ACE 240 Quiz 4

Molly and Justin are considering contributing $5,000 to their favorite, tax deductible charity. This contribution will bring their total itemized deductions to $20,000. Assuming they are in the 28% marginal tax bracket, how much will they save in taxes by contributing this $5,000 to charity?

$1,400 (5,000*0.28)

Tax practitioners that are Federally licensed are called

Enrolled Agents

A tax audit is a(n)

IRS attempt to verify the accuracy of a return

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

Married filing jointly

Ben and Jack both earned $60,000 this year. Ben (age 30) is married with two children, and Jack (age 68) is single with no dependents. Which of the following is true regarding the amount of Social Security taxes they will pay?

They will pay the same amount of Social Security taxes.

For tax purposes, head-of-household refers to

a single individual with dependents

The tax rate on capital gains for most people is

dependent on the time the asset was owned

Your take-home pay is what you are left with after subtracting withholdings from your

gross earnings.

The total amount that you owe for income tax in one year is your tax

liability.

You would typically not include ____ in your gross income.

life insurance death benefit payments

The federal income tax is

progressive

Local governments get most of their tax revenue from

property taxes.

Typically state governments get most of their tax revenue from

sales taxes and income taxes.

A ____ would be most likely to have to pay estimated taxes.

self-employed plumber

A capital gain is the result of

selling an asset for more than purchase price

If you do not wish to itemize deductions, you can use the

standard deduction.

Tax credits reduce your

tax liability

Your average tax rate is your

tax liability divided by taxable income

____ income is subject to federal taxes.

taxable

Connie is a 20-year-old college student who earned $8,000 and spent it all on her support during the year. Her parents may claim her as a tax dependent as long as

they contribute more than half her support for the year.