AnswersSNHS Financial Math - MA2007Tax Basics

Tax Basics Answers

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1
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Social Security and Personal Income tax are called Payroll taxes because _____.

A
they help to balance the national payroll budget.
B
they are automatically deducted from payroll.
C
once paid, they are used to supplement the paychecks of people in need.
D
you need to prove you have paid them before you can pick up your paycheck.
2
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Many communities today are concerned with their local government’s ability to appropriately manage the taxes it collects. If a government spends more money on expenditures than it collects in taxes, it may end up with not enough money, called deficit. Which of the following could result in a county government budget in deficit?

A
The government raises sales and property taxes without adjusting expenditures.
B
The county closes a fire station, reducing expenditures, without adjusting taxes.
C
The county gives all public school teachers a $2,000 raise without adjusting taxes.
D
The county collects donations to build a fountain in city hall.
3

Which of the following statements best describes the difference between sales tax and property tax?

A
Sales tax is applied to items as they are purchased while property tax is applied to items already owned.
B
Sales tax is applied repeatedly while property tax is paid only once for as long as you own the item.
C
Sales tax can be applied to a new speed boat while property tax cannot.
D
Sales tax is strictly meant for food and consumables while property tax is meant for non-food items.
4

If a taxpayer does not have enough taxes withdrawn from her paychecks throughout the year to equal the total tax she is required to pay that year, she will owe the government the remaining balance. On the other hand, if the taxpayer has more money withheld for taxes than she is required to pay that year, she will receive a refund for the difference. Mary has determined that, based on her annual income of $36,000, her federal income tax for the year is $5,424. Mary gets paid on a bi-weekly basis, giving her 26 paychecks throughout the 52 week year.What is the minimum amount Mary must have withheld from each of her 26 bi-weekly paychecks in order to avoid owing the federal government at the end of the year?

A
$104.30
B
$208.62
C
$692.31
D
$1,384.62
5

Based on his salary, Kevin knows that he will have $336.00 withheld from his paycheck for federal income tax. He would like to have approximately $70.00 withheld for state income tax. Which of the following withholding options should he choose for state income tax?

A
18% of federal income tax
B
21% of federal income tax
C
25% of federal income tax
D
29% of federal income tax
6

Gift tax falls under which tax category?

A
Payroll tax
B
Property tax
C
Purchase tax
D
Wealth tax
7

Which of the following is an example of a wealth tax?

A
income tax
B
excise tax
C
estate tax
D
sales tax
8

Curtis just received a raise at work increasing his salary by $8,500. He knows that an increase in salary will increase the amount of federal income taxes withheld from his paycheck. Which of the following statements best describes the effect his raise will have on state income tax withholdings?

A
State income tax is unrelated to federal, he will see no change in his state withholding.
B
Since he is having more withheld for federal, he will have less withheld for state so that he pays the same amount in the end.
C
State income tax is usually a set percentage of federal income tax. With an increase in federal he will see an increase in state withholding.
D
Since he is making more money, the state government will take advantage of his raise and charge him more income tax. His state withholding will increase.
9

Stacy thinks her employer may not be withholding the correct amount from her paychecks for state income tax. She made arrangements to have 19% of federal income tax withheld for state income tax. On her last paycheck, the federal withholding was $163.88 and her state income tax withholding was $24.58. Which of the following statements is true?

A
Stacy’s employer is withholding the correct amount for state income tax.
B
Stacy’s employer is withholding too little for state income tax.
C
Stacy’s employer is withholding too much for state income tax.
D
Stacy’s employer should not be withholding state income tax.
10

Ralph’s current annual income is $32,000. Using the graph shown below, Ralph has calculated that he will have to pay a total of $9,280 in federal taxes this year. Which of the following statements is true?

Question illustration
A
Ralph’s calculation is too high, he has only calculated state taxes.
B
Ralph’s calculation is too high, his calculation includes state taxes.
C
Ralph’s calculation is correct, he will have to pay $9,280 in federal taxes this year.
D
Ralph’s calculation is too low, he did not include medical care in his calculation.
11

A principal of $5,350 is placed in an account that earns 3.5% interest. If the interest is compounded annually, how much money will be in the account at the end of 4 years?

