Deck 4: Personal Taxation

Question 1

Which of the following creates the federal tax law?

A) The U.S. House of Representatives, only.
B) The U.S. Senate, only.
C) The U.S. House of Representatives and the U.S. Senate.
D) The U.S. Senate and the Internal Revenue Service.

Answer 1

The U.S. House of Representatives and the U.S. Senate.

Question 2

Most working adults, living in the United States, will pay

A) federal income taxes.
B) payroll taxes.
C) sales taxes.
D) All of these answer choices are correct.

Answer 2

All of these answer choices are correct.

Question 3

Which government agency is charged with collecting and enforcing tax laws?

A) Consumer Financial Protection Bureau (CFPB).
B) Internal Revenue Service (IRS).
C) Securities and Exchange Commission (SEC).
D) Federal Bureau of Investigation (FBI).

Answer 3

Internal Revenue Service (IRS).

Question 4

Which of the following refers to information that the taxpayer compiles and reports to the IRS on a standardized form?

A) Tax return.
B) Federal taxes.
C) Withholdings.
D) Tax formula.

Question 5

Which of the following forms shows the federal income tax formula?

A) Form W-2.
B) Form 1040.
C) Form 1099.
D) Form W-4.

Question 6

How often should self-employed individuals pay their taxes?

A) Monthly.
B) Quarterly.
C) Annually.
D) When they file their taxes.

Question 7

Which of the following refers to a tax that is imposed once per year?

A) Federal income taxes.
B) Payroll taxes.
C) Sales taxes.
D) Property taxes.

Question 8

Which of the following refers to a tax that imposes the same tax rate on all taxpayers subject to the tax?

A) Regressive tax.
B) Flat tax.
C) Progressive tax.
D) Federal income tax.

Question 9

Which of the following refers to annual expenditures exceeding tax revenue?

A) Federal surplus.
B) Federal deficit.
C) U.S. debt.
D) Federal income tax.

Question 10

Which of the following refers to tax revenue exceeding annual expenditures?

A) Federal surplus.
B) Federal deficit.
C) U.S. debt.
D) Federal income tax.

Question 11

Which of the following refers to a category of dependents?

A) Qualifying children, only.
B) Qualifying relatives, only.
C) Both qualifying children and qualifying relatives.
D) Head of household.

Question 12

Which of the following refers to your income after deductions?

A) Gross income.
B) Adjusted gross income (AGI).
C) Assessed income.
D) Tax formula.

Question 13

Mia buys a shirt for $43. The sales tax rate is 7%. How much is her total cost for the shirt?

A) $40.19.
B) $43.00.
C) $46.01.
D) $50.00.

Question 14

Which of the following are withholdings?

A) Federal income taxes, only.
B) Payroll taxes, only.
C) Sales taxes, only.
D) Both federal income and payroll taxes.

Question 15

Which of the following refers to the standard tax form that can be used to file taxes?

A) Form 1040.
B) Form W-2.
C) Form W-9.
D) Form 1099.

Question 16

Which of the following refers to a tax that is paid when purchasing goods and services?

A) Federal income taxes.
B) Payroll taxes.
C) Sales taxes.
D) Property taxes.

Question 17

What was the approximate value of the U.S. debt in 2018?

A) $10 billion.
B) $20 billion.
C) $10 trillion.
D) $20 trillion.

Question 18

Which of the following refers to a tax that applies higher tax rates to higher-income households?

A) Regressive tax.
B) Flat tax.
C) Progressive tax.
D) Sales tax.

Question 19

Which of the following refers to financial obligations imposed on individuals and businesses by government entities?

A) Taxes.
B) Public service.
C) Loan.
D) Social welfare.

Question 20

Which of the following refers to a tax that is paid throughout the year as income is earned?

A) Payroll taxes.
B) Sales taxes.
C) Property taxes.
D) All of these answer choices are correct.

