Finance: Chapter 3

The income tax is an example of a progressive tax.

True

Consumption taxes are taxes on goods and services.

True

You may take a standard deduction or itemize deductions on Schedule _____ if they will exceed the standard deduction.​

A

Tax returns must be filed by _________ of the following year.

April 15

As income grows, __________ taxes take a larger share of income and __________ taxes take a smaller share.

progressive; regressive

A tax in which the rate stays the same regardless of income is called...

proportional.

The government collections money, or __________, from citizens and businesses to spend as specified by Congress. ​

revenue

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

taxable income.

Gross income is the income on which you will pay tax.

False

Only a married person is considered a head of household.

False

Only married taxpayers qualify for the head of household filing taxes.

False

Our income tax system is based on involuntary compliance.

False

When the government spends more than it receives in revenue it has a surplus.

False

A taxpayer's filing status is unrelated to his or her marital status.

False

By law, only professional tax preparers may use tax preparation software.

False

Child support is taxable to the person receiving it and is deductible to the one paying it.

False

Federal income taxes are regressive.

False

File 1040EZ if your income is greater than $100,000, you have no dependents or deductions, and you have interest income of more than $1,500.​

False

You do not need to file a tax return if you are over the age of 65.

False

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

False

In the United States, both businesses and individuals pay income taxes and must file income tax returns each year.

True

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

True

On a local level, taxes pay for services such as education, parks, roads, and police, fire, and health departments.

True

The Internal Revenue Service is an agency of the Department of the Treasury.

True

The power to levy federal income taxes rests with the U.S. Congress.

True

To determine taxable income, subtract ​adjustments, deductions, and exemptions from gross income.

True

Unemployment compensation benefits received are taxable to the person who receives them.

True

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

True

You may claim an exemption for each of your dependents. ​

True

_________ are taxes paid when purchases are made on a specific good, such as gasoline.

Excise taxes

In the United States the power to impose federal taxes rests with...

Congress.

______ are not a part of income.

Gifts.

__________ income consists of taxable income received from all sources. ​

Gross

__________ taxes, or flat taxes, take the same percentage regardless of income.​

Proportional

A tax _______ is an amount directly subtracted from the tax owed.

Tax credit.

Every year, the IRS audits millions of taxpayers.​

True

If you file a joint tax return, you can take an exemption for your spouse.

True

If you hire a professional tax preparer you are responsible for supplying accurate and complete tax information.

True

Sequence.

You go from gross income to adjusted gross income by taking adjustments. From there you take deductions and exemptions to get to taxable income. Then you calculate what your tax is based on taxable income, and then apply credits and payments to tax to get to the actual amount you owe.

Which of the following is an example of non-taxable income? a) Life insurance. b) Interest on a bank account. c) Alimony d) None of the above.

a) Life insurance.

A ________ is a person other than the taxpayer or spouse who entitles the taxpayer to claim a dependency exemption.

dependent

For people who use Form 1040EZ or 1040A, the IRS allows a. both of these choices are correct. b. none of these choices are correct. c. electronic filing of tax returns. d. electronic payment of taxes due.

a. both of these choices are correct.

Student loan interest and tuition can be listed as _________ on Form 1040A.

adjustments to gross income

Which is the following is an example of a flat tax? a) Consumption tax b) Federal income tax c) Property tax d) Sales tax

c) Property tax

As an alternative to itemizing deductions, taxpayers may

claim the standard deduction.

A sales tax on specific products and services is a(n) _________ tax.

consumption or use

Which of these is a form of flat tax? a. excise tax b. sales tax c. income tax d. property tax

d. property tax

The largest source of government revenue in the United States is...

income tax.

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

office

In the United States, the responsibility for filing a tax return rests with the individual. This defines the concept of...

voluntary compliance.