Personal finance chapter 9

True

A progressive tax increases as the amount subject to taxation increases

D. all of the choices are correct

A regressive tax would be imposed on which of the following? A. Tobacco B. Alcohol C. Gas D. All of the choices are correct

B. Itemized deduction

A taxpayer who chooses not to take the standard deduction may choose which of the following alternatives? A. Special deduction B. Itemized deduction C. Exemption D. Adjusted deduction

C. income tax

All of the following are examples of regressive taxes except: A. Sales tax B. Excise tax C. Income tax D. Property tax

A. W-2 form

By January 31st of each year, what form must employers file to report your wages and tips to you and the government? A. W-2 form B. W-4 form C. 1040A D. 1099

A. Reduce it by deducting the cost of the benefits on a pretax basis

Cafeteria plan benefits do what to the qualified individual's taxable salary? A. Reduce it by deducting the cost of the benefits on a pretax basis B. Increase it C. Keep it the same D. The cafeteria plan has nothing to do with taxable salary

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Exemptions and deductions reduce taxable income.

D. all of the choices are correct

Explain the difference between a regressive tax and a progressive tax. A. A regressive tax is a fee that's applied uniformly, while a progressive tax is a fee designed to help create equity among citizens B. A progressive tax is also referred to as a "Robin Hood" tax C. A regressive tax imposes a greater burden on the poor than the rich D. All of the choices are correct

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Form 1040 is the most detailed form and is required if you are self-employed.

A. Divide your total income taxes due by your total income

How do you calculate your average tax rate? A. Divide your total income taxes due by your total income B. Divide your total income by your deductions C. The difference between your income and taxes paid D. The difference between your deductions and total income

B. 6

How many marginal federal tax rate brackets are there? A. 5 B. 6 C. 7 D. 9

D. every year

How often do tax credits and deductions change? A. Every 10 years B. Every 5 years C. Every 2 years D. Every year

B. $10,500

If a person's taxable income is $48,000, their tax bracket is 25%, and their tax credit is $1,500, what amount of taxes is due? A. $12,000 B. $10,500 C. $13,500 D. $11,625

B. $1860

If you earn a salary of $30,000, what will your total FICA taxes be? A. $435 B. $1,860 C. $2,297 D. Unknown

B. Itemized deductions

If your total tax deductions are greater than the standard deduction allowed by the IRS, you can list them on Form 1040 Schedule A, and reduce your income tax due. This is known as: A. Adjusted gross income B. Itemized deductions C. A tax credit D. An exemption

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Methods for lowering taxable income include investments in 401(k) plans, municipal bonds, health savings plans, and dependent care accounts.

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Municipal bond interest is federal income tax-free, however it may be subject to AMT depending on your income status

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One way to reduce tax liability is to take advantage of your cafeteria plan at work.

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Tax credits directly reduce the amount of tax owed dollar-for-dollar.

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Tax laws change each year

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Taxes are fees charged by the government on a product, income, or activity.

false

The average tax rate is the tax rate levied on your last dollar of taxable income.

False

The difference between a regressive tax and a progressive tax is that a progressive tax imposes a greater burden (relative to resources) on the poor than on the rich

A. Capital gain/loss

The difference between the sell price and the cost of an investment asset is called: A. Capital gain/loss B. Total assets C. Net worth D. Liability

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The goal of the government is to have a steady stream of income all year long; therefore, it wants you to pay a portion of your tax liability with each paycheck.

D. Public goods and services

The military, fire & police depts., public schools, libraries, and FEMA are examples of ___. A. Direct taxes B. Regressive jobs C. Property goods and services D. Public goods and services

C. 5

There are _________________ filing statuses. A. 7 B. 6 C. 5 D. 4

D. all of these

What is (are) considered adjustments to gross income? A. Pension contributions B. IRA contributions C. Alimony D. All of these

B. An employee-selected benefit plan that includes accident benefits, dependent care, adoption assistance, and Health Saving Accounts

What is a cafeteria plan? A. A meal plan at work that includes lunch and dinner B. An employee-selected benefit plan that includes accident benefits, dependent care, adoption assistance, and Health Savings Accounts C. Mutual funds that contain stocks and bonds D. None of these

B. Exemption

What is a dollar amount allowed by law as a reduction from your adjusted gross income (AGI) that would otherwise be taxed? A. Deduction B. Exemption C. Taxable incomes D. Tax credit

