LSU ACCT 3221: Ch. 1

True/False: At high levels of taxable income, the average tax rate and the marginal tax rate will be the same.

False

True/False: Employers report wage income to employees on a Form W-3.

False

True/False: Federal unemployment compensation benefits are not taxable.

False

True/False: Individuals who file a Form 1040EZ will determine their tax liability with reference to a tax rate schedule.

False

True/False: One major disadvantage the taxpayer has when filing a petition with the Tax Court is that the IRS's proposed tax assessment must be paid prior to trial.

False

True/False: State and local taxes levied on either property or sales are examples of progressive taxes.

False

True/False: Tax liability is calculated using income before permitted deductions. Permitted deductions are then subtracted from the tax liability.

False

True/False: Taxpayers normally pay their tax liability when they file their income tax return.

False

True/False: The average tax rate is always smaller than the marginal tax rate.

False

True/False: The marginal tax rate is the total tax liability divided by the taxable income.

False

True/False: There are two types of primary tax authority: statutory and judicial.

False

True/False: Typically, federal tax legislation is introduced in the Senate Finance Committee.

False

True/False: Under a flat tax, the marginal tax rate and the average tax rate are different.

False

True/False: Wages, salaries, and tips are compensation for services rendered. However, commissions, bonuses, and severance pay are not taxable.

False

True/False: A Private Letter Ruling is tax authority only to the taxpayer to whom it is issued.

True

True/False: A proportional tax rate structure is a tax where the tax rate remains at the same rate regardless of the tax base.

True

True/False: A single taxpayer cannot file a Form 1040EZ if she is age 65 or older.

True

True/False: All individual income tax returns follow the structure of the simplified tax formula.

True

True/False: IRS Regulations are by far the strongest administrative authority.

True

True/False: One of the criteria to file a Form 1040EZ is that the total taxable income of the taxpayer cannot exceed $100,000.

True

True/False: The U.S. individual income tax system is an example of a progressive tax rate structure.

True

True/False: The amount of tax liability is affected by the filing status of the taxpayer.

True

True/False: The average tax rate is the total tax liability divided by the taxable income.

True

True/False: The tax liability of a single individual with taxable income of $31,689 is $4,334.

True

True/False: With a regressive tax, the tax rate decreases as the tax base gets larger.

True

Peter and Penelope are married and have combined W-2 income of $57,421. They paid an additional $127 when they filed their taxes. How much income tax did their employers withhold during the year? A. $4,847. B. $5,101. C. $7,652. D. $7,906.

A. $4,847.

Victoria determined her tax liability was $6,145. Her employer withheld $6,451 from her paychecks during the year. Victoria's tax return would show: A. A refund of $306. B. A refund of $6,451. C. Tax due of $306. D. Tax due of $6,145.

A. A refund of $306.

Which of the following courts has the highest tax validity? A. Court of Appeals for the Fifth Circuit. B. U.S. Court of Federal Claims. C. U.S. District Court. D. U.S. Tax Court.

A. Court of Appeals for the Fifth Circuit.

Employers report wage income to employees on a: A. Form W-2. B. Form W-3. C. Form 1099-E. D. Form 1099-G.

A. Form W-2.

Which of the following is a statutory source of tax authority? A. Internal Revenue Code. B. IRS Regulation. C. Revenue Ruling. D. Tax Court decision

A. Internal Revenue Code.

The federal income tax is an example of a: A. Progressive rate structure. B. Proportional rate structure. C. Regressive rate structure. D. Flat tax structure

A. Progressive rate structure.

A tax rate that increases as the tax base increases is an example of what kind of tax rate structure? A. Progressive. B. Proportional. C. Regressive. D. Recessive.

A. Progressive.

Which of the following refers to an income tax regulation? A. Reg. §1.162-5. B. Reg. §20.2032-1. C. Reg. §25.2503-4. D. Reg. §31.3301-1.

A. Reg. §1.162-5.

Which court hears most of the litigated tax disputes between the IRS and taxpayers? A. U.S. Tax Court. B. U.S. District Court. C. U.S. Court of Federal Claims. D. None of the above

A. U.S. Tax Court.

The tax liability for a single individual with taxable income of $67,493 is: A. $13,061. B. $13,056. C. $11,721. D. $9,286.

B. $13,056.

Alice is an employee of Valley Company. She properly completed her Form 1040EZ tax return and received a refund from the IRS of $1,244. Alice had income tax withholding during the year of $4,782. Her tax liability for the year was: A. $1,244. B. $3,538. C. $4,782. D. $6,026.

B. $3,538.

On Form 1040EZ, the permitted deduction from income for a single taxpayer is: A. $0. B. $9,350. C. $10,000. D. $18,700.

B. $9,350.

A tax rate structure where the tax rate remains at the same rate regardless of the tax base is: A. A progressive rate structure. B. A proportional rate structure. C. A regressive rate structure. D. None of the above.

B. A proportional rate structure.

Which statement is correct with respect to marginal and average tax rates under a progressive tax structure? A. At very high levels of taxable income, a taxpayer's marginal and average tax rates will be the same. B. At very low levels of taxable income, a taxpayer's marginal and average tax rates will be the same. C. For most taxpayers, the average tax rate is larger than the marginal tax rate. D.Generalizations cannot be made. The question can only be answered with reference to the tax situation of a specific taxpayer.

