Deck 3: Preparing Your Taxes

Question 1

Congress considers tax law changes throughout the year.

Answer 1

True

Question 2

Income tax refunds are automatically sent to those who qualify for refunds no later than April 15.

Answer 2

False

Question 3

The main objective of tax planning is to maximize the amount of money you keep by minimizing the amount of taxes you pay.

Answer 3

True

Question 4

The Internal Revenue Service is responsible for making changes to the federal income tax codes.

Question 5

There is no limit on the amount of social security tax withheld annually.

Question 6

If you are married,you can legally file a single tax return.

Question 7

The federal personal income tax is a progressive tax.

Question 8

The tax brackets (rates)and payments for married couples filing separately are now typically close to the same as for joint filers.

Question 9

Russ and Lois got married December 30.Although they were single for most of the year,they can legally file as married taxpayers in the year of the wedding.

Question 10

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

Question 11

A spouse and spouse is the only couple combination that can file a joint return.

Question 12

Social security taxes are paid on earned income but not on investment income.

Question 13

If you are eligible to receive a tax refund,you will have to file a tax return to get the refund.

Question 14

Dwayne and Gayle were divorced September 29,have not remarried,and have no dependents.Their filing status for the year will each be "married" since they were married for more than half of the year.

Question 15

The federal personal income tax is a flat tax.

Question 16

Tax avoidance is legal,tax evasion is illegal.

Question 17

If you have any earned income,you are required to file a tax return.

Question 18

As a single taxpayer with no dependents,one is generally eligible to file as "head of household."

Question 19

Social security taxes are deducted from all wages and salaries earned in a year.

Question 20

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

Question 21

To receive the most favorable capital gains treatment,a taxpayer must own and occupy a home for at least two of the five years prior to its sale.

Question 22

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

Question 23

Mortgage interest and paid home property taxes are both itemized deduction items.

Question 24

A short-term capital gain would be taxed at the same rate as your salary.

Question 25

Gifts received from family and friends are included in gross income.

Question 26

The Medicare portion of the FICA tax is paid on 100% of earnings.

Question 27

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

Question 28

Dividends received from the stock you own will be taxable income.

Question 29

You should itemize deductions when total itemized deductions exceed the standard deduction.

Question 30

A long-term capital gain is taxed at the same rate as ordinary income.

Question 31

Itemized deductions could include certain taxes,medical expenditures,and home mortgage interest.

Question 32

Adjustments to income will decrease your taxable income.

Question 33

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

Question 34

Child support received is included in gross income.

Question 35

Gross income minus tax exempt income equals adjusted gross income.

Question 36

You should itemize deductions when total itemized deductions are less than the standard deduction.

Question 37

Alimony received is included in gross income for the receiver and deducted from gross income for the payer.

Question 38

The sale of your home will rarely result in a taxable capital gain.

Question 39

Your marital status will affect the amount of social security you must pay in a year.

Question 40

Qualified dividends are taxed at the same rates as long-term capital gains.

Question 41

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

Question 42

Tax credits are dollar-for-dollar reductions in taxes due.

Question 43

Opening a traditional IRA would allow you to defer taxes on the earnings.

Question 44

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

Question 45

A married couple filing a joint return has Ms.Cindy Cook,a CPA,complete their return.The IRS will hold only Ms.Cook responsible for any errors on the return.

Question 46

When a child qualifies as a dependent on her parent's return,the child cannot take a personal exemption for herself.

Question 47

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

Question 48

Tax-deferred income is better than tax-free income.

Question 49

Personal exemptions are deductions from AGI based on the number of persons supported by the taxpayer's income.

Question 50

Municipal bond investments typically provide tax-free interest income.

Question 51

If your AGI is less than $100,000 and you do not itemize deductions,the IRS will compute your taxes for you.

Question 52

A tax deduction is more valuable than a tax credit.

Question 53

State income taxes and real estate taxes are both itemized deduction items.

Question 54

Estimated tax payments must be made by those who do not have taxes deducted from their earnings.

Question 55

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

Question 56

The alternative minimum tax is designed to ensure that individuals with many deductions and tax-shelter investments are paying their fair share of taxes.

Question 57

A person with a significant amount of investment income would have a high probability of needing to make estimated tax payments.

Question 58

Opening a traditional IRA would allow you to take advantage of tax-free earnings.

Question 59

Federal income taxes paid can be deducted the following year.

Question 60

You have up to three years after mailing your tax return to file an amended tax return (1040X).

Question 61

Tax avoidance is a legal means to minimize tax liabilities.

Question 62

Most major software providers have free online versions for preparing federal taxes for all taxpayers.

Question 63

The alternative minimum tax calculation includes in taxable income certain types of deductions otherwise allowed,such as state and local income and property taxes.

Question 64

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.

Question 65

The federal income tax is

A)integrative.
B)regressive.
C)progressive.
D)flat rate.
E)none of the above.

Question 66

The tax year corresponds to the April 15 filing deadline,with a new tax year beginning April 16th.

Question 67

Henry is married to Lillian,and they have two dependent children.Henry can legally file using which of the following filing statuses?

A)Single
B)Married filing jointly
C)Head of household
D)Qualifying widow
E)Any of the above

Question 68

Most any wage earner can open an IRA and contribute up to $7,500 of tax-deferred income each year to the account.

Question 69

You are more likely to have your tax return audited if you have large deductions for meals,travel,and entertainment.

Question 70

The standard deduction in 2014 for a single filer was $6,500 and for married persons filing jointly was $13,000.

Question 71

A taxpayer claiming himself and one dependent had personal exemptions in 2014 amounting to $7,900.

Question 72

Pete and Pam are married with four dependent children.Pete and Pam can legally file using which of the following filing statuses?

A)married filing separately
B)married filing jointly
C)head of household
D)a or b
E)a, b, or c

Question 73

Tax evasion is a legal means to avoid tax liabilities.

Question 74

A progressive tax system is one in which higher-income people pay ____ than lower-income people.

A)a higher dollar amount in taxes
B)tax at a higher rate
C)a lower dollar amount in taxes
D)tax at a lower rate
E)tax at the same rate

Question 75

Mandi and Thomas were married and had one child,age 7.Mandi died in 2013 leaving Thomas a single parent.In 2014,the most favorable filing status for Thomas would be

A)single.
B)married filing separately.
C)head of household.
D)qualifying widow(er).
E)any of the above.

Question 76

The federal government gets the majority of its revenue from the ____ tax.

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

Question 77

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

Question 78

The regular income tax filing deadline is April 1 of each year.

Question 79

By filing a tax extension,one does not have to pay his income tax liability until October 15.

Question 80

Molly and Jason were married.Their only "dependent" was Spot,their black standard poodle.Jason died in 2013.Assuming she does not remarry,in 2014 the only legal filing status for Molly would be

A)single.
B)married filing separately.
C)head of household.
D)qualifying widow(er).
E)any of the above.