Exam 3: Preparing Your Taxes

Personal exemptions are tax deductions based on the number of taxpayers and dependents in the taxpayer's household.

A taxpayer can write off a maximum of $3,000 of capital losses in one tax year.

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. -Child support received is included in gross income.

Qualifying interest on a student loan can be written off 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. -The Federal personal income tax is a flat tax.

The personal exemption for a student can be taken both by the parent and by the child.

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. -Qualified dividends are taxed at the same rates as long-term capital gains.

State income taxes and real estate taxes are both itemized deduction items.

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. -The common name for Federal Insurance Contribution Act payments is [income taxes | social security].

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. -Qualified dividends are taxed at the same rates as [earned income | long-term capital gains].

Most states generate the majority of their revenues from property 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. -The lowest marginal tax rate is currently [10% | 35%].

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. -You will have to list and be able to prove [standard | itemized] deductions if audited.

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. -The date by which your tax liability must be paid in order to avoid late payment penalties and/or interest is [April 15 | August 15].

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. -Tax rates,standard deductions,and personal exemptions are now tied to the Consumer Price Index to prevent "bracket creep."

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. -Dividends received from stocks are known as [passive | portfolio] 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. -Tax [avoidance | evasion] involves failure to accurately report income or deductions,and,in extreme cases,a failure to pay taxes altogether.

Opening a traditional IRA would allow you to take advantage of tax free earnings.

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 have any earned income,you are required to file a tax return.

You have no employer provided pension plan;your IRA contributions are treated as