Jordan earns $600 gross. His total withholdings are 17.65% (Social Security, Medicare, and federal income tax). What is his approximate net pay?
Approximately $494
This form is sent to you by your employer in January and summarizes everything you earned and everything withheld from your paychecks over the previous year.
W-2
Derek marked exempt on his W-4. What does this mean for his paychecks and when might this make sense?
No federal income tax will be withheld. It makes sense if he expects to owe no taxes such as if he is below the income threshold.
Carlos works for himself as a freelance graphic designer. What term describes his work status and what extra tax does he face that a regular employee does not?
Carlos is self-employed and must pay a 15.3% self-employment tax.
This form is completed on your first day of work and tells your employer how much federal income tax to withhold from your paycheck.
W-4
Emma's gross pay is $900. Her pre-tax 401(k) contribution is $50. What is her taxable income?
$850
What is the standard deadline to file your federal tax return and what option do you have if you cannot meet it?
April 15th. You can file for an extension until October 15th.
When you start a new job you complete a W-4 and an I-9. What is the purpose of each form?
W-4: tells your employer how much federal income tax to withhold from your paycheck. I-9: verifies your identity and proves you are eligible to work in the U.S.
Alice earned $6,000 at the campus bookstore and $11,500 as a cashier, totaling $17,500. Does she need to file taxes? What forms does she need?
Yes, she exceeds the minimum income threshold. She needs two W-2 forms and a 1040.
If you paid more in taxes throughout the year than you actually owed, the IRS sends this back to you.
Refund
Marco just started a new job. He needs to prove he is legally allowed to work in the United States. Which form does he complete?
I-9
A retirement contribution that is deducted from your paycheck before taxes are calculated, lowering your taxable income.
Pre-tax deduction
What is a 1099 form and who receives one?
A form reporting income other than wages. It is received by freelancers, contractors, or people with unearned income such as investment earnings.
The government budget for national defense and education can shift from year to year depending on priorities. What type of spending is this?
Discretionary government spending
A child or relative who relies on you for financial support and can be listed on your tax return.
Dependent
Layla earned $800 babysitting and $400 in interest from a savings account. What type of income is each?
Babysitting is earned income. Savings interest is unearned income.
Your total earnings before any taxes or deductions are taken out.
Gross pay
Government spending on Social Security and Medicare cannot be redirected to other programs and is required by law. What type of spending is this?
Mandatory government spending
This payroll tax funds both Social Security and Medicare and is split between you and your employer.
FICA
Priya worked in New York during college then moved to Texas after graduation and started a job there. How many state tax returns does she need to file?
One. Only New York because Texas has no state income tax.
Tyler is 17, works part-time, and his parents claim him as a dependent. He earned $4,000 this year and had $300 withheld for federal income taxes. He is not legally required to file. Should he anyway and why?
Yes. He would likely receive his $300 back as a refund.
Name the three main methods of filing your taxes. Which is cheapest? Which is most reliable?
Paper filing, tax software, and hiring a tax professional. Cheapest is paper filing. Most reliable is a tax professional.
The amount you actually take home after all deductions are removed.
Net pay
Sofia works three part-time jobs. How many W-2 forms should she expect to receive in January?
Three, one from each employer
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