Question 1

A tax audit is an examination by enrolled agents to validate the accuracy of a filed tax return.

Accepted Answer

A) True 
 B)False  False

Question 2

A simplified version of Form 1040 for individual income tax if you have a taxable income of less than $100,000 from wages only and you do not claim any itemized deductions or any tax credit is:

Accepted Answer

A) Schedule a. 
B) Schedule b. 
C) Form 1040S. 
D) Form 1040A. 
E) Form 1040EZ. 
A) Schedule a. 
B) Schedule b. 
C) Form 1040S. 
D) Form 1040A. 
E) Form 1040EZ. E

Question 3

Which of the following is an illegal method of reducing your current tax liability?

Accepted Answer

A) Not reporting the taxable income you receive 
B) Investing in a tax deferred annuity 
C) Shifting income to your children 
D) Investing money in municipal bonds 
E) Putting money in a Roth IRA 
A) Not reporting the taxable income you receive 
B) Investing in a tax deferred annuity 
C) Shifting income to your children 
D) Investing money in municipal bonds 
E) Putting money in a Roth IRA A

Question 4

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 have to pay?

Accepted Answer

A) They will pay the same amount of Social Security taxes. 
B) Ben will pay lesser Social Security taxes because he is married. 
C) Ben will pay lesser Social Security taxes because he has children. 
D) Jack will pay lesser Social Security taxes because he is single. 
E) Jack will pay lesser Social Security taxes because he is over the age of 65. 
A) They will pay the same amount of Social Security taxes. 
B) Ben will pay lesser Social Security taxes because he is married. 
C) Ben will pay lesser Social Security taxes because he has children. 
D) Jack will pay lesser Social Security taxes because he is single. 
E) Jack will pay lesser Social Security taxes because he is over the age of 65.

Question 5

Which of the following statements is true of the tax levied under the Federal Insurance Contributions Act (FICA)?

Accepted Answer

A) It is also known as property tax. 
B) It is paid equally by employer and employee. 
C) It is not applicable to self-employed persons. 
D) It is applicable to all federal employees. 
E) It is used to provide insurance against theft. 
A) It is also known as property tax. 
B) It is paid equally by employer and employee. 
C) It is not applicable to self-employed persons. 
D) It is applicable to all federal employees. 
E) It is used to provide insurance against theft.

Question 6

Murray (age 68,single)sold his home owned for 35 years so that he could relocate to a place that is closer to where his grandchildren live.He realized a $400,000 capital gain on the home.Murray's tax liability on capital gain is computed on _____.

Accepted Answer

A) $400,000 
B) $300,000 
C) $250,000 
D) $150,000 
E) $0 
A) $400,000 
B) $300,000 
C) $250,000 
D) $150,000 
E) $0

Question 7

A taxpayer can file for an automatic extension of _____ months.

Accepted Answer

A) 2 
B) 4 
C) 6 
D) 9 
E) 12 
A) 2 
B) 4 
C) 6 
D) 9 
E) 12

Question 8

Tax credits reduce your:

Accepted Answer

A) tax liability. 
B) adjusted gross income. 
C) tax refund. 
D) tax withholding. 
E) taxable income. 
A) tax liability. 
B) adjusted gross income. 
C) tax refund. 
D) tax withholding. 
E) taxable income.

Question 9

George,aged 40,has the following expenses.He wants to include them under itemized deductions for the year.His adjusted gross income is $60,000.What is the total itemized deduction he can take? (Show all work.)
 $$\begin{array} { | l | l | } 
\hline \text { Medical expenses } & \$ 4,500 \
\hline \text { Home mortgage interest } & 8,000 \
\hline \text { Credit card interest } & 450 \
\hline \text { Charitable contributions } & 1,500 \
\hline \text { State property taxes } & 2,400 \
\hline \text { Job-related expenses } & 1,900 \
\hline
\end{array}$$

Accepted Answer

The answer of George,aged 40,has the following expenses.He wants to...

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

The Robertsons,a couple with an adjusted gross income of $28,500,decides to contribute the maximum amount possible toward their individual retirement accounts (IRAs)even though Mr.Robertson is covered by a pension plan where he works.He names his wife the beneficiary of the IRA.What is such a tax strategy called?