Question 21

If you want to know at what tax rate one more dollar of your income would be taxed, you would look at your

A) marginal tax rate.
B) tax bracket.
C) withholdings.
D) effective tax rate.

Question 22

Which of the following refers to income derived from work, interest, and self-employment?

A) Capital gain income.
B) Gross income.
C) Ordinary income.
D) AGI.

Question 23

Which of the following is included in your gross income?

A) A scholarship for tuition.
B) Scholarships and grants in excess of tuition and books.
C) Municipal bond interest.
D) A scholarship for books.

Question 24

Which of the following is excluded from your gross income?

A) Gifts.
B) Life insurance death benefits.
C) Fringe benefits.
D) All of these answer choices are correct.

Question 25

What filing status would be appropriate for someone who is unmarried and is the primary provider of a qualifying dependent?

A) Single.
B) Married filing jointly.
C) Married filing separately.
D) Head of household.

Question 26

Which of the following refers to the amount remaining after the standard or itemized deduction?

A) Gross income.
B) AGI.
C) Taxable income.
D) Net income.

Question 27

Which of the following refers to the rate of change in tax resulting from a change in income or deduction?

A) Marginal tax rate.
B) Federal taxes.
C) Withholdings.
D) Effective tax rate.

Question 28

Which of the following results from selling a capital asset at a gain when the asset was owned for more than a year?

A) Long-term capital gains.
B) Short-term capital gains.
C) Withholdings.
D) Ordinary income.

Question 29

Generally, filing a joint tax return with your spouse results in ________ tax liability compared with filing separately.

A) a lower
B) a higher
C) the same
D) zero

Question 30

How many tax brackets existed in 2018?

A) Five.
B) Six.
C) Seven.
D) Eight.

Question 31

When engaging in tax planning, knowing your ________ is very helpful.

A) marginal tax rate
B) tax bracket
C) withholdings
D) effective tax rate

Question 32

Which of the following results from selling a capital asset at a gain when the asset was owned for less than a year?

A) Long-term capital gains.
B) Short-term capital gains.
C) Withholdings.
D) Ordinary income.

Question 33

What filing status would be appropriate for someone who is unmarried and has no dependent children or relatives?

A) Single.
B) Married filing jointly.
C) Married filing separately.
D) Head of household.

Question 34

Long-term capital gains are most commonly taxed at what rates?

A) 0% or 10%.
B) 0% or 15%.
C) 15% or 25%.
D) 15% or 35%.

Question 35

Common itemized deductions include which of the following?

A) Qualifying charitable deductions.
B) Unreimbursed employee expenses.
C) State and local taxes.
D) All of these answer choices are correct.

Question 36

Which of the following refers to a predefined range of taxable income in which a single tax rate applies?

A) Marginal tax rate.
B) Tax bracket.
C) Withholdings.
D) Effective tax rate.

Question 37

Which of the following is NOT a general test for qualifying children?

A) Age.
B) Support.
C) Marital status.
D) Relationship.

Question 38

Which of the following is a filing status?

A) College student.
B) Qualifying child.
C) Head of household.
D) Qualifying child and qualifying relative.

Question 39

Your marital status is determined as of what date in regard to your income taxes?

A) January 1.
B) July 1.
C) December 1.
D) December 31.

Question 40

Which of the following measures the average tax an individual pays on their entire income?

A) Marginal tax rate.
B) Federal taxes.
C) Withholdings.
D) Effective tax rate.

Question 41

Jen is in graduate school. Unfortunately, she does not qualify for the American Opportunity Credit. As an alternative, Jen can claim the

A) Lifetime Learning Credit.
B) Earned Income Tax Credit.
C) Retirement Savings Contribution Credit.
D) Child Tax Credit.

Question 42

An example of a fully refundable tax credit is

A) the Lifetime Learning Credit.
B) the Earned Income Tax Credit.
C) the Retirement Savings Contribution Credit.
D) the Child Tax Credit.

