Chapter 3 Income Tax

Student loan interest and tuition can be listed as ____ on form 1040A

adjustments to gross income

As an alternative to itemizing deductions, taxpayers may

claim the standard deduction

money in this country is collected from citizens and redistrubuted according to priorities determined by

congress

For people who use Form 1040EZ or 1040A, the IRS allows...

electronic payment of tax returns and of taxes due (aka: both of these)

A sales taxon specific products and services is the

excise tax

A taxpayers filing status is unrelated to his or her marital status

false

Only a married person is considered a head of the household

false

You may not use short form 1040EZ for a joint return if your total taxable income is $20,000 or more

false

What is a type of IRS audit requiring a taxpayer to appear in person and bring records?

office

Indirect Taxes

pay taxes that are hidden in the price of goods Ex: gas, utilities, alcoholic beverages, and cigs. The taxes are passed on to the consumer indirectly through higher prices

a tax that increases in proportion to increases in income is known as a ________ tax

progressive

Which of these is a form of a flat tax

property tax

incoming taxes, which are treated as income by the government, are called

revenue

in order to avoid itemizing deductions, a person may elect to take the _______, which is a flat amount

standard deduction

after the standard deduction and exemptions are subtracted from adjusted gross income, you arrive at your _______ income

taxable

to compute your tax liability, turn to the tax tables and look up the amount called...

taxable income

Alimony is taxable to the person receiving it and is deductible to the one paying it

true

Money received in the form of wages, tips, salaries, or interest is taxable income

true

The IRS is an agency in the Department of Treasury

true

The income tax is an example of a progressive tax

true

The power to levy federal income taxes rests with the US Congress

true

You can file an amended tax return (1040X) if you discover you made an error

true

unemployment compensation benefits received are taxable to the person who received them

true

A type of tax for which the rate stays the same regardless of income is called ?

Proportional Taxes

An ? tax allows a higher income person to pay a lower percentage of income in taxes than an lower income person

Regressive Taxes

An ? Is an amount subtracted directly from tax owed

Tax Credit

How are tax deductions different from tax credit?

Tax deductions--amount deducted from income. Tax credits--amount deducted from tax owed.

To intentionally fail to pay taxes owed is to commit a serious crime called ?

Tax invasion

Taxable Income

The amount on which you will pay income tax.

A tax system that is based on ? requires all citizen to be responsible for preparing and filing their tax returns and time and paying taxes due

Voluntary Compliance

When all sources of taxable income are added together the total is called ? income

Gross Income

How is gross income different from taxable income?

Gross income--all taxable income you receive. Taxable income--income on which you will pay taxes (less than gross income)

An administrative agency of the federal government that collects taxes and enforces tax laws is the ?

IRS

Money paid to a former spouse which is taxable income for that persons support is called ?

Alimony

Gross Income

All taxable income you receive, including wages, salaries, and tips.

Tax credit

An amount subtracted directly from the taxed owed

Exemption

An amount you may subtract from your income for each person who depends on your income to live.

Tax returns must be filed by

April 15 of the following year

An exemption of tax returns by the IRS is called an ?

Audit

Money paid to a former spouse which is not taxable income is called?

Child Support

Expenses that can be subtracted from gross income are called ?

Deductions

An amount that can be subtracted from your income for each person who depends on your income to live is an ?

Exemption

Itemized Deductions

Expenses listed on Schedule A that you can subtract from adjusted gross income to determine taxable income.

What is the difference between Form 1040EZ and Form 1040A?

1040EZ--short form for single/married and claim no dependents. Income must be less than $100,000. 1040A--longer form. Income must be less than $100,000 and can take more deductions.

The amount remaining when adjustments are subtracted from gross income is called ?

Adjusted Gross Income