The Basics Of Taxes Answer Key
The Basics of Taxes Answer Key
Taxes are sums of money that a government mandates that its citizens pay in order to support the government itself and all of its goods and services. There are different types of taxes that are collected by the federal, state, and local governments in the United States. In this article, we will review some of the basic concepts and terms related to taxes, as well as provide some answers to common questions.
Types of Taxes
There are five main ways that taxes are collected by the federal, state, and local governments. They are:
Payroll tax: This is a tax on earned income, which is money earned from working for pay. This tax deduction from a paycheck supports both the Social Security and Medicare programs, which are federal government programs that help citizens fund retirement and health care. The payroll tax is also known as the FICA tax, which stands for Federal Insurance Contributions Act.
Income tax: This is a tax on earned and unearned income, which is money received from sources other than employment, such as interest from a savings account or money earned from investments. Most state governments and the federal government collect income tax, and some local governments also have an income tax.
Property tax: This is a tax on property, such as land, buildings, and motor vehicles. Property tax is usually paid once a year (annually) to the local government where the property is located.
Sales tax: This is a tax on purchased goods and services. Sales tax is usually added to the price of the item or service at the point of sale and paid by the buyer to the seller. Sales tax rates vary depending on the state and local area.
Excise tax: This is a tax on specific goods or services, such as gasoline, tobacco, or alcohol. Excise tax is usually collected from the seller or retailer and as such often remains "hidden" in the price of the product or service, rather than being listed separately.
Answers to Common Questions
Here are some answers to common questions related to taxes:
What does PEPSI stand for in terms of taxes?PEPSI is an acronym that helps remember the five types of taxes: Payroll, Excise, Property, Sales, and Income.
When is someone considered a taxpayer?Someone is considered a taxpayer in the United States if they live here and pay taxes to national, state, county or municipal (city/town) governments.
What is a community?A community is a group of people with common interests and concern for the common good. Taxes help fund public goods and services that benefit the community, such as roads, schools, parks, libraries, etc.
What are two items or services that federal income tax helps pay for?Federal income tax helps pay for many items and services that are provided by the federal government, such as national defense, social security, health care, education, environmental protection, etc.
What is the difference between earned income and unearned income?Earned income is money earned from working for pay, such as wages or salaries. Unearned income is money received from sources other than employment, such as interest from a savings account or money earned from investments.
What is the Social Security program?Social Security is a federal government program that helps citizens fund retirement, as well as helps people who have a profound disability, are under the age of 18 and experience the premature death of a parent, or the death of a spouse in a family with minor children. Social Security is funded by a payroll tax contribution of 6.2% of earned income (percentage varies from year to year).
What is Medicare?Medicare is a federal government program that helps pay for health care of senior citizens in the USA. Medicare is funded by a payroll tax contribution of 1.45% of earned income (there is no annual limit).
This article was created using information from [Quizlet] and [Google Sheets].