Ch.3 quiz FIN 3325

Taxpayers over 65 can only deduct expenses that are greater than 7.5% of adjusted gross income for

Medical and dental expenses.

Lauren owns her business and is thinking about saving for retirement. She wants to invest up to 25% of her annual income. Which plan should she use?

Keogh plan

Fred has been completing his own tax returns for years. The IRS has recently contacted him with questions about some of his prior returns. How many years back is he responsible for providing documentation?

6 years.

The amount levied on the value of property bequeathed by a deceased person is

Inheritance tax.

The maximum amount that an individual can give another in a year without being subject to estate taxes is

$14,000.

Janet is completing her federal income taxes for the year and has identified the amounts listed here. How much can she rightfully deduct? • AGI: $42,000 • Medical and dental expenses: $1,100 • State income taxes: $1,000 • Mortgage interest: $7,000 • Charitable contributions: $1,250

$9,250

Amanda and Jack are working on their taxes and need to determine which form to file. They had wages, interest, and dividends. In addition, they bought a house this past year and are thinking of itemizing their deductions. Which form should they use?

1040

Evan is not concerned about immediate tax benefits but instead wants his investment to grow in value on a tax-free basis. Which of these would be the best for him to invest in today?

A Roth IRA

When calculating federal income taxes, what increases "gross income"?

Alimony received

The tax based on the total tax due divided by taxable income is called the

Average tax rate.

Fees, tips, and bonuses are forms of

Earned income.

Which of the following is NOT a tax that most people pay?

Federal taxes on possessions

The major sections of Form 1040 include all of the following except

Filing status and exemptions. Adjustments to income (AGI). Tax credits. Signature. -all of the above are correct

The types of tax services available that offer professional tax assistance include:

National Firms (such as H&R Block) Enrolled Agents Accountants Attorneys -All of the above are correct

Joseph needs to complete his income taxes for the year. He has already calculated his adjusted gross income. What does he need to do next?

Subtract his itemized deductions.

If Brenda wants to pay her fair share of taxes, no more and no less, she should practice

Tax avoidance.

A tax imposed on the value of a person's property at the time of death is called a(n)

Estate tax.

A tax due on the purchase of gasoline is called a(n)

Excise tax.

Tax assistance sources include all of the following except

IRS publications. IRS phone hotline. The Ernst & Young Tax Guide. The Internet. -All of these are tax assistance sources.

The rate used to calculate the tax due on the next dollar of income is referred to as the

Marginal tax rate.

Nancy is married to Jerry and needs to complete her tax form. They both earn about the same amount of money each year. What filing status would be best for them?

Married, filing a joint return

Income that is taxed at a later date is

Tax-deferred income.

According to Tax Service Warnings, who is responsible for supplying accurate and complete information for completing a tax return?

Taxpayer

At the end of the year, Xavier received a form from his employer that reported annual earnings and the amounts deducted for taxes. That form is called a

W-2.