1993 ch 3
Complete the formula: Taxable income = Gross income -
Adjustments to gross income - Deduction(s) - Personal exemption(s).
Capital is:
An asset like a stock or a bond
Tax planning involves the use of various investment vehicles, retirement programs, and estate distribution procedures to accomplish which of the following?
Avoid taxes
In this context, an exemption is:
Being free from the obligation of paying taxes
Estimated taxes of self-employed professionals must be paid in four installments on April 15, July 15, and October 15 of the current year, and January 15 of the following year.
F
If you file an extension, you get more time to pay your taxes.
F
If you qualify for a tax credit, you should first subtract the amount of the credit from your taxable income and then calculate the amount of taxes you owe.
F
If you've decided to use a professional tax preparer, you no longer have primary responsibility for the accuracy of your return.
F
Long-term capital gains are always taxed at 25%.
F
Maggie is a 20-year-old student at Big State University, has a part-time job, and is completing her tax return. Even though her parents claimed her as an exemption on their tax return, Maggie can also claim herself as an exemption on her own tax return.
F
Margie's accountant told her that her income put her in the 25% tax bracket. That means Margie must pay 25% of her total gross income in taxes.
F
Most homeowners will have to pay capital gains taxes when they sell their homes.
F
Self-employed professionals can wait until April 15 of the following year to pay all the taxes that were due for a given year.
F
Taxpayers who itemize their deductions are allowed to take the standard deduction as well.
F
Which of the following significantly increases your chance of being audited by the IRS?
Higher-than-average deductions
Which of the following are allowable as adjustments to gross income?
IRA contributions Higher education tuition costs Qualified moving expenses
Which of the following statements is true of FICA taxes?
In 2014, the total FICA tax rate was 15.3%, allocating 12.4% to Social Security and 2.9% to Medicare.
Capital gains:
can be tax
All of the following types of income must be included in gross income and hence be subject to federal income taxes except
child-support payments received.
For the most recent tax year, Sara had gross income of $50,000, was single, had taxable income of $40,000, and owed taxes of $7,800. Her average tax rate was
19.5%.
Assume that you had a bad year in the stock market with capital gains of $10,000 and capital losses of $25,000. How much can you write off on this year's tax return?
$13,000
The vast majority of taxpayers fall into which three federal tax brackets?
10%, 15%, 25%
Waldo is married and has 4 young children. How many exemptions can he claim on his federal income tax return, provided he files jointly with his wife?
6
The idea behind a tax exemption is:
A taxpayer gets to keep some money because they have to house, feed and clothe a bunch of dependents
Effective tax planning involves using legal strategies for tax evasion.
F
A typical American family pays approximately how much in taxes?
More than 33% of its gross income
In 2014, Michael had earned income of $40,000, gains of $5,000 from stock transactions, and an $8,000 loss from the sale of his boat. How much could he write off in capital losses?
Nothing
Dividends that you receive from your mutual fund would be considered which type of income?
Portfolio
Jason's wife passed away this past November. He is raising the couple's 10-year-old daughter on his own. On his federal income tax return, which filing status should he choose to obtain the highest standard deduction?
Qualifying widow(er)
A tax credit:
Reduces the amount of tax you have to pay
In 2014, self-employed persons had to pay the full 15.3% FICA tax but could deduct half of the amount paid on their federal tax returns.
T
Social Security and Medicare taxes are also known as FICA taxes.
T
The IRS will compute taxes for those whose taxable income is less than $100,000 and who do not itemize deductions.
T
Tax credits can be controversial because:
They can be used to encourage certain types of behavior, like home ownership
Why is it beneficial to have your taxes deferred?
You may be in a lower tax bracket when you are retired
Tax deferred means:
You pay the taxes in the future
Taxable Income is:
Your income with adjustments for certain excepted income
Deductions and exemptions can include:
a. Mortgage payments b. Medical expenses c. The number of people in your household
If you need to make a correction to a previous tax return, you should
fill out Form 1040X.
IRS fill-in forms
give you a cleaner, crisper printout for your records
Creating a trust or custodial account, or making an outright gift of income-producing property to relatives in a lower tax bracket, is called
income shifting
Your employer calculates how much to withhold from your paycheck for federal income taxes according to the information you filled out on which of the following forms?
w-4