Question 43

What happens to the tax brackets if your filing status changes from single to married?

A) The same tax rates apply, but the tax brackets are larger so that more of your income is taxed at higher tax rates.
B) The same tax rates apply, but the tax brackets are smaller so that more of your income is taxed at lower tax rates.
C) The same tax rates apply, but the tax brackets are larger so that more of your income is taxed at lower tax rates.
D) A different tax rate applies.

Question 44

Negative effective tax rates are most prevalent in which population?

A) High-income households.
B) Middle-income households.
C) Single taxpayer households.
D) Low-income working households with dependent children.

Question 45

A(n) ________ represents a dollar-for-dollar reduction in an assessed tax liability.

A) tax credit
B) exemption
C) deduction
D) negative effective tax rate

Question 46

How does increasing your number of allowances affect your paycheck?

A) It will decrease the amount of taxes automatically withheld.
B) It will increase the amount of taxes automatically withheld.
C) It will more than double the amount of taxes automatically withheld.
D) No change in your paycheck.

Question 47

How are short-term capital gains taxed?

A) 0%.
B) 15%.
C) 25%.
D) Same rate as ordinary income.

Question 48

If you had too much in taxes taken out of your paycheck, what might you qualify for?

A) A tax credit.
B) A tax deduction.
C) A refund.
D) A loan.

Question 49

Which of the following refers to a tax on dependent children with more than $2,100 (in 2018) of unearned income?

A) Marginal tax rate.
B) Kiddie tax.
C) Effective tax rate.
D) Capital gains.

Question 50

Which of the following refers to a tax credit that is partly refundable and is available to whoever claims the students as a dependent on their tax return?

A) Lifetime Learning Credit.
B) American Opportunity Credit.
C) Retirement Savings Contribution Credit.
D) Child Tax Credit.

Question 51

Which of the following do you need to know in order to calculate your marginal tax rate?

A) The new tax liability after the change in income.
B) The old tax liability before the change in income.
C) The change in income.
D) All of these answer choices are correct.

Question 52

Which of the following is a result of when refundable tax credits exceed an individual's total tax?

A) Marginal tax rate.
B) Federal taxes.
C) Effective tax rate.
D) Negative effective tax rate.

Question 53

How does decreasing your number of allowances affect your paycheck?

A) It will decrease the amount of taxes automatically withheld.
B) It will increase the amount of taxes automatically withheld.
C) It will more than double the amount of taxes automatically withheld.
D) No change in your paycheck.

Question 54

What percent of all working households owe no federal income taxes?

A) 10%.
B) 20%.
C) 30%.
D) 40%.

Question 55

Which of the following is more valuable for the taxpayer?

A) $1,000 tax credit.
B) $1,000 tax deduction.
C) A tax credit and a tax deduction are the same value.
D) Kiddie tax credit.

Question 56

Which of the following refers to a tax credit that can reduce an individual's assessed tax to zero but cannot make it negative?

A) Refundable tax credit.
B) Nonrefundable tax credit.
C) Deduction.
D) Negative effective tax rate.

Question 57

Which of the following refers to a tax credit that can reduce an individual's assessed tax below zero?

A) Refundable tax credit.
B) Nonrefundable tax credit.
C) Deduction.
D) Negative effective tax rate.

Question 58

Which of the following is a partly refundable tax credit?

A) Lifetime Learning Credit.
B) American Opportunity Credit.
C) Retirement Savings Contribution Credit.
D) Earned Income Tax Credit.

Question 59

If you could have all of your income taxed at the lower capital gains tax rates, you would be able to accumulate after-tax wealth

A) slower.
B) faster.
C) at the same rate.
D) All of these answer choices are correct.

Question 60

Which of the following refers to a tax credit that is refundable and designed to reward work and boost the income of low-income workers?

A) Lifetime Learning Credit.
B) Earned Income Tax Credit.
C) Retirement Savings Contribution Credit.
D) Child Tax Credit.

