Tax Smartbook Questions

The ___________ authorities are official sources of the tax law generated by one of the branches of government. The ____________ authorities are unofficial tax authorities that help explain the law.

secondary

Will and Lyndsey are married with no dependents and file a joint tax return. In 2021, they paid $3,000 in qualified student loan interest in addition to $22,850 in itemized deductions. What is the total of their "FROM AGI" deductions in 2021?

22,850-3000=25,100

There is no statute of limitations for ___________returns or failure to file.

Fraudulent

The _____ Committee attempts to reconcile he House and Senate versions of a tax bill

Joint Conference

A question of _______ could involve the interpretation of a particular Code section, while a question of _________ hinges upon the circumstances of the taxpayer's transaction.

Law, fact

Tax deductions are a matter of _____.

Legislative grace

A(n) ____-day letter asks the taxpayer to either pay the deficiency or petition the Tax Court to hear the case. A(n) _____-day letter asks the taxpayer to either pay the deficiency or request an appeals conference with the IRS.

90, 30

What are two examples of tax prepayments

overpayment of taxes in prior year applied as payment for current year, income tax withheld from salary by employer, estimated tax payments the taxpayer made directly to the IRS

Which of the following definitions describes a tax? a. A payment required by a government that is unrelated to any specific benefit or service received from the government. b. A payment required by an organization, business, or governmental agency to benefit the general welfare of the country. c. A payment required by a government that is directly related to a specific benefit or service received from the government.

A

In addition to the individual income tax, individuals may be required to pay other taxes. Taxpayers with a large amount of tax preference items and itemized deductions may be subject to the _____________ tax.

Alternative minimum

What is the tax base for the gift tax? A. An appraisal made by the Internal Revenue Service B. The fair market value of the gift on the date the gift is given C. An amount agreed upon by the donor and the donee D. The original purchase price of the gift paid by the donor

B

Which of the following is necessary for a payment to be considered a tax? a. The payment is imposed by an organization, business, or government agency. b. The payment is intended to prevent illegal behavior. c. The payment is required by a governmental body. d. The payment is tied directly to an economic benefit received by the taxpayer.

C

Which of the following statements describes implicit taxes? A. The increased before-tax return that a tax-favored asset produces because of its tax-advantaged status B. The increased after-tax return that a tax-favored asset produces because of its tax-advantaged status C. The reduced before-tax return that a tax-favored asset produces because of its tax-advantaged status D. The reduced after-tax return that a tax-favored asset produces because of its tax-advantaged status

C

Which of the following statements is correct regarding state income tax? a. States with an income tax system generally do NOT impose a sales and use tax. b. The states are not allowed to deviate from the Internal Revenue Code, except for using a much lower tax rate schedule. c. Many states also impose an income tax on corporations. d. All states and the District of Columbia impose some type of a state income tax on individuals.

C

T/F: The federal estate tax is the MOST significant tax assessed by the U.S. government because it generates more revenue for the government than other types of federal taxes.

False, most significant tax assessed by the U.S. gov is the federal income tax

T/F: A six month extension allows a taxpayer to file and pay a return up to six months after the original due date

False: it only allows them 6 extra months to file.

Which of the following taxes uses a proportional tax rate structure? Federal corporate income tax Federal estate tax Federal individual income tax Social security tax

Federal Corporate Income Tax

Which of the following taxes uses a progressive tax rate structure? Multiple choice question. Federal corporate income tax Federal corporate income tax Excise tax Social security tax Sales tax Federal individual income tax

Federal individual income tax

Are excise taxes regressive?

No, they are proportional

What is the correct order for the authoritative weights of regulations?

Internal Revenue Code Treasury regulations revenue rulings and procedures letter rulings

The understanding that the Treasury Department has of the Internal Revenue Code is represented in ______ regulations.

Interpretative

______ facts have not yet occurred. _______ facts have already occurred.

Open, closed

Which of the following taxes are commonly assessed by state and/or local governments? Sales tax Estate tax Income tax Gift tax Property tax

sales, income, and property

In addition to the individual income tax, individuals may be required to pay other taxes. Owners of unincorporated businesses may have to pay _____________.

self-employment

Are social security taxes progressive?

No they are regressive

What is the correct order of the courts' authoritative rank?

Supreme Court Court of Appeals U.S. tax Court U.S. Court of Federal Claims District Courts

T/F: S corps can get an automatic 6 month extension

True

When evaluating a tax system, ______________considers how the tax burden should be distributed across taxpayers.

Equity

What are the steps to enact a tax law?

1. The bill is discussed in the House Ways and Means Committee and moves to the House or Representatives for a vote 2. The bill is reviewed in the Senate Finance committee for discussion and revisions 3. The revised bill from the Finance Committee passes a vote in the Senate 4. The two versions of the bill are reconciled in the Joint Conference Committee 5. The bill passes both the House of Representatives and the Senate 6. The bill is signed into law or vetoed by the President

When evaluating a tax system, _____________ suggests that taxpayers should be able to determine when to pay the tax, where to pay the tax, and how to determine the tax.

