PF_Chapter7

Question 1

Revenue

Answer 1

Money collected by the government in the form of taxes

Question 2

Ability-to-pay principle

Answer 2

Individuals with high incomes should pay more taxes than people with low incomes

Question 3

Progressive taxes

Answer 3

Taxes that take a larger share of income as the amount of income grows (ex. Federal income taxes)

Question 4

Regressive taxes

Answer 4

Taxes that take a smaller share of income as the amount of income grows (ex. Sales tax)

Question 5

Proportional taxes

Answer 5

Taxes for which the rate stays the same, regardless of income (ex. Property taxes)

Question 6

Excise taxes

Answer 6

Sales taxes imposed on gasoline, cigarettes, alcoholic beverages, air travel, and telephone service.

Question 7

Internal Revenue Service

Answer 7

Agency of the Department of Treasury with the main functions of collecting income taxes and enforcing tax laws

Question 8

Congress

Answer 8

Has the power to levy taxes

Question 9

Tax brackets

Answer 9

Taxable income ranges that determine tax rates

Question 10

Deficit

Answer 10

When the government spends more money than it receives in revenue

Question 11

Voluntary compliance

Answer 11

Means all citizens are expected to prepare and file tax returns on their own accord without force

Question 12

Audit

Answer 12

An examination of your tax returns

Question 14

Filing status

Answer 14

Describes your tax-filing group based on your marital status

Question 15

Exemption

Answer 15

An amount you may subtract from your income for each person who depends on you income to live

Question 16

Dependent

Answer 16

A person who lives with you and for whom you pay more than half of his or her living expenses

Question 17

Gross income

Answer 17

All the taxable income you receive

Question 18

Earned income

Answer 18

Money you earned from working

Question 19

Unearned income

Answer 19

Money you received from passive activity (other than working)

Question 20

Adjusted gross income

Answer 20

Amount of income after adjustments have been subtracted from gross income

Question 21

Itemized deductions

Answer 21

Expenses you can subtract from adjusted gross income to determine your taxable income

Question 22

Standard deductions

Answer 22

A stated amount that you may subtract from adjusted gross income instead of itemizing your deductions

Question 23

Taxable income

Answer 23

The income on which you will pay tax

Question 24

Tax credit

Answer 24

An amount subtracted directly from the tax owed

Question 25

15-Apr

Answer 25

Deadline to file taxes

Question 26

1040EZ

Answer 26

You can use this tax form if you are single or married filing jointly, claim no dependents, and make less than $100,000

Question 27

1040A

Answer 27

You can use this tax form if you earn less than $100,000 and you can take more deductions than with 1040EZ