Question 1

Tax indexation

Accepted Answer

A) Decreases (or eliminates) bracket creep 
B) Results in unlegislated tax increases 
C) Provides adjustments in standard deductions and tax brackets only 
D) Provides adjustments tied to changes in the Index of Leading Economic Indicators

Question 2

Fred, 19 years of age and single, is claimed as a dependent on his parents' return.He has decided not to go to college.The following information is derived from his tax return for 2012: $\begin{array}{lr}
\text { Taxable interest and dividends } & \$ 3,600 \
\text { Salary from part-time job } & 2,500 \
\text { Itemized deductions } & 1,270
\end{array}$ Which of the following is false?

Accepted Answer

A) Fred's taxable income is $3,300. 
B) Fred will not itemize his deductions for the year. 
C) $1,700 of the interest and dividends will be taxed at Fred's parents' marginal tax rate if it is higher than Fred's rate. 
D) Fred's standard deduction is $2,800.

Question 3

Which statement below is not true of single filing status?

Accepted Answer

A) A single taxpayer may claim dependency exemptions. 
B) Single filing status applies to anyone who does not qualify as married, surviving spouse, or head of household. 
C) A person whose divorce becomes final on December 30, and does not re-marry the next day, will use single filing status for the calendar year if he/she is not head of household. 
D) A married person may elect to use single filing status if filing separately.

Question 4

Which statement concerning the statute of limitations is not true?

Accepted Answer

A) The statute of limitations never ends if the return is fraudulent. 
B) If an individual (calendar year) taxpayer files a return for calendar year 2011 on March 15, 2012, the IRS normally may not assess an additional tax liability against the taxpayer after April 15, 2015 for reasons other than a false or fraudulent return, no return, or a substantial omission of income. 
C) The statute of limitations period does not change regardless of the amount of income that is omitted or deduction improperly claimed. 
D) The statute of limitations begins to run only if a return is filed.

Question 5

Under a multiple support agreement, A, who provided 55 percent of the support of his mother, may assign the exemption to his sister, L, who provided 25 percent of the support.

Accepted Answer

A) True 
 B)False

Question 6

A multiple support agreement allows a group of individuals to divide the exemption amount so that each member of the group has a proportional share of the total exemption deduction for the common dependent.

Accepted Answer

A) True 
 B)False

Question 7

When support is provided in a form other than a current cash expenditure (e.g., a home in which the dependent is living), it is the cost of the support item that is considered in determining whether the support test is met.

Accepted Answer

A) True 
 B)False

Question 8

In what situation is a married person generally required to file separately?

Accepted Answer

A) They are separated and planning a divorce. 
B) Another taxpayer could claim one spouse as a dependent. 
C) Either spouse is a nonresident alien. 
D) Use of the separate return tables yields a lower tax than use of the joint return tables.

Question 9

F and B were divorced in 1996, their divorce decree gave custody of their child to B, and under a separate written agreement, B surrendered the dependency exemption to F for the current year.F paid child support of $800 in the current year.B provided the other support of $2,000 for their only child.What is B's filing status and her number of exemptions?

Accepted Answer

A) Head of household and one 
B) Head of household and two 
C) Single and one 
D) Single and two

Question 10

A taxpayer who files late and fails to get the proper extension must pay a penalty of 0.5 percent per month (up to a maximum of 25%), beginning with the due date of the tax return (usually April 15 for calendar year individuals) and ending with the date the return is filed.

Accepted Answer

A) True 
 B)False

Question 11

A parent whose 12-year-old child's only income is interest of $4,100 may elect to report the income on his own return and pay the tax with that return.

Accepted Answer

A) True 
 B)False

Question 12

V is 66 years of age and has good sight.V provided $8,000 of the support of his elderly mother, who lives in a rest home and whose only income is Social Security benefits of $6,200.What is V's filing status and how many exemptions may he claim?

Accepted Answer

A) Head of household and two 
B) Head of household and one 
C) Single and two 
D) Single and one

Question 13

A 16-year-old child with earned income of $8,000 cannot be claimed as a dependent on his or her parents' tax return.

