Money and Credit Chapter 3 Quiz
The Social Security Tax in 2015:
15.3% (Social Security taxes are paid by all employed workers under the provisions of the Federal Insurance Contributions Act (FICA). It is a combination of old-age, survivor's, disability, and hospital insurance tax.)
Sarah is a homeowner and a single taxpayer. She has owned and occupied the house as a principal residence for the last 8 years. In the current taxable year, she receives a promotion. She sells her home and moves to another area. The capital gain on the sale of the principal residence will:
be taxable excluding the first $250,000 of the gain.
Tax practitioners who are federally licensed are called:
enrolled agents
Your take-home pay is what you are left with after subtracting withholdings from your:
gross earningss
Molly and Jason were married. Their only dependent was Spot, their black standard poodle. Jason died in 2014. Assuming Molly does not remarry, the only legal filing status for Molly in 2015 will be:
single
Payments under the provisions of the Federal Insurance Contributions Act (FICA) are also known as
social security tax
Tax credits reduce your:
tax liabilty
Your income tax withholding is dependent on:
your income level and the number of withholding allowances you have claimed.
Tax preparers must be licensed by either the state or the federal government. T/F?
False
Which of the following statements is true of the tax levied under the Federal Insurance Contributions Act (FICA)?
It is paid equally by employer and employee.
Molly and Justin are considering contributing $5,000 to a tax-deductible charity. This contribution will bring their total itemized deductions to $20,000. Assuming they are in the 28% marginal tax bracket, how much will they save in taxes by contributing the $5,000 to charity?
$1400
Jamil and Vicki have one child, aged 3, for whom they paid childcare expenses of $2,500 this year. If they are eligible for a 20% dependent care credit plus child tax credit, by how much will these credits reduce their tax liability?
$1500
Diana sold mutual fund shares, which she had owned for 4 years, so that she could use the proceeds to travel across Europe with her son. Diana is in the 35 percent marginal tax bracket, and her capital gains from the sale were $30,000. Diana's tax liability on the gain is _____.
$4500
Mr. and Mrs. McMurray have three children, aged 6, 12, and 18, for whom they paid childcare expenses of $6,000 in 2015. The McMurrays' tax liability calculated as per the tax schedule is $10,000. The McMurrays' tax liability is _____.
$8,800 (A tax credit is the deduction from a taxpayer's tax liability that directly reduces his or her taxes due. An often-used tax credit is the child tax credit. This credit is currently $1,000 per child under 17.)
Which of the following private tax preparers are required to pass an exam administered by the Internal Revenue Service (IRS)?
Enrolled agents (Private tax preparers who have passed an IRS-administered exam are fully qualified to handle tax preparation at various levels of complexity.)
Qualified dividends are taxed at the highest capital gain rates. T/F?
False
A simplified version of Form 1040 for individual income tax if you have a taxable income of less than $100,000 from wages only and you do not claim any itemized deductions or any tax credit is:
Form 1040EZ
Adjustments to gross income will decrease your taxable income.
True (Adjustments to gross income are allowable deductions from gross income.)
Tax credits are dollar for dollar reductions in taxable income. T/F?
True (Tax credits are dollar for dollar reductions in the amount of taxes due.)
Henry is married to Lillian, and they have two dependent children. Both of them want to file their own tax returns, reporting only his or her own income, deductions, and exemptions. The filing status of Henry and Lillian in their tax returns is:
married filing seperately
If you are a professional who is likely to receive income that is not subject to withholding, then you are required to _____.
pay an estimated tax