A. Wages, bonuses, tips, interest earnings, dividends, and gains from selling investments

What is gross income? A. Wages, bonuses, tips, interest earnings, dividends, and gains from selling investments B. What you spent throughout the year C. The dollar amount allowed by law as a reduction from your adjusted gross income that would otherwise be taxed D. An amount that reduces your tax liability, dollar-for-dollar

C. the extra tax you have to pay on top of your regular income tax

What is the alternative minimum tax (AMT)? A. The tax rate levied on your last dollar of taxable income B. The tax rate that is calculated by dividing total income taxes due by AGI C. The extra tax you have to pay on top of your regular income tax D. An alternative tax you may opt for

B. alternative min tax

What is the extra tax a person has to pay on top of his or her regular income tax? A. Average tax rate B. Alternative minimum tax C. Marginal income tax D. None of the answers are correct

A. the tax rate levied on your last dollar of taxable income

What is the marginal income tax rate? A. The tax rate levied on your last dollar of taxable income B. The tax rate levied on your capital gains C. The taxes raised on differential cost structures D. Your total income taxes due divided by your total income

C. 12 month

What is the time limit on a short-term gain? A. 24 months B. 18 months C. 12 months D. 6 months

C. tax credit

What reduces your tax liability, dollar-for-dollar? A. Deductions B. Taxable income C. Tax credits D. Exemptions

C. Estate

What type of tax is an accounting of everything you own or have an interest in on the day you die? A. Gift B. Social Security C. Estate D. Progressive

A. single

What would your filing status be if you were single with no dependents? A. Single B. Married filing jointly C. Married filing separately D. Head of household

A. If you're 65 or older and/or if you're legally blind

When is the standard deduction higher? A. If you're 65 or older and/or if you're legally blind B. When you get married C. When you turn 16 D. After your first paycheck

D. all of the choices are correct

Which of the following is an example of a refundable credit? A. Child tax credit B. Adoption credit C. Earned income credit D. All of the choices are correct

C. contributions to ROTH IRAs

Which of the following is not a way to lower annual income for federal tax purposes? A. Health savings accounts B. Contributions to 401 (k) plans C. Contributions to Roth IRAs D. Investing in municipal bonds because the interest is tax-free

D. all of the choices are correct

Which of the following principles accurately describes a regressive tax? A. A regressive tax is a fee that is applied uniformly, thus imposing a greater burden (relative to resources) on the poor than on the rich B. There is an inverse relationship between the tax rate and the taxpayer's ability to pay C. A regressive tax is often referred to as a fixed tax where every person has to pay the same amount of money; examples include sales tax, taxes on tobacco and alcohol, and property taxes D. All of the choices are correct

B. tax credits

Which of the following will generally reduce your tax liability by the greatest amount? A. Tax deductions B. Tax credits C. Not filing D. Filing the 1040EZ

B. Cigarettes

Which product has an excise tax on it? A. Milk B. Cigarettes C. Fire department services D. Land

C. 1040

Which tax form is available for anyone to use? A. 1040EZ B. 1040A C. 1040 D. 43110

B. Regressive

Which tax is applied uniformly, thus imposing a greater burden on the poor than on the rich? A. Progressive B. Regressive C. Gift D. Estate

B. .4%

Who pays 6.2% of an employee's salary toward Social Security tax and 1.45% toward Medicare? A. The employee only B. The employer only C. Both the employee and the employer D. Neither pays this tax because it is paid by the federal government.

C. Both the employee and the employer

Who pays 6.2% of an employee's salary toward Social Security tax and 1.45% toward Medicare? A. The employee only B. The employer only C. Both the employee and the employer D. Neither pays this tax because it is paid by the federal government.

D. A and B

Why is your filing status important? A. It determines your tax bracket, and therefore the amount of tax you must pay B. It determines your standard deduction amount C. It has no effect on your taxes and therefore it is not important D. A and B

A. To keep the rich from avoiding paying their fair share of taxes

Why was the alternative minimum tax (AMT) designed? A. To keep the rich from avoiding paying their fair share of taxes. B. To get rid of regular income tax C. So only one tax would be issued D. So taxpayers with mortgage interest deductions could pay less

A. capital gain

You buy a house for $112k and 10 years later, you sell the house for $136k. You received a: A. Capital gain B. Capital loss C. Gross income D. Tax credit

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You should consider your marginal tax rate when deciding how and when to sell investments.

A. hope and lifetime learning

. What are the two kinds of education credits? A. Hope and lifetime learning B. Early and late C. First and second D. College and university