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Review Questions 4-1 2-18 - adjusted gross income in...

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Greg Stoker February 17, 2008 Professor Linck FNPL-101 Review Questions 4-1 3. The difference between progressive taxes and regressive taxes is how the amount of taxes paid are divided up. With progressive taxes, the higher-income individuals would pay proportionately more than others, while with regressive taxes, a disproportionate financial burden is placed on low-income tax payers. Our federal income tax is a progressive tax. Social Security Payroll tax is a regressive tax because everyone pays the same. 13. The difference between earned income and income invested is that earned income comes in the form of salaries, wages, commissions, etc. while income invested is more like interest earned, dividends, capital gains, royalties, etc. 16. A standard deduction is a dollar amount based on filing status that is subtracted from
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Unformatted text preview: adjusted gross income in calculating taxable income. Itemized deductions are an alternative to the standard deduction in which the taxpayer reports and deducts actual expenses in certain allowed categories to arrive at taxable income. You should use itemized deductions if your annual expenses in certain categories exceed the standard deduction for your filing status. You should use form Schedule A. 24. The alternative minimum tax is federal income tax calculations designed to ensure that people who receive certain tax breaks pay their fair share of taxes. 34. An audit is a process by which the IRS more carefully examines particular tax returns for errors and omissions. Audit triggers include suspicious characteristics of income, deductions that have been correlated with fraud in the past....
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