H&R Block Ch. 1&2 || Possible Questions Accurately Answered.
Wage correct answers Compensation, usually financial, received by workers in exchange for
their work.
Adjusted gross income (AGI) correct answers Equals gross income, less reductions that are
allowable, regardless of whether personal deductions are itemized.
Credits correct answers Reductions of tax liablility allowed for various purposes to tax payers
who meet the qualifications. Some are refundable some are non-refundable. Some credits may be
carried to different years.
Refundable credits correct answers Credits where the IRS will send the taxpayer a refund for any
amount in excess of the tax liablity.
Non-refundable credits correct answers These credits can only reduce tax liability to zero.
Earned income correct answers Income from personal services as distinguished from income
generated by property or other sources. Includes all amounts received as wages, tips, bonuses,
other employee compensation, and self-employment income, whether in the form of money,
serivices, or property.
Exemption correct answers An amount ($3650 for 2009) allowed by law as a reduction of
income that would otherwise be taxed.
Federal Income Tax Withheld correct answers The amount taken out of income by the payer and
submitted to the IRS as an advance payment of the taxpayer's federal income tax.
Gross income correct answers Total worldwide income received in the form of money, property,
or services that is subject to tax.
, Income correct answers The word (in it's broad sense) is the gain derived from capital, labor, or a
combination of the two. It is distinguishable from the capital itself. Ordinarily for income tax
purposes, this word is not used alone. Rather it is used within such discriptive terms as gross
income, taxable money, adjusted gross income, all of which are defined elsewhere in this
glossary.
Medicare Part A correct answers The medicare tax taken out of an employer's wages, or the same
tax paid by a self-employed person on net self-employed income. The medicare A tax rate is
1.45% of gross wages (2.9% for self-employed individuals).
Social Security Tax withheld correct answers The employee's share of social security tax that
was taken out of the employer's pay and submitted along with the employer's share to the IRS by
the employer. Both the employee and the employer pay 6.2% of the first $106,800 of the
employee's gross wages (for 2009).
Social Security Wages correct answers Total wages paid to an employee that are subject to this
tax. This amount does not include tips. Wages are also subject to medicare tax.
Tax Liability correct answers The amount of total tax due the IRS after any credits and before
taking into account any advance payments (withholding, estimated payments, etc.) made by the
taxpayer.
Taxable income correct answers Adjusted gross income less itemized deductions or the standard
deduction, less allowable personal and dependent exemption amounts. This term is also used to
refer to income tha is not exempt or excluded from taxation. For example, "Wages are taxable
income, but gifts are not."
Unearned income correct answers Taxable income other than that received for services
performed (earned Income). Unearned income includes money received for the investment of
money or other property, such as interest, dividends, and royalties. It also includes pensions,
alimony, unemployment compensation, and other income that is not earned.
Wage correct answers Compensation, usually financial, received by workers in exchange for
their work.
Adjusted gross income (AGI) correct answers Equals gross income, less reductions that are
allowable, regardless of whether personal deductions are itemized.
Credits correct answers Reductions of tax liablility allowed for various purposes to tax payers
who meet the qualifications. Some are refundable some are non-refundable. Some credits may be
carried to different years.
Refundable credits correct answers Credits where the IRS will send the taxpayer a refund for any
amount in excess of the tax liablity.
Non-refundable credits correct answers These credits can only reduce tax liability to zero.
Earned income correct answers Income from personal services as distinguished from income
generated by property or other sources. Includes all amounts received as wages, tips, bonuses,
other employee compensation, and self-employment income, whether in the form of money,
serivices, or property.
Exemption correct answers An amount ($3650 for 2009) allowed by law as a reduction of
income that would otherwise be taxed.
Federal Income Tax Withheld correct answers The amount taken out of income by the payer and
submitted to the IRS as an advance payment of the taxpayer's federal income tax.
Gross income correct answers Total worldwide income received in the form of money, property,
or services that is subject to tax.
, Income correct answers The word (in it's broad sense) is the gain derived from capital, labor, or a
combination of the two. It is distinguishable from the capital itself. Ordinarily for income tax
purposes, this word is not used alone. Rather it is used within such discriptive terms as gross
income, taxable money, adjusted gross income, all of which are defined elsewhere in this
glossary.
Medicare Part A correct answers The medicare tax taken out of an employer's wages, or the same
tax paid by a self-employed person on net self-employed income. The medicare A tax rate is
1.45% of gross wages (2.9% for self-employed individuals).
Social Security Tax withheld correct answers The employee's share of social security tax that
was taken out of the employer's pay and submitted along with the employer's share to the IRS by
the employer. Both the employee and the employer pay 6.2% of the first $106,800 of the
employee's gross wages (for 2009).
Social Security Wages correct answers Total wages paid to an employee that are subject to this
tax. This amount does not include tips. Wages are also subject to medicare tax.
Tax Liability correct answers The amount of total tax due the IRS after any credits and before
taking into account any advance payments (withholding, estimated payments, etc.) made by the
taxpayer.
Taxable income correct answers Adjusted gross income less itemized deductions or the standard
deduction, less allowable personal and dependent exemption amounts. This term is also used to
refer to income tha is not exempt or excluded from taxation. For example, "Wages are taxable
income, but gifts are not."
Unearned income correct answers Taxable income other than that received for services
performed (earned Income). Unearned income includes money received for the investment of
money or other property, such as interest, dividends, and royalties. It also includes pensions,
alimony, unemployment compensation, and other income that is not earned.