Accepted Answer

A) Tax deferral strategy 
B) Tax avoidance strategy 
C) Tax evasion strategy 
D) Tax ignorance strategy 
E) Income shifting strategy 
A) Tax deferral strategy 
B) Tax avoidance strategy 
C) Tax evasion strategy 
D) Tax ignorance strategy 
E) Income shifting strategy

Question 12

A progressive tax system is one in which:

Accepted Answer

A) tax rates are directly proportional to inflation rates. 
B) people at higher-income levels pay tax at a higher rate than people at lower-income levels. 
C) tax rates are inversely related to inflation rates. 
D) people at higher-income levels pay tax at a lower rate than people at lower-income levels. 
E) there are no exemptions or deductions available from taxable income. 
A) tax rates are directly proportional to inflation rates. 
B) people at higher-income levels pay tax at a higher rate than people at lower-income levels. 
C) tax rates are inversely related to inflation rates. 
D) people at higher-income levels pay tax at a lower rate than people at lower-income levels. 
E) there are no exemptions or deductions available from taxable income.

Question 13

Income shifting refers to the process of transferring income from the taxpayer to the IRS.

Accepted Answer

A) True 
 B)False

Question 14

Henry is married to Lillian,and they have two dependent children.Both of them want to file their own tax returns,reporting only his or her own income,deductions,and exemptions.The filing status of Henry and Lillian in their tax returns is:

Accepted Answer

A) single taxpayer. 
B) married filing jointly. 
C) head of household. 
D) qualifying widow. 
E) married filing separately. 
A) single taxpayer. 
B) married filing jointly. 
C) head of household. 
D) qualifying widow. 
E) married filing separately.

Question 15

Jamie has taxable income of $45,000.She is single,and her tax rate is 10% on the first $9,225 of the taxable income,15% on the amount over $9,225 up to $37,450 of the taxable income,and 25% on the remainder.What are Jamie's tax liability,marginal tax rate,and average tax rate? (Show all work.)

Accepted Answer

Tax liability = 10% × $9,225 + 15% × ($3

Question 16

If you are married,you can legally file as a single taxpayer.

Accepted Answer

A) True 
 B)False

Question 17

The federal government gets a majority of its revenue from _____ tax.

Accepted Answer

A) sales 
B) property 
C) excise 
D) income 
E) estate 
A) sales 
B) property 
C) excise 
D) income 
E) estate

Question 18

Mr.and Mrs.McMurray have three children,aged 6,12,and 18,for whom they paid childcare expenses of $6,000 in 2015.The McMurrays' tax liability calculated as per the tax schedule is $10,000.The McMurrays' tax liability is _____.

Accepted Answer

A) $8,000 
B) $8,500 
C) $8,800 
D) $13,190 
E) $10,000 
A) $8,000 
B) $8,500 
C) $8,800 
D) $13,190 
E) $10,000

Question 19

Tom sold mutual fund shares,which he had owned for 3 years,so that he could use the proceeds to return to college.Tom is in the 15% marginal tax bracket,and his capital gain from the sale was $11,000.How much tax does Tom owe on the gain?

Accepted Answer

A) $11,000 
B) $3,080 
C) $1,650 
D) $1,100 
E) $0 
A) $11,000 
B) $3,080 
C) $1,650 
D) $1,100 
E) $0

Question 20

All taxpayers have an equal probability of having their tax returns audited.

Accepted Answer

A) True 
 B)False

A tax audit is an examination by enrolled agents to validate the accuracy of a filed tax return.

A simplified version of Form 1040 for individual income tax if you have a taxable income of less than $100,000 from wages only and you do not claim any itemized deductions or any tax credit is:

Which of the following is an illegal method of reducing your current tax liability?

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 have to pay?

Which of the following statements is true of the tax levied under the Federal Insurance Contributions Act (FICA)?

Murray (age 68,single)sold his home owned for 35 years so that he could relocate to a place that is closer to where his grandchildren live.He realized a $400,000 capital gain on the home.Murray's tax liability on capital gain is computed on _____.