A
$5,760.06
B
$5,537.25
C
$6,099.00
D
$6,139.25
12

Sue’s bank account has a balance of $899.83 before she starts spending money. She makes the following transactions:TransactionCost ($)Rent353.76Video game32.79Bike maintenance60.26Jacket55.62Rug80.40Night out35.77Sue is considering splitting the cost of a new TV with her roommate. Her share would be $305.22. Can Sue afford this?

A
Yes, she can make the purchase and have money left over.
B
Yes, but doing so will clear out her account.
C
No, making that purchase will overdraw her account.
D
No, she is overdrawn already.
13

Mary and Lewis each open a savings account at the same time. Mary invests $3,700 in an account yielding 3.2% simple interest, and Lewis invests $3,000 in an account yielding 5.9% simple interest. After fifteen years, who has the greater total amount of money, and how much greater is it?

A
Lewis has $879 more than Mary.
B
Lewis has $179 more than Mary.
C
Mary has $776 more than Lewis.
D
Mary has $345 more than Lewis.
14

Which of these can be considered “online banking?”I. A brick-and-mortar bank that allows its customers to transfer money online.II. A bank that has only a few branches but has customers depositing money online.III. A bank that does not exist as a real building, but only has an internet presence.

A
I and II
B
II and III
C
III only
D
I, II, and III
15

In 2007, the FDIC’s insurance limit was $100,000 per person per bank. Approximately 62% of Gil’s deposits were insured by the FDIC. Which of the following was a possible setup for Gil’s deposits?

A
A $13,000 money market account at Bank T; a $31,000 CD, $44,000 savings account, and $16,000 checking account at Bank U; a $70,000 CD and $28,000 money market account at Bank V
B
A $54,000 checking account and $84,000 savings account at Bank T; a $28,000 money market account, $27,000 savings account, and $20,000 CD at Bank U; a $130,000 CD at bank V
C
A $60,000 money market account and $70,000 savings account at Bank T; a $40,000 checking account and $92,000 savings account at Bank U; a $45,000 CD and $75,000 checking acount at Bank V
D
A $108,000 savings account and $46,000 CD at Bank T; a $36,000 money market account and $38,000 CD at Bank U; a $63,000 checking account, $80,000 savings account, and $70,000 money market account at Bank V
16

The same amount of principal is invested in different accounts earning the same interest rate. Which of the following accounts would have the greatest accumulated value at the end of one year?

A
An account earning no interest
B
An account earning simple interest
C
An account earning interest compounded annually
D
An account earning interest compounded daily
17

Orlando invested $16,000 in an eight-year CD bearing 6.5% simple annual interest, but needed to withdraw $3,500 after five years. If the CD’s penalty for early withdrawal was one year’s worth of interest on the amount withdrawn, when the CD reached maturity, how much less money did Orlando earn total than if he had not made his early withdrawal?

A
$227.50
B
$682.50
C
$910.00
D
$455.00
18

Why is simple interest useful for planning parts of your financial future?

A
Simple interest can endure unforeseen economic changes by fluctuating.
B
Simple interest generates more money than any other source of income.
C
Simple interest grows more quickly if you invest in it longer.
D
Simple interest is very regular and can be calculated in advance.
19

Ian invests $13,670 in a savings account at his local bank which gives 1.9% simple annual interest. He also invests $6,040 in an online savings account which gives 4.5% simple annual interest. After nine years, which one will have earned more interest, and how much more interest will it have earned, to the nearest dollar?

A
The local account will have earned $7,521 more interest.
B
The local account will have earned $3,199 more interest.
C
The online account will have earned $3,090 more interest.
D
The online account will have earned $109 more interest.
20

Rex has several hundred thousand dollars to save, and he wants to keep it as safe as possible. What would you recommend Rex do to keep his money safe?

A
Deposit the money in a bank, ideally in a single well-protected account.
B
Deposit the money in a bank, but in several different accounts.
C
Deposit the money in several banks, not putting too much money in any one.
D
Keep the physical cash at home in a fireproof safe.

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