Exam 3: Preparing Your Taxes

The standard deduction is a blanket deduction that depends on the taxpayers

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement. -There is a [high | low] chance that one's tax return will be audited in a given year.

Which of the following state and local taxes are deductible on federal income taxes for those that itemize deductions?

The amount of one personal exemption in 2008 was $3,500.

Tax preparers must be licensed by either the state of federal government.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement. -A tax credit is subtracted from your [taxable income | tax liability].

The alternative minimum tax is an issue only for high-income taxpayers.

You are preparing your own tax return.The least costly source for answering your questions would be

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement. -[All | Some] of your medical expenses during the year could be taken as an itemized deduction.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement. -A typical American family currently pays about [one-third | one-tenth] of its gross income in taxes.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement. -If you are married,you can legally file a single tax return.

You should itemize deductions when total itemized deductions exceed the standard deduction.

Ben and Jack both earned $60,000 this year.Ben (age 30)is married with two children,and Jack (age 68)is single with no dependents.Which of the following is true regarding the amount of Social Security taxes they will pay?

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement. -As a single taxpayer with no dependents,one is generally eligible to file as "head of household."

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement. -[Alimony | Child support] would be reported as taxable income.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement. -A long-term capital gain,a investment held for more than 6 months,would be taxed at the same rate as earned income.

An investment must be owned over one year in order to qualify for long-term capital gains treatment.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement. -Your marital status will affect the amount of social security you must pay in a year.

____ income receives the same preferential tax treatment as long-term capital gains.