A taxpayer can file for an automatic extension of _____ months.

Tax credits reduce your:

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

A progressive tax system is one in which:

Income shifting refers to the process of transferring income from the taxpayer to the IRS.

Henry is married to Lillian,and they have two dependent children.Both of them want to file their own tax returns,reporting only his or her own income,deductions,and exemptions.The filing status of Henry and Lillian in their tax returns is:

Jamie has taxable income of $45,000.She is single,and her tax rate is 10% on the first $9,225 of the taxable income,15% on the amount over $9,225 up to $37,450 of the taxable income,and 25% on the remainder.What are Jamie's tax liability,marginal tax rate,and average tax rate? (Show all work.)

If you are married,you can legally file as a single taxpayer.

The federal government gets a majority of its revenue from _____ tax.

Mr.and Mrs.McMurray have three children,aged 6,12,and 18,for whom they paid childcare expenses of $6,000 in 2015.The McMurrays' tax liability calculated as per the tax schedule is $10,000.The McMurrays' tax liability is _____.

Tom sold mutual fund shares,which he had owned for 3 years,so that he could use the proceeds to return to college.Tom is in the 15% marginal tax bracket,and his capital gain from the sale was $11,000.How much tax does Tom owe on the gain?

All taxpayers have an equal probability of having their tax returns audited.

Understanding the Financial Planning Process

Using Financial Statements and Budgets

Managing Your Cash and Savings

Making Automobile and Housing Decisions

Using Credit

Using Consumer Loans

Insuring Your Life

Insuring Your Health

Protecting Your Property

Investment Planning

Investing in Stocks and Bonds

Investing in Mutual Funds, ETFS and Real Estate

Planning for Retirement

Preserving Your Estate

Filters

Exam 3: Preparing Your Taxes

A tax audit is an examination by enrolled agents to validate the accuracy of a filed tax return.

A simplified version of Form 1040 for individual income tax if you have a taxable income of less than $100,000 from wages only and you do not claim any itemized deductions or any tax credit is:

Which of the following is an illegal method of reducing your current tax liability?

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 have to pay?

Which of the following statements is true of the tax levied under the Federal Insurance Contributions Act (FICA)?

Murray (age 68,single)sold his home owned for 35 years so that he could relocate to a place that is closer to where his grandchildren live.He realized a $400,000 capital gain on the home.Murray's tax liability on capital gain is computed on _____.

A taxpayer can file for an automatic extension of _____ months.

Tax credits reduce your:

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

A progressive tax system is one in which:

Income shifting refers to the process of transferring income from the taxpayer to the IRS.

Henry is married to Lillian,and they have two dependent children.Both of them want to file their own tax returns,reporting only his or her own income,deductions,and exemptions.The filing status of Henry and Lillian in their tax returns is:

Jamie has taxable income of $45,000.She is single,and her tax rate is 10% on the first $9,225 of the taxable income,15% on the amount over $9,225 up to $37,450 of the taxable income,and 25% on the remainder.What are Jamie's tax liability,marginal tax rate,and average tax rate? (Show all work.)

If you are married,you can legally file as a single taxpayer.

The federal government gets a majority of its revenue from _____ tax.

Mr.and Mrs.McMurray have three children,aged 6,12,and 18,for whom they paid childcare expenses of $6,000 in 2015.The McMurrays' tax liability calculated as per the tax schedule is $10,000.The McMurrays' tax liability is _____.

Tom sold mutual fund shares,which he had owned for 3 years,so that he could use the proceeds to return to college.Tom is in the 15% marginal tax bracket,and his capital gain from the sale was $11,000.How much tax does Tom owe on the gain?

All taxpayers have an equal probability of having their tax returns audited.

Understanding the Financial Planning Process

Using Financial Statements and Budgets

Managing Your Cash and Savings

Making Automobile and Housing Decisions

Using Credit

Using Consumer Loans

Insuring Your Life

Insuring Your Health

Protecting Your Property

Investment Planning

Investing in Stocks and Bonds

Investing in Mutual Funds, ETFS and Real Estate

Planning for Retirement

Preserving Your Estate

Filters