FHCE 3200 UPDATED 2026 EXAM SCRIPT QUESTIONS AND
SOLUTIONS RATED A+
✔✔federal insurance contributions act (FICA) - ✔✔tax is used exclusively to pay for two
government programs: social security and medicare
✔✔FICA - social security - ✔✔-applies to earned income up to $132,900
--6.2%of gross pay (half paid by employer; half paid by employee)
✔✔FICA - medicare - ✔✔-applies to all earned income
--1.45% of gross pay (half paid by employer; half paid by employee)
✔✔sales tax - ✔✔imposed by state and local governments on the sale of certain goods
and services, and are paid when you buy something
✔✔tax base - ✔✔amount of money that will be taxed, generally the cost of the item you
purchase
✔✔tax rate - ✔✔used to calculate the amount of tax owed and is generally denoted as a
percentage rate, such as 7.5%
✔✔property tax - ✔✔assessed based on the value of property you own, such as your
car or your home
--vary by state and are most often assessed by the city or country
--often referred to as ad valorem taxes, which means "according to value"
--based on the current assessed value of the property
--determined by each taxing authority (city or state)
✔✔yes - ✔✔do you pay property taxes after you've paid off your home?
✔✔flat tax - ✔✔-everyone pays the same tax rate
-everyone shares the tax burden in proportion to his or her income
✔✔regressive tax - ✔✔low-income earners pay a larger proportion of their incomes in
taxes relative to high-income households
✔✔progressive tax - ✔✔-those with more income pay increasingly higher taxes
-high-income earners pay a disproportionately larger amount of taxes
✔✔federal surplus - ✔✔-annual tax revenue exceeds annual federal expenditures
--decreases the U.S. debt
✔✔federal deficit - ✔✔-annual expenditures exceed annual revenue
--adds to the U.S. debt
,✔✔U.S. debt - ✔✔money that the U.S. has borrowed and must repay
✔✔2017 total U.S. debt - ✔✔~20 trillion
✔✔tax return - ✔✔information that the taxpayer compiles and reports to the IRS on a
standardized form
✔✔tax-return process: required - ✔✔file a tax return if your income is above a certain
level
✔✔tax-return process: not required but a good idea - ✔✔file a tax return even if you
owe no tax because you can claim a refund for any taxes withheld
✔✔single - ✔✔-not married
-no dependent children or relatives
✔✔married filing jointly - ✔✔must be legally married on the last day of the year (dec 31)
✔✔married filing separately - ✔✔must be legally married on the last day of the tax year
and choose to file separately
✔✔head of household - ✔✔-not married
-support at least one qualifying dependent
✔✔surviving spouse with dependent children - ✔✔-spouse died within the three
previous years and have not remarried
-support at least one qualifying child
✔✔types of tax forms - ✔✔-form 1040EZ
-form 1040A
-form 1040
✔✔form 1040EZ - ✔✔-a simplified tax form for
--single or married-filing-jointly
--income reported from wages or salaries
--standard deduction use
--no dependents
✔✔form 1040A - ✔✔-a more complicated form than form 1040EZ
--allows other types of income reported (such as tips, interest, dividends, and
scholarships)
--allows the taxpayer to claim more deductions and tax credits
, ✔✔form 1040 - ✔✔-the standard tax form everyone can use
-used by the highest-earning households
-also used by households with modest incomes
✔✔support - ✔✔the child did not provide more than half of his or her own support
during the tax year
✔✔age - ✔✔at the end of the tax year, the child is:
-younger than 19 and younger than the taxpayer
OR
-a full-time student, younger than 24, and younger than the taxpayer
✔✔relationship - ✔✔-taxpayer's child, adopted child, stepchild, foster child, or his or
descendent
OR
-taxpayer's sibling, half-sibling, step-sibling, or descendent of any of them
✔✔abode - ✔✔the child must live with the taxpayer for more than half the year,
excluding temporary absences such as schooling, vacations, and illness
✔✔gross income - ✔✔the sum of all your income
✔✔adjusted gross income (agi) - ✔✔amount calculated after the for agi deductions
(expenses allowed by congress to offset gross income)
✔✔taxable income - ✔✔the amount remaining to be taxed after the from agi deductions
(standard or itemized)
✔✔standard deduction - ✔✔an amount set by congress
✔✔itemized deductions - ✔✔specific expenditures that taxpayers can claim instead of
the standard deduction
✔✔effective tax rate (average tax rate) - ✔✔measures the average tax an individual
pays on his or her entire income
✔✔effective tax rate - ✔✔total federal taxes / taxpayer's total income =
✔✔capital gain income - ✔✔produced by owning capital assets
--things you own for investment or personal use
---stocks
---mutual funds
---coin collections
---other investments
SOLUTIONS RATED A+
✔✔federal insurance contributions act (FICA) - ✔✔tax is used exclusively to pay for two
government programs: social security and medicare
✔✔FICA - social security - ✔✔-applies to earned income up to $132,900
--6.2%of gross pay (half paid by employer; half paid by employee)
✔✔FICA - medicare - ✔✔-applies to all earned income
--1.45% of gross pay (half paid by employer; half paid by employee)
✔✔sales tax - ✔✔imposed by state and local governments on the sale of certain goods
and services, and are paid when you buy something
✔✔tax base - ✔✔amount of money that will be taxed, generally the cost of the item you
purchase
✔✔tax rate - ✔✔used to calculate the amount of tax owed and is generally denoted as a
percentage rate, such as 7.5%
✔✔property tax - ✔✔assessed based on the value of property you own, such as your
car or your home
--vary by state and are most often assessed by the city or country
--often referred to as ad valorem taxes, which means "according to value"
--based on the current assessed value of the property
--determined by each taxing authority (city or state)
✔✔yes - ✔✔do you pay property taxes after you've paid off your home?
