5 times for her aunt. How many W-2 forms will she receive?
2
What is the lowest tax bracket?
10%
Who must file a tax return?
Anybody who worked & had money deducted.
Money collected by the government through taxes.
Revenue
List an example of a flat tax.
Property tax
An IRS agent or local representative visits the taxpayer to verify information or ask specific questions.
Field audit
Another name for a proportional tax.
Flat tax
An amount you may subtract from your income for each person who depends on your income to live.
Exemption
Taxes that take a larger share of income as the amount of income grows.
Progressive taxes
Taxes for which the rate stays the same regardless of the amount on which the tax is imposed.
Proportional or flat taxes
An examination of a tax return by the IRS.
Audit
Income on which you will pay tax.
Taxable income
Expenses the law allows taxpayers to subtract from their adjusted gross income to determine their taxable income.
Deductions
Taxes that take a smaller share of income as the amount of income grows.
Regressive taxes
Money paid to support a former spouse.
Alimony
Money paid to a former spouse to support dependent children.
Child support
All the taxable income received during the year, including wages, tips, salaries, interest, dividends, alimony, and unemployment compensation.
Gross income
Stated amount taxpayers may subtract from adjusted gross income instead of itemizing their deductions.
Standard deduction
Income ranges to which different tax rates apply.
Tax brackets
Willful failure to pay taxes. Tax evasion
The process of listing allowable deductions on a tax return.
Itemize
The amount taxpayers may subtract from their income for each person who depends on their income to live.
Exemption
Why do some taxpayers itemize rather than taking the standard deduction?
Because their allowable deductions are greater than the standard deduction. This means they will pay less in taxes than if they took the standard deduction.