Chapter 3 Quiz

Which of the following can be adjustment(s) to gross income on the 1040 form? Health insurance premiums paid by self-employed individuals Alimony paid Moving expenses

All

Which of the following offer tax preparation services? National and local tax services Certified public accountants (CPAs) Enrolled agents (EAs) Tax attorneys

All

____ income is subject to federal taxes.

Taxable

The standard deduction is a blanket deduction that depends on the taxpayers filing status age vision

all

You have no employer provided pension plan; your traditional-IRA contributions are treated as

an adjustment to gross income.

Your average tax rate is your

tax liability divided by taxable income.

Tax credits reduce your

tax liability.

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

tax at a higher rate

____ would be considered taxable income.

Alimony received

You made an error when you filed your tax return last year. You can correct this error by filing Form

1040X.

In 2014, the total social security tax was

15.3%.

____ would not be considered taxable income.

Child support payments

A declaration of estimated taxes is made by filing

Form 1040 ES.

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

IRS 800 numbers.

A tax audit is a(n)

IRS attempt to verify the accuracy of a return.

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

Ben and Jack both earned $60,000 this year. Ben (age 30) is married with two children, and Jack (age 61) is single with no dependents. Which of the following is true regarding the amount of Social Security taxes they will pay?

They will pay the same amount of Social Security taxes.

On which of the following types of income would you normally have income tax withheld? Tips Interest Dividends Capital gains Self-employment income

Tips

For tax purposes, head of household refers to

a single individual with dependents.

The tax rate on capital gains for most people is

dependent on the time the asset was owned.

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

gross earnings.

Which of the following is not one of the three basic categories for individual income?

gross income

Your income tax withholding is dependent on

income level and number of withholding allowances.

Which of the following are legal methods of reducing your current tax liability? not reporting taxable income you receive investing in a tax deferred annuity shifting income to your children writing off deductions above the actual amount(s) spent

investing in a tax deferred annuity shifting income to your children

You would typically not include ____ in your gross income.

life insurance death benefit payments

Itemized nonbusiness expenses do not include

life insurance premiums.

Pete and Pam are married with four dependent children. Pete and Pam can legally file using which of the following filing statuses? married filing jointly married filing separately head of household

married filing separately married filing jointly

You have owned and lived in your home for 8 years. Now you have received an excellent promotion, but you will have to sell your home and move to another community. You expect to realize a capital gain of $100,000 on the home's sale. The capital gain will

not be taxable because the home was your principal residence.

For those under the age of 65, medical and dental expenses may be included as itemized deductions

only in the amount in excess of 10% of adjusted gross income.

The federal income tax is

progressive.

Mandi and Thomas were married and had one child, age 7. Mandi died in 2013 leaving Thomas a single parent. In 2014, the most favorable filing status for Thomas would be

qualifying widow(er).

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

self-employed plumber

A capital gain is the result of

selling an asset for more than its purchase price.

Molly and Jason were married. Their only "dependent" was Spot, their black standard poodle. Jason died in 2013. Assuming she does not remarry, in 2014 the only legal filing status for Molly would be

single.

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

standard deduction.