Chapter 7 Review

What is a cafeteria plan?

• A meal plan offered by educational institutions.

• A portion of pre-tax wages set aside for the payment of certain medical, childcare, parental care, and nonreimbursed medical insurance expenses.

• A government program providing food assistance.

• A detailed plan for starting a cafeteria business.

Who is considered a dependent for tax purposes?

• A person who lives with the taxpayer for more than half the year.

• A person reported on a taxpayer's income tax form that the taxpayer supports financially.

• A person who is employed by the taxpayer.

• A person who occasionally borrows money from the taxpayer.

What is an exemption on tax forms?

• A penalty for not following tax laws.

• A mandatory fee added to the taxpayer's total tax due.

• Information included on tax forms that lowers taxes; exemptions include dependents as well as the taxpayer.

• A request to be excluded from paying taxes.

What is a flat tax?

• A tax that increases based on the taxpayer's income.

• A tax that is the same percentage or rate for everyone, such as sales tax.

• A tax that is only applied to luxury items.

• A tax that is determined by the size of the taxpayer's property.

What is a flexible spending account (FSA)?

• An account used for saving money tax-free for retirement.

• An account where employees can save pre-tax dollars for education expenses.

• An employee-sponsored cafeteria plan in which employees choose to deposit funds that will be used in a specified 12-month period for certain expenses.

• A savings account with a high interest rate offered by banks.

What is Form 1040 used for?

• To apply for a tax refund.

• To report personal income and expenses for small businesses.

• A tax form used by people that have other types of income such as royalties, alimony, or prizes; also called the long form.

• To request an extension for filing taxes.

What is the purpose of Form W-2?

• A form used to report the withholding data; a Wage and Tax Statement given to employees to compute federal, state, and local income taxes; a copy of the W-2 is submitted along with tax forms.

• A form used to report tips received by employees.

• A form used to request a tax payment plan.

• A form used to declare self-employment income.

What does the Internal Revenue Service (IRS) do?

• Provides loans to small businesses.

• Regulates the stock market.

• Collects federal taxes.

• Manages federal student aid programs.

What does it mean to itemize on a tax form?

• To pay taxes in installments.

• To list all personal assets.

• When deductions are listed on a tax form.

• To file taxes electronically.

What is the difference between "married filing jointly" and "married filing separately"?

• "Married filing jointly" is for couples who are legally married, while "married filing separately" is for couples who are separated but not divorced.

• "Married filing jointly" is for couples with children, while "married filing separately" is for childless couples.

• "Married filing jointly" is for couples who choose to fill out one income tax return together, while "married filing separately" is for those who choose to fill out separate income tax returns.

• There is no difference; they are just two terms for the same filing status.