chapter 3 taxes

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

For tax purposes, head-of-household refers to:

the person with the larger income when a couple is filing a joint return.

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

true

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

true

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

true

Tax avoidance is legal, tax evasion is illegal.

true

The Federal personal income tax is a progressive tax.

true

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

true

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

true

A long-term capital gain, a investment held for more than 12 months, would be taxed at the same rate as earned income.

f

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

false

You would typically not include ____ in your gross income.

life insurance death benefit payments

A capital gain is the result of

selling an asset for more than purchase price.

You purchased and lived in your home 8 years. Now you have received an excellent promotion, but you will have to sell your home and move to another community. The $200,000 capital gain on the home sold will

15%

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

true

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

false

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

false

Tax planning is most commonly done to

minimize taxes.

The standard deduction is a blanket deduction that depends on the taxpayers

all of these

Based on last years statistics the IRS will audit every one in what?

300

You are preparing your own tax return. The least costly source for answering your questions would be

800 number

The federal income tax is

progressive

Chad and Becky like to save money and are starting a family. They are expecting a pair of twins on Christmas Eve. On Christmas Day, Becky still hasn't gone into labor. Chad starts to freak out- Why?

Chad and Becky won't receive the Child Tax Credit for the year

A tax audit is a(n)

IRS revision of previously filed return.

When someone files for a tax extension, when must taxes be paid by?

October 15th of that year

If John makes a contribution to a charitable trust, what will happen with his taxes?

Receives a deduction

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

f

The Internal Revenue Service is responsible for writing the federal income tax codes. Group of answer choices

f

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

false

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

false

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

false

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

gross earning

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

income

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

more than half

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

self employed plumber

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

standard deduction

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

t

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

t

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

tax at higher rate

How do you find your average tax rate? How do you find your marginal tax rate?

tax base/total tax; total tax/taxable income?

____ income is subject to federal taxes.

taxable

Tax credits reduce your

taxable income