Ch. 3 Tax
A tax planning activity for February would be to check to see if you have received all of your __________________ and all of your ________________ so you can begin to organize and prepare your income tax return.
W-2 forms (salary and wages) 1099 forms (interest and dividends)
Taxpayers pay income taxes either through payroll ______________ or through estimated tax _____________.
Withholding Payments
Which of the following statements are true about software and taxes? Multiple select question.
- A spreadsheet program can help you keep track of income and expenses as the year plays out. - Software packages such as H&R Block At Home and TurboTax help users prepare and file returns. - You can save time while preparing Form 1040 and its accompanying schedules.
What are the reasons most planners advise people to contribute as much as possible to a SEP-IRA or 401(k) plan.
- Contributions reduce adjusted gross income and therefore reduce taxes. - Increased value accumulates on a tax-free basis until funds are withdrawn.
Which of the following accurately describes the contribution limits of a 401(k) plan?
- Up to $5,000 in 2020, the same as a traditional IRA - Up to $30,000 in 2020 for workers under the age of 50 - Up to $10,000 in 2020, double the amount allowed by a traditional IRA **Up to $19,500 in 2020 for workers under the age of 50**
Income Records
- W-2 forms and bank statements - W-2P forms reporting pension income - 1099 interest, dividends, capital gains and losses from savings and investments - 1099 forms from self employment income, royalty income, lump sum payments from pension or retirement plan
The 5 federal tax filing categories are...
1. Single 2. Married/combine income 3. Married but filing seperate returns 4. Head of household 5. Qualifying widow or widower (spouse died within the last 2 yrs)
tax audit
A detailed examination of your tax return by the Internal Revenue Service.
tax credit
An amount subtracted directly from the tax owed
A CPA and enrolled agents both offer tax services including return preparation while a(n) ______ will represent you in the case of an IRS lawsuit
Attourney
Which of the following events might cause a taxpayer to make estimated tax payments?
Earnings from independent contracting Lump-sum payments from pensions Significant earnings from savings or investments Royalties
Which of the following is not a deductible tax?
Excise tax
True or false: State income tax returns are always required to be filed after the federal return is due.
False
A tax that would require all taxpayers regardless of income level to pay the same percentage is:
Flat tax
Which statement best describes how taxpayers pay their taxes to the IRS?
It is a pay-as-you-go system utilizing withholding of tax from paychecks or making estimated payments.
Which of the following would potentially have tax-free withdrawals? Multiple choice question.
RothIRA
Which of the following taxes are deductible for the person/family paying them? Multiple select question.
State income taxes Real estate property taxes
Royalty Income
The amount someone pays you to use your property, after you subtract the expenses you have for the property
marginal tax rate
The rate used to calculate tax on the last (and next) dollar of taxable income.
different retirement plans
Traditional IRA Roth IRA Sep-IRA Plan 401K Plan
Form 1040X is used to...
amend (change) a previously filed tax return
types of tax audits
correspondance audit (mail inquiry... clarify doc) office audit (visit IRS office to clarify tax return) Field audit (IRS member visits you to see records)
IRS2Go App
provides options for checking your refund status, requesting tax records, locating free tax prep help, and accessing other interactive tools?
Alternative Minimum Tax (AMT)
structured to ensure that those who receive tax breaks also pay their fair share of taxes.
