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38 Cards in this Set

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Internal Revenue Code
tax laws passed by Congress
imposes a higher tax on higher incomes
progressive tax
places a disproportionate burden on low income tax payers., ex: FICA gas taxes
regressive tax
Internal Revenue Code
tax laws passed by Congress
how long does the average american work to pay for his/her taxes per year?
3.5 months
imposes a higher tax on higher incomes
progressive tax
places a disproportionate burden on low income tax payers., ex: FICA gas taxes
regressive tax
government agency responsible for collecting taxes
IRS
tax laws passed by Congress
Internal Revenue Code
how long does the average american work to pay for his/her taxes per year?
3.5 months
largest source of learned income, from employment
earned income
increase in value of taxable investments that you sold during the year
capital gain
certain expenses subtracted from total income to arrive at _____.
adjusted gross income (AGI)
an amount of money you can subtract from taxable income for each qualifying person in the household
exemption
the amount of money you can deduct from your income to determine "taxable income"
deduction
directly reduces the amount of tax you owe
tax credit
examples of tax credit
education credit, adoption, credit, child care credit
what amount can you deduct for each exemption you can claim in 2006?
$3,300
what is the standard deduction for a person filing with single status?
$5,150
what is the standard deduction for a person filing married and jointly?
$10,300
what is the standard deduction for a person filing as head of household?
$7,550
a dollar amount based on filing status
standard deduction
you report and deduct actual expenses in certain categories
itemized deduction
what happens to taxes when you sell an asset for a profit?
they are postponed
how long are long term gains from assets held for?
12 months or more
how are short term gaines taxed?
marginal tax rate
up to what amount are gains on the sale of your primary home tax free?
$500,000 per couple or $250,000 per individual
shows how much income tax must be paid for particular ranges of income. There are separate schedules for different household types.
tax rate schedule
range of taxable income to which a particular marginal tax rate applies
tax bracket
None
what is aimed at minimizing your average tax rate or the proportion of total taxable income paid in taxes?
tax planning
what is the formula to determine average tax rate?
taxes paid/taxable income
when making decisions you should always consider the ____, which is the reduction in taxes owed as a result of a financial decision
marginal tax rate
What does the AMT do?
calculates your taxes under a different set of rules in which many deductions do not apply, result: you pay a higher rate.
T or F: Most taxpayers have less withheld than they owe, and therefore do not receive a refund.
False; most do
Usually a person who is self-employed owes taxes beyond federal. What is an example of this?
FICA
What is the time and date when the tax returns must be postmarked?
midnight on April 15th of the year following the tax year
What is an online system used to replace manual steps when filing taxes?
e-file
Name the three primary forms.
1040, 1040EZ, 1040A