✔✔flat tax - ✔✔-everyone pays the same tax rate
-everyone shares the tax burden in proportion to his or her income
✔✔regressive tax - ✔✔low-income earners pay a larger proportion of their incomes in
taxes relative to high-income households
✔✔progressive tax - ✔✔-those with more income pay increasingly higher taxes
-high-income earners pay a disproportionately larger amount of taxes
✔✔federal surplus - ✔✔-annual tax revenue exceeds annual federal expenditures
--decreases the U.S. debt
✔✔federal deficit - ✔✔-annual expenditures exceed annual revenue
--adds to the U.S. debt
,✔✔U.S. debt - ✔✔money that the U.S. has borrowed and must repay
✔✔2017 total U.S. debt - ✔✔~20 trillion
✔✔tax return - ✔✔information that the taxpayer compiles and reports to the IRS on a
standardized form
✔✔tax-return process: required - ✔✔file a tax return if your income is above a certain
level
✔✔tax-return process: not required but a good idea - ✔✔file a tax return even if you
owe no tax because you can claim a refund for any taxes withheld
✔✔single - ✔✔-not married
-no dependent children or relatives
✔✔married filing jointly - ✔✔must be legally married on the last day of the year (dec 31)
✔✔married filing separately - ✔✔must be legally married on the last day of the tax year
and choose to file separately
✔✔head of household - ✔✔-not married
-support at least one qualifying dependent
✔✔surviving spouse with dependent children - ✔✔-spouse died within the three
previous years and have not remarried
-support at least one qualifying child
✔✔types of tax forms - ✔✔-form 1040EZ
-form 1040A
-form 1040
✔✔form 1040EZ - ✔✔-a simplified tax form for
--single or married-filing-jointly
--income reported from wages or salaries
--standard deduction use
--no dependents
✔✔form 1040A - ✔✔-a more complicated form than form 1040EZ
--allows other types of income reported (such as tips, interest, dividends, and
scholarships)
--allows the taxpayer to claim more deductions and tax credits
, ✔✔form 1040 - ✔✔-the standard tax form everyone can use
-used by the highest-earning households
-also used by households with modest incomes
✔✔support - ✔✔the child did not provide more than half of his or her own support
during the tax year
✔✔age - ✔✔at the end of the tax year, the child is:
-younger than 19 and younger than the taxpayer
OR
-a full-time student, younger than 24, and younger than the taxpayer
✔✔relationship - ✔✔-taxpayer's child, adopted child, stepchild, foster child, or his or
descendent
OR
-taxpayer's sibling, half-sibling, step-sibling, or descendent of any of them
✔✔abode - ✔✔the child must live with the taxpayer for more than half the year,
excluding temporary absences such as schooling, vacations, and illness
✔✔gross income - ✔✔the sum of all your income
✔✔adjusted gross income (agi) - ✔✔amount calculated after the for agi deductions
(expenses allowed by congress to offset gross income)
✔✔taxable income - ✔✔the amount remaining to be taxed after the from agi deductions
(standard or itemized)
✔✔standard deduction - ✔✔an amount set by congress
✔✔itemized deductions - ✔✔specific expenditures that taxpayers can claim instead of
the standard deduction
✔✔effective tax rate (average tax rate) - ✔✔measures the average tax an individual
pays on his or her entire income
✔✔effective tax rate - ✔✔total federal taxes / taxpayer's total income =
✔✔capital gain income - ✔✔produced by owning capital assets
--things you own for investment or personal use
---stocks
---mutual funds
---coin collections
---other investments