Certainty

The first personal income tax was enacted in 1861 to fund the __________________________________.

Civil War

Which one of the following individuals would NOT meet the relationship test for being a qualifying relative of the taxpayer through a qualifying family relationship? Nephew Mother Grandmother Cousin Sister-in-law Aunt

Cousin

Sharon Jones is single. During 2021, she had gross income of $159,800, deductions for AGI of $5,500, itemized deductions of $14,000 and tax credits of $2,000. Sharon had $22,000 withheld by their employer for federal income tax. She has a tax _________(due/refund) rounded to the nearest whole dollar of $___________.

Due, $3693

The _______________system assigns a score to each tax return representing the probability the tax liabilities on the return have been underreported.

Discriminant Function

Individual Income Tax Formula

Gross income minus for AGI equals adjusted gross income minus from AGI equals taxable income

Most states and the District of Columbia impose ____________________ on individuals and corporations who earn income within the state.

Income taxes

Blade pays tax of $5,000 on taxable income of $50,000 while Caden pays tax of $12,000 on taxable income of $100,000. What type of tax rate structure appears to be in force? Progressive Flat Regressive Proportional

Progressive

The federal individual income tax system in the United States uses a(n)______________ tax structure.

Progressive

Which of the following criteria are often used to evaluate a good tax system? (Check all that apply.) Sufficiency Economy Certainty Punctuality Popularity Equity Convenience

Sufficiency, economy, certainty, equity, convenience

T/F: self-employment tax can be imposed in addition to individual income tax and is calculated on a different tax base than taxable income.

T (also alternative minimum taxes)

What action does the 30-day letter provide a taxpayer if the taxpayer does NOT agree with an assessment after being audited by the IRS? Multiple choice question.

The taxpayer can request an appeals conference

Are Federal corporate tax rates flat taxes?

Yes

Are sales taxes proportional/flat?

Yes

Which of the following sentences describes the average tax rate? a. The average level of taxation on each dollar of the taxpayer's taxable income b. The average level of taxation on each dollar of the taxpayer's total income including taxable and nontaxable income c. The tax rate applied to the next additional increment of a taxpayer's taxable income (or deductions)

a

Which of the following sentences describes the marginal tax rate? a. The tax rate applied to the next additional increment of a taxpayer's taxable income (or deductions) b. The average level of taxation on each dollar of the taxpayer's taxable income c. taxpayer's total income including taxable and nontaxable income d. The marginal tax rate that is constant and applies to each dollar of taxable income generated by the taxpayer

a

Judging the convenience of a tax system is best described by which of the following? a. Suggesting that a tax system should be designed to facilitate the collection of tax revenue without undue hardship b. Considering whether tax revenues generated are adequate to meet the financial needs of the government c. Considering that the system should minimize compliance and administration costs d. Considering that taxpayers should be able to determine when, where, and how to calculate and pay the tax e. Considering how the tax burden should be distributed across taxpayers

a.

A tax ________ reduces taxable income and a tax deduction _______ reduces the tax liability dollar for dollar.

deduction, credit

All sources of income are taxable unless specifically excluded through a tax provision. However, _______are NOT permitted unless a specific tax provision allows them.

deductions

Judging the sufficiency of a tax system is best described by which of the following? a. Considering how the tax burden should be distributed across taxpayers b. Considering that taxpayers should be able to determine when, where, and how to calculate and pay the tax c. Considering that the system should minimize compliance and administration costs d. Suggesting that a tax system should be designed to facilitate the collection of tax revenue without undue hardship e. Considering whether tax revenues generated are adequate to meet the financial needs of the government

e

Treasury regulations come in three forms: _________regulations have been issued in their final form and represent the Treasury's interpretations of the Code; __________regulations have a limited life but carry high authoritative weight; and ____________regulations, which have the lowest authority.

final, temporary, proposed

A sales tax is an example of a tax that uses a(n) _____________tax rate structure when compared to its tax base.

flat/proportional

Some tax deductions are subtracted _____ AGI and some are subtracted _____AGI.

for and from

A tax is a payment required by a(n) _________________that is unrelated to any specific benefit or service received by the taxpayer.

government

A(n) _________ tax is defined as the reduced before-tax return that a tax-favored asset produces because of its tax-advantaged status.

implicit

Mary Beth is considering accepting some additional contract work. She is trying to evaluate whether the compensation for the job is worth the effort. Which tax rate should she use to calculate her after-tax proceeds of accepting the job? Effective tax rate Marginal tax rate Average tax rate Proportional tax rate

marginal tax rate

If their gross income exceeds $600, ______ and ________ must file a tax return.

trusts and estates