College P.F. Chapter 3

The maximum amount that an individual can give another in a year (2017) without being subjected to estate is

$14,000.

Evan is not concerned about immediate tax benefits but instead wants his investment to grow in value on a tax-free basis. Which of these would be the best for him to invest in today?

A Roth IRA

Tax assistance sources include all of the following except

All of these are tax assistance sources

The tax based on the total tax due divided by taxable income is called the

Average tax rate.

When calculating federal income taxes, "gross income" includes all of the following except

Earned income credit.

A tax imposed on the value of a person's property at the time of death in called a(n)

Estate tax.

A tax due on the purchase of gasoline is called a(n)

Excise tax.

A person with taxable income of $40,000 and a total tax bill of $4,200 would have an average tax rate of 15%.

False

A tax credit reduces the taxable income on which the tax liability in computed.

False

Adjusted gross income is increased by the itemized or standard deduction.

False

All citizens of the United States are required to file a federal income tax return if their income falls below a certain level.

False

An example of an excise tax is Social Security.

False

Contributions to a Keogh or 401(k) are tax-exempt.

False

If your tax payments are less than the amount of income tax you owe, you are entitled to a refund.

False

Interest paid on a home equity loan in not deductible.

False

Most states do not require state income taxes.

False

One of the best tax shelters in owning a car.

False

One of the most frequent filing errors in signing the return.

False

Tax rate schedules lit average tax rates

False

The average tax rate is the tax paid on the next dollar of taxable income.

False

When Paul completes his taxes, he can include all of the following as exemptions except

His 20-year-old son who id working full-time and living in an apartment.

Lauren owns her business and is thinking about saving for retirement. She wants to invest up to 25% of her annual income. Which plan should she use?

Keogh Plan

A worker's primary goal should be to

Pay his or her fair share of taxes while taking advantage of appropriate tax benefits

An advantage of investing in a 401(k) plan is the

Possibility of receiving a employer match on your contributions

Bob was married to sandy, and they have a 12 year-old son, Sandy passed away last year. Bob needs to complete his federal income taxes for the year. What filing status could he use for 2 years after the death of his spouse.

Qualifying widow or widower

Taxes on earnings that fund old age, survivor, and disability insurance benefits are called

Social Security taxes.

Joseph needs to complete his income taxes for the year. He has already calculated his adjusted gross income. What does he need to do next?

Subtract his itemized deductions

If Brenda wants to pay her fair share of taxes, no more and no less, she should practice

Tax avoidance

Income that is taxed at a later date is

Tax-deferred income.

Income that is not subjected to tax is called

Tax-exempt income.

According to Tax Service Warnings, who is responsible for supplying accurate and complete information for completing a tax return?

Taxpayer

"Tax Freedom Day" represents how long the average person works to pay her or his taxes each year.

True

A tax credit has a full dollar effect in lowering taxes.

True

Adjusted gross income is reduced by the itemized or standard deduction.

True

Tax rate schedules show marginal tax rates.

True

The IRS has made online filing free for millions of taxpayers through the Free File Alliance.

True

When Marissa completes her taxes, she can include her qualified dependent children, her husband, and herself as exemptions.

True

At the end of the year, Xavier received a form from his employer that reported annual earnings and the amounts deducted for taxes. That form is called a

W-2

Fees, tips, and bonuses are forms of

earned income.

This tax is a major financial planning factor for most people because it is sometimes imposed at the federal, state, and local levels.

income tax

This tax is a major financial planning factor for most people because it is sometimes imposed at the federal, state, and local levels.

income tax.

This tax is a major source of revenue for local governments is called a(n)

real estate property tax.

Every taxpayer receives at least the standard deduction, a set amount on which no taxes are paid.

True

Individuals are allowed to give money or items valued at $14,000 or less in a year to a person without being subjected to

True

Social Security is an example of a tax on earnings.

True

At the end of the year, employees receive a ______ form that reports annual earnings and the amounts deducted for taxes from their employers.

W-2

Gross Income less Adjustments to Income equals

adjusted gross income

Determining adjusted gross income is the final step in calculating federal income tax.

False

Federal income tax returns must be filed by April 1 of each year.

False