Question 61

Which of the following refers to a statement that an employee receives at the end of the year to summarize earned income?

A) W-2.
B) 1099.
C) 1040.
D) W-9.

Question 62

Which of the following refers to the legal, systematic structuring of transactions to minimize taxes?

A) Tax avoidance.
B) Tax loopholes.
C) Tax evasion.
D) Tax advantage.

Question 63

Which of the following refers to the legal strategies to reduce the amount of taxes owed?

A) Tax avoidance.
B) Tax loopholes.
C) Tax evasion.
D) Tax advantage.

Question 64

Which of the following might a self-employed individual deduct when calculating AGI?

A) Some of the costs of their home.
B) Miles driven for business.
C) Supplies for business.
D) All of these answer choices are correct.

Question 65

Which of the following refers to a statement that a self-employed individual receives at the end of the year to summarize earned income?

A) W-2.
B) 1099.
C) 1040.
D) W-9.

Question 66

Which of the following occurs when realized income is reported and taxed?

A) Tax avoidance.
B) Tax loopholes.
C) Realized income.
D) Recognized income.

Question 67

Which of the following describes a self-employed individual?

A) Paid only when working.
B) Pay for all of their expenses related to work.
C) Make quarterly estimated tax payments.
D) All of these answer choices are correct.

Question 68

The Medicare tax is formally known as what?

A) FICA.
B) Health insurance.
C) Medicaid.
D) 1099.

Question 69

Which of the following occurs each time you convert one asset into a different one for a gain?

A) Tax avoidance.
B) Tax loopholes.
C) Realized income.
D) Recognized income.

Question 70

From an employer's perspective, which of the following is an advantage of classifying workers as self-employed contractors?

A) It lowers the overall amount of taxes the employer must pay.
B) It increases the amount of taxes workers must pay.
C) It lowers the overall amount of taxes the employer must pay, and it increases the amount of taxes workers must pay.
D) None of these answer choices are correct.

Question 71

At what amount does the tax base cap for Social Security tax?

A) $107,200.
B) $117,200.
C) $128,400.
D) There is no cap.

Question 72

Which of the following describes an employee?

A) Paid an hourly wage for a guaranteed number of hours each week.
B) May incur some expenses in carrying out job duties.
C) Taxes are withheld from the paycheck.
D) All of these answer choices are correct.

Question 73

Which of the following refers to the fraudulent structuring of transactions for the sole purpose of tax avoidance, that is, without any other business or economic purpose?

A) Tax avoidance.
B) Tax loopholes.
C) Tax evasion.
D) Tax advantage.

Question 74

What is the total tax rate for Medicare?

A) 1.45%.
B) 2.9%.
C) 6.2%.
D) 12.4%.

Question 75

What is the total tax rate for Old Age, Survivors, and Disability Insurance?

A) 6.2%.
B) 8.4%.
C) 10.2%.
D) 12.4%.

Question 76

Which of the following refers to the form that self-employment income and related expenses are more often reported on?

A) W-9.
B) Schedule C.
C) 1099.
D) W-2.

Question 77

Which of the following is an example of realized income?

A) Converting your human capital into a paycheck.
B) Converting a coin collection into cash by selling it.
C) Converting good grades in school into a scholarship that pays your tuition and fees.
D) All of these answer choices are correct.

Question 78

Which of the following refers to a form that employers or workers can file with the IRS if there is a question about how the worker should be classified?

A) W-9.
B) Schedule C.
C) 1099.
D) SS-8.

Question 79

Which of the following refers to the national health insurance program for individuals 65 years and older?

A) Medicaid.
B) Social Security.
C) Medicare.
D) Federal Insurance Contributions Act (FICA).

Question 80

Which of the following refers to the total amount of money received from the self-employment activity less the expenses incurred to generate that income?

A) Net earnings.
B) Total income.
C) Annual income.
D) Annual salary.