Fin101

True or false: State income tax returns are always required to be filed after the federal return is due.

false

A tax ______ reduces taxable income, thereby reducing the tax liability.

Deduction

A ___ form is used to amend a previously filed tax return.

1040X

If you want to amend (change) a previous return, you would need to file a ______ form.

1040x

If Mary owes the IRS $5,000 for her income taxes and is in the 15% marginal tax bracket, what would be her average tax rate if she had taxable income of $41,667?

About 12%

Which month is the deadline to file your federal tax return or file an extension if necessary?

April

Which of the following is true? Multiple choice question. Joan, age 48, can contribute up to $7,000 in an IRA as of 2020. Bill, age 58, can contribute up to $7,000 in an IRA as of 2020. As of 2020, the contribution limit for IRAs is $5,000 for workers under 50 years old. Bob, age 55, can contribute up to $5,000 in an IRA as of 2020.

Bill, age 58, can contribute up to $7,000 in an IRA as of 2020.

If you file Form 4868 to obtain an automatic extension on filing your forms, you must pay your estimated taxes owed or face ________________________.

a penalty for being just one day late

A tax ___ directly reduces taxes owed.

credits

True or false: If you owe $10,000 in taxes but have paid $8,000 in withholding payments and $1,900 in estimated payments, you will have a refund.

false

Which of the following is true regarding the use of software when preparing your Form 1040?

it can save you time

Real estate taxes and ______ are tax deductible by the homeowner.

mortgage interest

All but how many states currently have some type of state income tax?

seven

Your ______ income is the basis for computing the amount of tax owed.

taxable

Which of the following is not a deductible tax?

excise tax

Which tool provides options for checking your refund status, requesting tax records, locating free tax prep help, and accessing other interactive tools?

IRS2Go App

True or false: If you itemize your deductions, you can deduct contributions made to charities and amounts paid for real estate taxes.

True

True or false: Income tax is paid during the year through withholding from paychecks and/or estimated payments.

True

Which of the following do not offer for-profit tax services?

Universities

The simplest type of IRS audit is the ___ audit. This is taken directly from the text.

correspondence

True or false: Only cash contributions to qualified charitable organizations are allowed as deduction.

false

_______ income is the net amount of income, after considering allowable deductions, on which tax is computed.

taxable

As of 2020, the IRA contribution limit for workers under age 50 was $6,000.

true

The calculation of your total tax due begins by using your taxable income with either tax tables or a tax schedule.

true

True or false: A tax credit is an amount subtracted directly from taxes owed.

true

A person would file as head of household if he or she is:

unmarried with a dependent child

A recent tax strategy employed by the government is to allow employees with health care FSAs to carry over up to $___ of unused funds. (Enter the numerical value.)

$500

True or false: Income tax is calculated on adjusted gross income less deductions and exemptions.

true

True or false: While municipal bonds pay a lower rate of interest than other types of bonds, the after-tax income may be higher than other types of bonds.

true

When taxes are added to a product for each stage in the manufacturing process, this is called:

vat

If you have made estimated quarterly payments totaling $4,000 and your annual taxes owed total $3,700, then which of the following is true?

you will receive a refund of $300

Which of the following types of interest expense is not deductible?

Automobile Loan Interest

If you are in the 28% tax bracket and owe $20,000 on $100,000 of taxable income, your average tax rate and marginal tax rate would be, respectively:

20% for average and 28% for marginal

Which of the following is not legal?

Take cash for work done and do not declare it as income.

A tax that would require all taxpayers regardless of income level to pay the same percentage is:

flat tax

Tax avoidance means using ____ strategies to reduce taxes, while tax ____ involves using illegal means to lower tax liability.

legal, evasion

Interest income from ____ bonds issued by state and local governments is not subject to federal tax.

municipal

Which of the following would potentially have tax-free withdrawals?

roth IRA

The biggest difference between a(n) ___ IRA and a Roth IRA is that the Roth IRA contribution is not tax deductible, but after five years, its earnings are tax free.

traditional

True or false: There are five filing statuses for your tax return, and they are affected by marital status and number of dependents.

true

Taxpayers pay income taxes either through payroll _____ or through estimated tax _____.

withholding or deduction, payments or payout

Which of the following is not a deductible charitable donation?

Giving money to a homeless person on the street

The due date for the third installment for estimated tax is in which month?

September

Which of the following is not an IRS service for tax assistance?

Ernst and Young Tax Guide

Which of the following taxes are deductible for the person/family paying them? Multiple select question. -Inheritance taxes -Estate taxes -State income taxes -Real estate property taxes

State Income Taxes, Real estate property taxes

John owed $10,000 in taxes on taxable income of $40,000. If John earns an additional $1,000, he will pay an additional $280. Therefore:

his average tax rate is about 25%

Which of the following statements are true about software and taxes?

-You can save time while preparing Form 1040 and its accompanying schedules. -Software packages such as H&R Block At Home and TurboTax help users prepare and file returns. -A spreadsheet program can help you keep track of income and expenses as the year plays out.

Select all the accurate observations below about different types of audits. Multiple select question. -The simplest audit is a correspondence audit. -With an office audit, you must visit the IRS office to answer questions about your return. -An office audit usually is the most complex type of audit. -A field audit involves an IRS agent visit to your home or office and is the most complex type of audit.

-The simplest audit is a correspondence audit. -With an office audit, you must visit the IRS office to answer questions about your return. -A field audit involves an IRS agent visit to your home or office and is the most complex type of audit.

Two possible tax planning activities for April are filing the tax return by April ___, and, if necessary, filing for an automatic ___.

15th, extension

The tax rate on your next dollar of taxable income is called the: Multiple choice question. gross tax rate. marginal tax rate. average tax rate. progressive tax rate.

Marginal tax rate

Which of the following best describes why the home can be a tax shelter?

Mortgage interest and real estate taxes are tax deductible, which helps lower the cost of home ownership.

Which of the following is not a recent tax strategy change?

Mortgage interest deduction

Which of the following would have tax deductible interest?

Home Mortgage

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 estimates payments.

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.

attorney

You can file Form 4868 to obtain a(n) ______ six-month extension on filing an income tax return by filing the proper forms with the IRS before the April 15 filing deadline.

automatic