Personal Finance

Which of the following is not true about filing your income tax return online?

"Free file fillable forms" option is available for taxpayers whose income is below the income limitations for free file.

Payments for Blank______ taxes are due by April 15, June 15, September 15, and January 15 of the following year

estimated

Two possible tax planning activities for April _____ are filing the tax return by April , and, if necessary, filing for an automatic six-month _____.

fifteenth, extension

If you find that you have income or deductions that you did not report on your tax return, you should:

file a 1040X to amend the return.

Achieving your financial goals and carrying out your daily activities require many _____ services.

financial

Achieving your financial goals and carrying out your daily activities require many ______ services.

financial

Insurance is a(n) ______.

financial service

As of 2021, the IRA contribution limit was ______.

$6,000

Which of the following tax activities should be completed in January?

- Make your final estimated quarterly tax payment for the previous year by the 15th. - If you expect a refund, file your return for the previous year.

A premature withdrawal from a traditional IRA will result in taxable income and a penalty of ______% of the withdrawn amount.

10

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

1040X

A tax planning activity for February would be to check to see if you have received all of your W-2 forms (salary and wages) and all of your _____ forms (interest and dividends) so you can begin to organize and prepare your income tax return.

1099

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

A spreadsheet program such as MS Excel can help you with your tax planning. A spreadsheet program can help you keep track of income and expenses as the year plays out. Software packages such as H&R Block At Home and TurboTax help users prepare and file returns.

Which of the following is a tax consequence of self-employment?

Business owners must pay self-employment tax.

Which of the following tax activities should be completed in February?

Check to make sure you received all forms to complete your tax return.

You did some independent contracting in 2018 that resulted in a tax liability of $1,000. You did not make estimated tax payments. Your withholding for 2018 was $2,500 and your total tax liability is $3,200. Your tax liability for 2017 was $2,100. Will you incur penalties as a result of your underpayment in 2018?

No, because your withholding is more than your tax liability for the previous year.

True or false: One criterion for choosing a saving plan is the interest rate.

True

True or false: The EIC is a credit that low-income working families can claim to lower their taxes or receive a check from the IRS. True false question.

True

Which of the following tax activities should be completed in December?

Decide if you can defer income to the following year Determine if you should make estimated payments for the next year

Which of the following is a tax avoidance strategy?

Delay the receipt of income because you want to delay the payment of taxes until next year. Accelerate deductions to save taxes this year.

_____ deposits include checking accounts and other payment methods. This is a one-word answer.

Demand

True or false: The IRS reviews all returns for completeness and accuracy.

True

True or false: A tax-exempt investment generates income to be taxed in later years, while a tax-deferred investment produces tax-free income.

False

True or false: Credit alternatives are only for people of limited resources.

False

True or false: The ability to transfer money is not a necessary part of daily business activities.

False

True or false: The advantage of a Coverdell Education Savings Account is that the contribution of $2,000 per year is tax deductible.

False

Which of the following tax activities must be completed by April 15?

File your federal tax return or file for an extension.

What are tax-free savings accounts into which people with high-deductible health insurance plans can place funds each year called?

HSAs

True or false: The contribution limit for an IRA (as of 2021) is $6,000 for workers under the age of 50.

True

True or false: Time deposits include money in savings accounts and certificates of deposits.

True

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 and estimated quarterly payments.

Which of the following best describes the purpose of the alternative minimum tax? This is found in the discussion of calculating taxes owed.

It is to assure that people who receive tax breaks pay a fair share of taxes.

The due dates for quarterly estimated payments are April 15, June 15, and September 15 of the current year and Blank______ 15 of the following year.

January

A retirement plan designed for self-employed people is a ______.

Keogh plan

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 tax activities must be completed by June 15?

Pay the second installment of estimated taxes.

Which of the following tax activities must be completed by September 15?

Pay the third installment of estimated taxes.

A Coverdell Education Savings Account is most similar to a:

Roth IRA.

________ 15 is the due date for the third installment for estimated tax.

September

True or false: A Keogh plan is a tax-deferred retirement plan designed for self-employed people.

True

Which of the following is an indicator of a good tax preparation service?

Tax preparation is the main business activity.

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

True

True or false: Achieving your financial goals and carrying out your daily activities require various financial services.

True

You filed a Form 4868 and received a six-month extension on your taxes for 2018. Which of the following is true?

The filing will not postpone your payment liability, so you must pay your estimated payment liability by April 15, 2019.

Which of the following is a difference between a traditional IRA and a Roth IRA?

The initial contribution to a Roth IRA is not tax deductible.

True or false: Many taxpayers view an annual tax refund as a "windfall," extra money they can count on each year.

True

Select all the accurate observations below about different types of audits.

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.

True or false: Underpayment penalties are usually avoided if you make sure you pay in, through withholding and estimated payments, an amount that is equal to or more than last year's tax liability or pay in at least 90% of the current year's tax liability.

