What is the difference between adjustments and credits?
Adjustments to income influence final tax bill indirectly, credits reduce tax bill directly, dollar for dollar.
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What is the difference between earned income and investment income?
Earned income is something you work for. Investment income comes from sales of securities (stocks, bonds).
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15
What is the difference between a secured and non-secured loan?
A secured loan requires collateral, non-secured doesn't.
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15
Mary has no tax liability for 2020. But she earned EIC of $500. What will happen with that credit?
Full amount of $500 EIC will be refunded to her by the IRS.
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What is a final tax bill?
Amount, owed to the government after all payments, and/or credits were applied to tax liability.
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What is collateral?
Something you offer to secure a loan.
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15
Give example of liability.
mortgage, loan, account payable
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What is an equity?
Something that you own, that belongs to you.
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What is the difference between tax liability and a final tax bill?
Final tax bill equals tax liability, minus any payments already made, or/and credit applied..
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What is an asset?
Something that can produce economic value or benefit.
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What is a tax liability?
Amount of tax, an American tax payer pays to the American government.
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What is income?
Money, received on a regular basis.
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15
At 2020, Mary worked at a bank. Her tax liability is $1500. Her employer withheld from her paycheck $1000 of Federal tax liability. What her final tax bill?
