Exam 3: Preparing Your Taxes

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. -[Both you and your employer | Only your employer] will make social security contributions based on your wages.

Persons who work for more than one employer in any year will owe more Social Security taxes than if all their income was earned from a single employer.

One's average tax rate is typically lower than one's marginal tax rate.

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] focuses on reducing taxes in ways that are legal and compatible with the intent of Congress.

You would typically not include ____ in your gross income.

There is no limit on the amount of Social Security withheld annually.

A tax audit is a(n)

Which of the following can be adjustment(s)to gross income on the 1040 form?

Marginal tax and average tax rate refer to the same thing.

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].

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. -My son,age 26 and a full-time college student,earned $5,000 last year.He still lives at home,and I provide over 50% of his support.I [can | cannot] claim him as a dependent on my tax return.

If you earn less than $15,000,you probably pay more in social security taxes than in federal income taxes.

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

Portfolio-related expenses can be written off against passive income.

Sue and Tim are married taxpayers in the 33% marginal tax bracket.In 2011,they sold common stock shares for a long-term capital gain of $3,800.They also sold some technology stock for a long-term capital loss of $9,000.In addition,they sold the home they had lived in for the past 10 years and experienced a $75,000 gain on the house.How much will their net capital gains (or losses)be for 2011? How much will they pay (or save)in taxes as a result of these transactions?

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 pay a professional to prepare your taxes,any errors on the return will be [your | the preparer's] responsibility.

Qualifying interest on a student loan can be written off as an itemized deduction.

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

____ income is subject to federal taxes.

Anyone can legally prepare tax returns and charge a fee for that service.