Quick Answer: Which Of The Following Statements Regarding The Self-employment Tax Is Most Accurate?

Which of the following statements regarding tax credit is true?

The correct answer is C) Tax credits reduce taxes payable dollar for dollar. The tax credits reduce the amount of tax liability of a taxpayer.

What is the underpayment penalty rate that taxpayers pay when they underpay their estimated taxes quizlet?

What is the underpayment penalty rate that taxpayers pay when they underpay their estimated taxes? Federal short-term interest rate PLUS THREE percentage points.

Which of the following is not an additional tax a taxpayer may have to pay quizlet?

Which of the following is not an additional tax a taxpayer may have to pay? Excess wage tax. Baker is single and earned $225,000 of salary as an employee in 2018.

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Which of the following does FICA apply to?

What two thing does FICA fund? Your earned income (salary or wages) is subject to FICA (federal insurance contributions act) taxes that fund Social Security and Medicare. the social security tax is equal to 6.20% of your salary up to a maximum level ($118,500).

What does it mean to have capital gain loss?

Definition: Capital gain is the profit one earns on the sale of an asset like stocks, bonds or real estate. It results in capital gain when the selling price of an asset exceeds its purchase price. Capital loss is the reverse of capital gain, i.e. it results in a loss when the investment is sold.

What is the highest federal income tax bracket?

The U.S. currently has seven federal income tax brackets, with rates of 10%, 12%, 22%, 24%, 32%, 35% and 37%. If you’re one of the lucky few to earn enough to fall into the 37% bracket, that doesn’t mean that the entirety of your taxable income will be subject to a 37% tax. Instead, 37% is your top marginal tax rate.

What filing status has the highest standard deduction?

The highest standard deduction amount is associated with the married filing jointly and qualifying widow(er) with dependent child filing statuses.

Can I still file a tax return with no income?

Any year you have minimal or no income, you may be able to skip filing your tax return and the related paperwork. However, it’s perfectly legal to file a tax return showing zero income, and this might be a good idea for a number of reasons.

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What is a good way to lower your tax obligation?

15 Legal Secrets to Reducing Your Taxes

  • Contribute to a Retirement Account.
  • Open a Health Savings Account.
  • Use Your Side Hustle to Claim Business Deductions.
  • Claim a Home Office Deduction.
  • Write Off Business Travel Expenses, Even While on Vacation.
  • Deduct Half of Your Self-Employment Taxes.
  • Get a Credit for Higher Education.

Which of the following best describes gross income?

Which of the following best describes gross income? Income that is not earned, including money received for the investment of money or other property, such as interest, dividends, rents, and royalties. It also includes pensions, alimony, unemployment compensation, and other income that is not from performing services.

Which of the following is an example of non taxable income?

The following items are deemed nontaxable by the IRS: Inheritances, gifts and bequests. Cash rebates on items you purchase from a retailer, manufacturer or dealer. Alimony payments (for divorce decrees finalized after 2018)

How is the recovery period of an asset determined?

How is the recovery period of an asset determined for tax purposes? Revenue Procedure 87-56 helps taxpayers determine the recovery period for assets. The full month convention is used for tax amortization which does not fall under MACRS depreciation.

What are the two parts of FICA taxes?

Unlike federal income tax, FICA tax is a percentage of each employee’s taxable wages. It consists of two types of taxes: Social Security and Medicare. Part of the FICA percentage goes toward Social Security and the other part goes toward Medicare.

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What is the main purpose of FICA?

What is the main purpose of FICA? The main goal is to assist in the identification of the proceeds of unlawful activities, combat money laundering, and fight the financing of terrorist and related activities.

What kind of income is subject to FICA tax?

For 2020, the Social Security wage base is $137,700, up from $132,900 in 2019. This means, if an employee makes $137,700 or less in 2020, the employer and employee each pay 7.65% of the employee’s full salary toward FICA taxes.

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