chapter 3 - taxes

george washington had earning from his salary of $34,000, interest on savings of $800, a contribution to an individual retirement account of $1,500, and dividends from mutual funds of $600. george's adjusted gross income (agi) would be

$33,900

a tax credit of $50 for a person in a 28% tax bracket would reduce a person's taxes by

$50

michele barbour is considering an additional charitable contribution of $2,000 to a tax-deductible charity, bringing her total itemized deductions to $16,000. if michelle is in a 28 percent tax bracket, how much will this $2,000 contribution reduce her taxes?

$560

a taxpayer with a taxable income of $47,856 and a total tax bill of $5,889 would have an average tax rate of ___ percent

12.3

which type of audit is the least complicated for taxpayers

a correspondence audit

________ would qualify a person for an exemption when computing taxable income

a dependent

which of the following is least likely to have to file a federal income tax return: - a US citizen residing in Puerto Rico - a US citizen living/working in foreign country - a person earning less than $8k - a person over 65 - a college student

a person earning less than $8k

kelly vernon wants her tax return prepared by a government approved tax expert. which tax preparer should kelly use?

an enrolled agent

a deduction from adjusted gross income for yourself, your spouse, and qualified dependents is

an exemption

an example of itemized deduction is

certain job-related travel expenses

money received by an individual for personal effort is __________ income

earned

the roth ira differs from the regular ira in that

earnings on the account are tax free after five years

t/f: a general sales tax is also referred to as an excise tax

false

t/f: interest paid on credit cards and charge accounts may be deducted for taxes

false

t/f: tax avoidance refers to illegal actions to reduce one's taxes

false

the main purpose of taxes is to

generate revenue for funding government programs

taxable income is used to compute a person's

income tax

money received in the form of dividends or interest is _________ income

investment

the "head of household" filing status is for people who are

not living with a spouse and have dependent children

a person with a total tax liability of $4,350 and withholding of federal taxes of $3,975 would

owe 375

earnings from a limited partnership would be an example of ____________ income

passive

tax-deferred retirement plans are a type of

tax shelter

an ira, keogh plan, and 401(k) plan are examples of

tax-deferred retirement plans

_________ is a set amount on which no taxes are paid

the standard deduction

t/f: a person's filing status is affected by marital status and dependents

true

t/f: a tax credit is an amount subtracted directly from the amount of taxes owed

true

t/f: an estate tax is imposed on the value of an individual's property at the time of his or her death

true

t/f: an office audit requires that a taxpayer visit an IRS office to clarify some aspect of his or her tax return

true

t/f: capital gains refer to profits from the sale of investments

true

t/f: real-estate property taxes are a major source of revenue for local governments

true

parents can reduce their taxes by

using a child-care tax credit

interest earnings of $1,600 from a taxable investment for a person in a 28% tax bracket would result in after-tax earnings of

$1,152

a person had $4,000 in medical expenses and an adjusted gross income of $32,000. if taxpayers are allowed to deduct the amount of medical expenses that exceed 7.5% of agi, what would be the amount of the deduction?

$1,600

an itemized deduction of $500 with a 36% tax rate would reduce a person's taxes by

$180