Question 1

All reportable income from any source is called

Accepted Answer

A)  wages and salaries. 
B)  gross income. 
C)  interest income. 
D)  dividend income. 
A)  wages and salaries. 
B)  gross income. 
C)  interest income. 
D)  dividend income.

Question 2

Gross income is comprised of only salary or wages.

Accepted Answer

A) True 
 B)False

Question 3

If your taxable income is $190,000 and the marginal tax bracket for amounts $157,500 - $200,000 is 32%, what will be the amount of tax due on your earnings over $157,500?

Accepted Answer

A)  Not enough information provided 
B)  $60,800 
C)  $10,400 
D)  $64,000 
A)  Not enough information provided 
B)  $60,800 
C)  $10,400 
D)  $64,000

Question 4

An earned income credit is a special credit that reduces the amount of taxes owed by taxpayers who earn high incomes.

Accepted Answer

A) True 
 B)False

Question 5

When you own a house as a primary residence,

Accepted Answer

A)  it is always best to itemize deductions on your tax return. 
B)  your property taxes are not deductible. 
C)  you get a straight $5,000 deduction. 
D)  interest and taxes may increase your allowable deductions to the point where it is beneficial to itemize them. 
A)  it is always best to itemize deductions on your tax return. 
B)  your property taxes are not deductible. 
C)  you get a straight $5,000 deduction. 
D)  interest and taxes may increase your allowable deductions to the point where it is beneficial to itemize them.

Question 6

________ is withheld at a rate of 6.2% on the first $128,400 of your 2018 earnings.

Accepted Answer

The answer of ________ is withheld at a rate of...

Question 7

Marginal tax rate is the

Accepted Answer

A)  average rate for your total income. 
B)  lowest rate applied to your taxable income. 
C)  rate applied to your last dollar of taxable income. 
D)  None of these is correct. 
A)  average rate for your total income. 
B)  lowest rate applied to your taxable income. 
C)  rate applied to your last dollar of taxable income. 
D)  None of these is correct.

Question 8

Which of the following is not a legitimate itemized deduction?

Accepted Answer

A)  Mortgage interest expense 
B)  Real estate tax 
C)  Interest paid on credit cards 
D)  State income tax 
A)  Mortgage interest expense 
B)  Real estate tax 
C)  Interest paid on credit cards 
D)  State income tax

Question 9

Different tax brackets are associated with each filing status such as single, married filing jointly, and head of household.

Accepted Answer

A) True 
 B)False

Question 10

All taxpayers have a choice of whether to take the standard deduction or itemize deductions.

Accepted Answer

A) True 
 B)False

Question 11

Gross income includes all of the following, except

Accepted Answer

A)  salary or wages. 
B)  interest or dividends received. 
C)  employer's current contribution to 401(k). 
D)  capital gains realized. 
A)  salary or wages. 
B)  interest or dividends received. 
C)  employer's current contribution to 401(k). 
D)  capital gains realized.

Question 12

All medical expenses may be deducted from income as long as you have the receipts or can show proof of payment.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following can be deducted from your taxable income even if you do not itemize?

Accepted Answer

A)  Mortgage interest expense 
B)  Real estate taxes 
C)  State income taxes 
D)  Student loan interest 
A)  Mortgage interest expense 
B)  Real estate taxes 
C)  State income taxes 
D)  Student loan interest

Question 14

Erin has a tax credit of $100 and a marginal tax rate of 28 percent. Erin's income tax liability will be reduced by how much as a result of the credit?

Accepted Answer

A)  $100 
B)  $128 
C)  $28 
D)  $2,800 
A)  $100 
B)  $128 
C)  $28 
D)  $2,800

Question 15

Taxpayers can have more than the minimum amount of required income tax withheld from their pay.

Accepted Answer

A) True 
 B)False

Question 16

Lucky Louie's base salary is $90,000 per year and he earns an additional $75,000 in annual bonus. Luckily, Lucky only has to pay FICA tax on

Accepted Answer

A)  his base salary. 
B)  his base salary plus bonus up to the annual legal withholding limit for FICA. 
C)  all of his earnings. 
D)  $130,000. 
A)  his base salary. 
B)  his base salary plus bonus up to the annual legal withholding limit for FICA. 
C)  all of his earnings. 
D)  $130,000.

Question 17

If you were to receive $100,000 from a corporation, the most tax-efficient way to receive it would be as

Accepted Answer

A)  dividends. 
B)  interest. 
C)  capital gains. 
D)  salary. 
A)  dividends. 
B)  interest. 
C)  capital gains. 
D)  salary.

Question 18

Knowledge of individual income taxes is crucial to sound financial planning.

Accepted Answer

A) True 
 B)False

Question 19

There are 10 tax brackets for individual taxpayers.

Accepted Answer

A) True 
 B)False

Question 20

Comment on a large tax refund. Is it a good use of your funds considering present value concepts? Does the government pay you interest? What can you do to change your withholding or recalculate it?

Accepted Answer

A LARGE REFUND IS NOT A PRUDEN

Exam 4: Using Tax Concepts for Planning

All reportable income from any source is called

Gross income is comprised of only salary or wages.

If your taxable income is $190,000 and the marginal tax bracket for amounts $157,500 - $200,000 is 32%, what will be the amount of tax due on your earnings over $157,500?

An earned income credit is a special credit that reduces the amount of taxes owed by taxpayers who earn high incomes.

When you own a house as a primary residence,

________ is withheld at a rate of 6.2% on the first $128,400 of your 2018 earnings.

Marginal tax rate is the

Which of the following is not a legitimate itemized deduction?

Different tax brackets are associated with each filing status such as single, married filing jointly, and head of household.

All taxpayers have a choice of whether to take the standard deduction or itemize deductions.

Gross income includes all of the following, except

All medical expenses may be deducted from income as long as you have the receipts or can show proof of payment.

Which of the following can be deducted from your taxable income even if you do not itemize?

Erin has a tax credit of $100 and a marginal tax rate of 28 percent. Erin's income tax liability will be reduced by how much as a result of the credit?

Taxpayers can have more than the minimum amount of required income tax withheld from their pay.

Lucky Louie's base salary is $90,000 per year and he earns an additional $75,000 in annual bonus. Luckily, Lucky only has to pay FICA tax on

If you were to receive $100,000 from a corporation, the most tax-efficient way to receive it would be as

Knowledge of individual income taxes is crucial to sound financial planning.

There are 10 tax brackets for individual taxpayers.

Comment on a large tax refund. Is it a good use of your funds considering present value concepts? Does the government pay you interest? What can you do to change your withholding or recalculate it?

Overview of a Financial Plan

Planning With Personal Financial Statements

Applying Time Value Concepts

Banking and Interest Rates

Managing Your Money

Assessing and Securing Your Credit

Managing Your Credit

Personal Loans

Purchasing and Financing a Home

Auto and Homeowners Insurance

Health and Disability Insurance

Life Insurance

Investing Fundamentals

Investing in Stocks

Investing in Bonds

Investing in Mutual Funds

Asset Allocation

Retirement Planning

Estate Planning

Integrating the Components of a Financial Plan

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