B. At very low levels of taxable income, a taxpayer's marginal and average tax rates will be the same.

Which of the following would disqualify a taxpayer from filing a Form 1040EZ? A. Has total taxable income under $100,000. B. Be age 68 and not blind. C. Has no dependents. D. Has interest income less than $1,500.

B. Be age 68 and not blind.

Interest payers (banks, savings and loans, insurance companies, etc.) report interest earnings to taxpayers on a: A. Form W-2-INT. B. Form 1099-INT. C. Form 1099-INC. D. Form 4070.

B. Form 1099-INT.

Which of the following types of Regulations is the strongest tax authority? A. Final. B. Legislative. C. Temporary. D. Proposed.

B. Legislative.

A tax rate that remains the same as the tax base increases is an example of what kind of tax rate structure? A. Progressive. B. Proportional. C. Regressive. D. Recessive.

B. Proportional.

In terms of dollars, wage earning taxpayers will normally pay the majority of their tax liability: A. When they file their tax return. B. Through withholding from their wages. C. In the following tax year. D. In advance in January.

B. Through withholding from their wages.

For equivalent amounts of taxable income, the total tax liability of a single individual: A. Will be less than married filing jointly. B. Will be more than married filing jointly. C. Will be more than married filing separately. D. Cannot be determined with the information provided.

B. Will be more than married filing jointly.

Jordan and Paul, a married couple, have taxable income of $48,025 which is taxed as follows: $16,700 x 10% = $1670.00 ($48,025 - $16,700) x 15% = $4698.75 Total tax liability = $6368.75 Their average tax rate is: A. 0%. B. 10%. C. 13.3%. D. 15%.

C. 13.3%.

With respect to the income tax formula, which of the following statements is correct? A.The simplified income tax formula is only applicable to taxpayers with taxable income less than $100,000. B. Tax liability is determined by applying an appropriate tax rate to total income. C. Certain deductions from income are permitted before calculating tax liability. D. Tax payments are ignored when calculating the tax refund or tax due with the return.

C. Certain deductions from income are permitted before calculating tax liability.

A tax rate that increases as the tax base decreases is an example of what kind of tax rate structure? A. Progressive. B. Proportional. C. Regressive. D. Recessive.

C. Regressive.

Jake earned $15,000 and paid $1,500 of income tax, while Jill earned $40,000 and paid $3,000 of income tax. The structure of the tax their income is subject to is: A. Progressive. B. Proportional. C. Regressive. D. Flat.

C. Regressive.

Which of the following would disqualify a taxpayer from filing a Form 1040EZ? A. The taxpayer is married. B. The taxpayer has interest income of $1,400. C. The taxpayer is age 66. D. The taxpayer received unemployment compensation income of $1,700.

C. The taxpayer is age 66.

The tax liability for a married couple with taxable income of $92,409 is: A. $20,011. B. $19,599. C. $17,957. D. $15,481.

D. $15,481.

Hamad is an employee of Mountain Company. He properly completed his Form 1040EZ tax return and was required to pay the IRS $1,244 at the time of filing. He had income tax withholding during the year of $4,782. Hamad's tax liability for the year was: A. $1,244. B. $3,538. C. $4,782. D. $6,026.

D. $6,026.

Jordan and Paul, a married couple, have taxable income of $48,025 which is taxed as follows: $16,700 x 10% = $1670.00 ($48,025 - $16,700) x 15% = $4698.75 Total tax liability = $6368.75 Their marginal tax rate is: A. 0%. B. 10%. C. 13.3%. D. 15%.

D. 15%.

Which of the following are primary sources of tax authority? A. Statutory sources. B. Administrative sources. C. Judicial sources. D. All of the above.

D. All of the above.

Which of the following is an administrative source of tax law? A. Revenue Ruling. B. IRS Regulation. C. Private Letter Ruling. D. All of the above.

D. All of the above.

Which of the following trial courts hear tax cases? A. U.S. Tax Court. B. U.S. District Court. C. U.S. Court of Federal Claims. D. All of the above.

D. All of the above.

Which of the following statements is true with respect to marginal and average tax rates under a progressive tax structure? A. Marginal rates are always larger than average rates. B. Marginal rates are always smaller than average rates. C. Average rates can only be calculated for taxpayers with income over $100,000. D. Average rates are never more than marginal rates.

D. Average rates are never more than marginal rates.

Which of the following is correct with respect to Private Letter Rulings? A. Issued when a taxpayer wants to know the tax treatment of a specific tax situation. B. Can be relied upon by all taxpayers in a similar tax situation. C. Provides tax authority only to the taxpayer to whom it is issued. D. Both a and c.

D. Both a and c.

Which of the following is an example of a regressive tax? A. Federal income tax. B. State and local taxes levied on property. C. Sales tax. D. Social security tax.

D. Social security tax.

Which of the following would disqualify a taxpayer from filing a Form 1040EZ? A. The taxpayer has total income of $74,000. B. The taxpayer has interest income of $500. C. The taxpayer is age 63. D. The taxpayer has one dependent.

D. The taxpayer has one dependent.