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

You received your W-2 and it had the following information: Wages, tips, other compensation: $35,000, Federal income tax withheld: $4,500. You do your 1040 and find that your taxes owed are $3,500. Which of the following is true?

You will receive a refund of $1,000.

Which of the following is a tax-deferred investment?

a retirement plan

People who claim large or unusual deductions increase their chances of ______.

an audit

Factors to consider when evaluating tax services include experience and training of the provider, the fee, and if the provider will represent you with the IRS in the case of an _____.

audit

On filing Form 4868, you can ______ a six-month extension on filing an income tax return by filing the proper forms with the IRS before the April 15 filing deadline.

automatically receive

Tax _____ means using legitimate strategies to reduce taxes, while tax _____ involves using illegal means to lower tax liability.

avoidance, evasion

Trusts are typically created by a ______.

bank lawyer

A premature withdrawal from an IRA may be subject to a tax penalty. What is the age considered "premature"?

before age 59 1/2

The two key tax planning activities of December are deciding whether to make payments that would be to your _____ for this year while deferring _____ into the next tax year.

benefit, income

When a stock is sold at a higher price than that for which it was purchased, it is called a:

capital gain

The positive difference between the purchase price of a stock and its sale price is called _____ _____.

capital, gains

Credit alternatives include:

cash loans, home mortgages, credit cards

If you get a large tax refund, it is wise to:

change your withholding amount. save it for retirement. pay off credit cards.

Time deposits do not include:

checking accounts.

A trust is a legal agreement that provides for:

control of assets. management of assets. creation of a beneficiary.

The simplest type of IRS audit is the _____ audit. This is a one-word answer.

correspondence

Using savings for _____ living expenses is one of the mistakes people make when managing current cash needs. This is a one-word answer.

current

Financial services include all of the following except:

debt counseling.

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.

deductible

People who claim a large or unusually high amount of ______ increase their odds of getting audited.

deductions

Very low-income workers can benefit from the ______.

earned income credit

Parents who set aside funds for their children will often intend for the money to be used for ______.

education

The two main activities of the CCCS are:

helping families with debt problems by helping them manage debts teaching families how to avoid heavy debt burdens in the future

Which of the following might trigger alternative minimum tax?

high tax deductions for state taxes significant amount of second mortgage interest high tax deductions for local taxes

Asset management accounts are commonly offered by ______.

investment companies

The actions the IRS will take if you make an error could include recalculating your tax, sending you a(n) _____ or refund, or, in a worst-case scenario, notifying you of a tax _____. These are one-word answers.

invoice, audit

Two of the tax advantages of being self-employed are that you can deduct the cost of both health (medical) and ______ insurance as a business expense.

life

Two tax planning activities for the month of January include ______.

making your final estimate quarterly payment for the previous year for income not covered by withholding record-keeping

One way to reduce your tax liability is to:

maximize contributions to tax-deferred retirement programs.

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

mortgage interest

Interest income from _____ bonds, which are issued by state and local governments, is not subject to federal income taxes.

municipal

The ability to transfer money to others is:

necessary for daily business activities.

Many taxpayers have found filing:

online to be easier and less expensive than paper filing.

Common mistakes made when managing current cash needs include:

overspending using savings for current expenses lacking sufficient funds

Taxpayers pay income taxes through:

payroll withholding and through estimated tax payments.

The purpose of the W-2 is to:

report, document annual earnings and amounts paid in taxes.

Saving funds for future use is necessary for financial ______.

safety

Criteria for selection of a savings plan include:

safety. interest rate. liquidity. convenience.

Health _____ accounts are designed to promote personal saving out of which workers can pay routine health care expenses while working and can pay for Medicare copayments and deductibles later, during retirement.

savings

Demand deposits are not ______.

savings accounts

Financial services include:

savings. investments. financial planning. insurance. payment services. borrowing.

Head of household is a filing status for a(n) Blank______ individual or a(n) Blank______ spouse who maintains a household for a child or dependent relative.

single; surviving

A(n) ______ can be helpful in maintaining and updating income and expense data.

spreadsheet program

Additional financial services that may be needed for successful financial management include:

tax assistance. insurance. investments. financial planning. trust services.

CPAs and enrolled agents both offer tax services including return preparation, while a(n) ______ will represent you in the case of an IRS lawsuit.

tax attorney

Which of the following are tax-deferred investments?

tax-deferred annuities IRA Section 529 savings plans Keogh

From a tax standpoint, which of the following is most beneficial?

tax-exempt investments

Taking advantage of tax credits, deferring capital gains and accelerating capital losses, and considering tax-exempt investments are all strategies to lower income _____.

taxes

What are capital gains?

the positive difference between the purchase price of a stock and its sale price

A _____ is a legal agreement that provides for the management and control of assets by one party for the benefit of another. This is a one-word answer.

trust

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

universities