Question 1

The deadline to file your income tax return is ________ although an automatic extension may be filed.

Accepted Answer

A)   March 15
B)   March 30
C)   April 15
D)   April 30 C

Question 2

Why might someone choose to use itemized deductions instead of taking the standard deduction offered by the IRS?

Accepted Answer

A)   It is easier to calculate your itemized deductions versus the standard deduction.
B)   You may have a lower tax liability if you itemize instead of using the standard deduction.
C)   Married taxpayers must use the itemized deductions only.
D)   Most computer tax software automatically itemizes deductions.
E)   both B and C are correct. B

Question 3

Name the categories of filing status.

Accepted Answer

Single status,married filing jointly or surviving spouse,married filing separately,and head of household.

Question 4

For 2014,the federal tax code allows an estate valued at up to $5.34 million to be transferred tax free to any heir.If the estate is valued at more than $5.34 million,the amount over $5.34 million will be taxed at

Accepted Answer

A)   25 percent.
B)   30 percent.
C)   40 percent.
D)   55 percent.

Question 5

Name and describe the four general categories that reduce your taxable income,therefore reducing your tax liability.

Accepted Answer

The answer of Name and describe the four general categories...

Question 6

Danielle is a divorced single parent who is currently paying back a college loan,attending graduate school part-time,and working full-time earning $42,000.She has custody and provides all support for her child.Which of the following adjustments,deductions,or credits might apply to her?

Accepted Answer

A)   Adjustment for student loan interest
B)   Child tax credit
C)   Child and dependent care credit
D)   Lifetime learning tax credit
E)   All of the above

Question 7

The FICA tax is typically deducted from your salary at a rate of ________until your salary reaches a point where it is no longer taxed at the rate of ________ for Social Security.

Accepted Answer

A)   6.20 percent; 1.45 percent
B)   7.65 percent; 6.20 percent
C)   15.3 percent; 7.65 percent
D)   20 percent; 10 percent

Question 8

Your deductions as a single person have reduced your taxable income to $38,950,bringing you into the 25 percent tax bracket.As such,your taxes will amount to 25 percent of your taxable income of $38,950.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is an income tax filing status?

Accepted Answer

A)   Divorced filing spouse
B)   Married filing jointly and surviving spouses
C)   Head of divorced household
D)   All of the above are income tax filing statuses.

Question 10

You and spouse are filing a joint return.Your current deductions have reduced your taxable income to $88,990,bringing you into the 25 percent tax bracket.The last dollars you earned will be taxed at the ________ tax bracket.

Accepted Answer

A)   10 percent
B)   15 percent
C)   25 percent
D)   33 percent

Question 11

The earned income credit serves as a negative income tax and is available to

Accepted Answer

A)   anyone with an earned income as opposed to passive income.
B)   low-income taxpayers.
C)   only head of household status filers.
D)   only senior citizens below the poverty line.

Question 12

Elizabeth currently makes $45,000 per year and is in a 25% tax bracket.If she contributes $2,400 to her 401(k)plan at work,by how much will this lower her taxable income?

Accepted Answer

A)   $7,500
B)   $600
C)   $2,400
D)   $11,250

Question 13

In chapter 4,Dianne Taylor won a 2013 Honda Accord on "The Price is Right" TV show.She has to pay taxes on her prize.The taxes are based on the car's ________ value.

Accepted Answer

A)   fair market
B)   residual
C)   manufacturer's suggested retail price
D)   invoice

Question 14

What combination of deductions and exemptions can the typical full-time college student who is employed during the summer,or perhaps during the school year,claim? Why?

Accepted Answer

The answer of What combination of deductions and exemptions can...

Question 15

Katarina and Richard are a busy young couple with a son, Caleb, who is 6 and twin daughters, Stacy and Casey, who are actively exploring the world as four-year-olds. Before the twins were born, Katarina and Richard bought their first home with plenty of indoor and outdoor space for a growing young family. The Bajorshiks are concerned about their 2014 tax issues, but they are also committed to planning for the future of their family. Next year Richard should be able to pay off the remaining balance of his law school student loans. Contributing to Richard's Roth IRA is an annual priority. The following information reflects tax year 2014.
Gross income $98,712
Student loan interest $1,965
Richard's traditional IRA $1,500
Total itemized deductions $12,000
Standard deduction for 2014 $12,400
Personal exemption amount $3,950
Marginal tax bracket 25%
-Katarina worked as an ER nurse,and knows that demand for the job is high.However,prior to returning to work,when the twins enter kindergarten,she will need to take classes on the latest technological advancements.Which of the following tax planning strategies should the Bajorshiks consider as they plan their financial future?

Accepted Answer

A)   When Katrina returns to school, they should track school-related expenses and determine eligibility for the Lifetime Learning credit.
B)   While the children are under age 13, the Bajorshiks should track childcare expenses and determine eligibility for the child and dependent care credit.
C)   Both A and B are legitimate tax planning strategies that the couple should consider.
D)   Neither A nor B is a tax planning strategy that is relevant to this couple's situation.

Question 16

Why is tax planning so important?

Accepted Answer

The answer of Why is tax planning so important?...

Question 17

Income on which the payment of taxes is postponed until some future date is called

Accepted Answer

A)   tax-delayed.
B)   tax-deferred.
C)   tax-postponed.
D)   tax-tardy.

Question 18

Karen and her husband, Jeffrey, are facing a new income tax situation this year. She is a corporate accountant and Jeffrey is an engineer. Their gross salaries total $89,000. Both graduated from four-year universities five years ago and are still paying off large student loans. She is now attending school part-time to prepare for the CPA exam. The Bosteins incurred considerable expenses in the process of adopting an infant this year, and they have the ongoing expense of daycare. In January of last year they closed on their new home. Although trained as an accountant, Karen's work has not involved income tax preparation. Help them consider the following questions.
-Additional items that may reduce the Bosteins' tax burden might include

Accepted Answer

A)   the child credit.
B)   adjustment for the interest on their college loans.
C)   earned income credit.
D)   both A and B.

Question 19

An IRS-allowed reduction in your income for yourself,your spouse,and any dependents that is subtracted before you compute your taxes is called a(n)

Accepted Answer

A)   itemized exemptions.
B)   standard exemptions.
C)   marital exemptions.
D)   personal exemptions.

Question 20

Suppose that you are not able to complete your tax returns by April 15.Which of the following statements is most accurate?

Accepted Answer

A)   You must provide adequate need in tax court, requesting extension of the deadline.
B)   You can apply for an automatic extension - no questions asked, but you must enclose a check in payment for estimated taxes due.
C)   You may have an extension, and the taxes are not due until the extension expires.
D)   You do not have to pay interest on any taxes due on April 15, provided that you have filed for and have an approved extension prior to April 1 of the tax year.

Exam 4: Tax Planning and Strategies