Accepted Answer

A) True 
 B)False

Question 14

A single woman whose only income is taxable interest of $2,900 and Social Security benefits of $7,300 for 2012 cannot qualify as a dependent of her son because she fails to meet the gross income test.

Accepted Answer

A) True 
 B)False

Question 15

A taxpayer whose estimated tax due after withholding is less than $1,000 need not make estimated payments even if the other requirements are met.

Accepted Answer

A) True 
 B)False

Question 16

J paid her 2012 taxes by filing quarterly estimated tax payments of $2,000 each.She requested an automatic extension of the filing due date in March, 2013, and in July filed her completed return showing total 2012 tax liability of $9,500.If she paid $8,400 in 2012 taxes, enclosed no money with Form 4868 in March, and enclosed $1,500 with Form 1040 in July, what interest or penalty does she not owe?

Accepted Answer

A) Failure-to-file penalty 
B) Failure-to-pay penalty 
C) Interest on balance due 
D) Penalty on underpayment of estimated tax

Question 17

A person who receives more than one-half of his or her support in welfare payments from the state cannot qualify as a dependent of another individual.

Accepted Answer

A) True 
 B)False

Question 18

Pat, age 12, received the following income in 2012: $$\begin{array} { l r } 
\text { Dividends } & \$ 2,900 \
\text { Interest } & 1,900 \
\text { Wages } & 500
\end{array}$$ She deposited all her income in a savings account.Pat is a U.S.citizen and lives with her parents, who provide the full $13,000 annual cost of her support.Which statement is false?

Accepted Answer

A) Pat's parents may claim her as a dependent. 
B) Pat has net unearned income of $2,900. 
C) Pat has taxable income of $4,350. 
D) Pat's standard deduction is $800.

Question 19

Which of the following is not true of the due date for the individual tax return?

Accepted Answer

A) The due date is the fifteenth day of the fourth month following the taxable year. 
B) An automatic extension of time to file the individual return will be granted upon request. 
C) An extension of time to file also allows the taxpayer to pay his or her tax late with no penalty.Interest will be charged, however. 
D) An extension beyond four months from the original due date will be granted if an adequate reason is given.

Question 20

A taxpayer who does not file a tax return is protected by a seven-year statute of limitations (i.e., the IRS cannot assess a deficiency after seven years).

Accepted Answer

A) True 
 B)False

Exam 4: Personal and Dependency Exemptions; Filing Status; Determination of Tax for an Individual; Filing Requirements

Tax indexation

Which statement below is not true of single filing status?

Which statement concerning the statute of limitations is not true?

Under a multiple support agreement, A, who provided 55 percent of the support of his mother, may assign the exemption to his sister, L, who provided 25 percent of the support.

A multiple support agreement allows a group of individuals to divide the exemption amount so that each member of the group has a proportional share of the total exemption deduction for the common dependent.

When support is provided in a form other than a current cash expenditure (e.g., a home in which the dependent is living), it is the cost of the support item that is considered in determining whether the support test is met.

In what situation is a married person generally required to file separately?

A taxpayer who files late and fails to get the proper extension must pay a penalty of 0.5 percent per month (up to a maximum of 25%), beginning with the due date of the tax return (usually April 15 for calendar year individuals) and ending with the date the return is filed.

A parent whose 12-year-old child's only income is interest of $4,100 may elect to report the income on his own return and pay the tax with that return.

V is 66 years of age and has good sight.V provided $8,000 of the support of his elderly mother, who lives in a rest home and whose only income is Social Security benefits of $6,200.What is V's filing status and how many exemptions may he claim?

A 16-year-old child with earned income of $8,000 cannot be claimed as a dependent on his or her parents' tax return.

A single woman whose only income is taxable interest of $2,900 and Social Security benefits of $7,300 for 2012 cannot qualify as a dependent of her son because she fails to meet the gross income test.

A taxpayer whose estimated tax due after withholding is less than $1,000 need not make estimated payments even if the other requirements are met.

A person who receives more than one-half of his or her support in welfare payments from the state cannot qualify as a dependent of another individual.

Which of the following is not true of the due date for the individual tax return?

A taxpayer who does not file a tax return is protected by a seven-year statute of limitations (i.e., the IRS cannot assess a deficiency after seven years).