Ch. 3 Personal Finance
gross income reduced by certain adjustments, such as contributions to an individual retirement account (IRA) and alimony payments
AGI; adjusted gross income
which type of audit is the least complicated for taxpayers
a correspondence audit (mail)
which of the following would qualify a person for an exemption when computing taxable income?
a dependent; allowance; exemption
which of the following people is least likely to file a federal income tax return?
a person earning less than 8,000
Kelly Vernon wants her tax return prepared by a government approved tax expert, who should she go to?
an enrolled agent- IRS
a deduction from adjusted gross income for yourself, your spouse, and qualified dependents is...
an exemption
total tax due divided by taxable income
average tax rate
an example of an itemized deduction is...
certain job-related travel expenses
money received by an individual for personal effort is...
earned income ( wages, salary..etc)
the Roth IRA differs from the regular IRA in that...
earnings on the account are tax free after five years
a tax imposed on specidic goods and services, such as gasoline, cigarettes, alcholoic beverages, tires, and air travel
excise tax
an amount not included in gross income
exclusion
a general sales tax is also referred to as an excise tax
false; a luxury
interest is paid on credit cards and charge accounts may be deducted for taxes purposes
false; absolutely NOT
tax avoidance refers to illegal actions to reduce one's taxes
false; tax AVOIDANCE
the main purpose of taxes is to...
generate revenue for funding government programs (schools, hospitals, etc.)
taxable income is used to compute a person's...
income tax
a tax levied on the value of a property bequeathed by a deceased person
inheritance tax
money received in the form of dividends or interest is...
investment income; also called portfolio income
expenses that can be deducted from the AGI, such as medical expenses, real estate property taxes, home mortgage interest, charitable contributions, causality losses and certain work-related expenses
itemized deductions
the rate used to calculate tax on the last (and next) dollar of taxable income
marginal income
the "head of household" filing status is for people who are...
not living with a spouse and have dependent children
earnings from a limited partnership (business activities in which you inactively participate in) would be an example of...
passive income
a set amount on which no taxes are paid
standard deduction
a detailed examination of your tax return by the IRS
tax audit
an amount subtracted directly from the amount of taxes owed
tax credit
an amount subtracted from AGI to arrive at taxable income
tax deduction
income that will be taxed at a later day
tax deferred income
tax deferred retirement plans are a type of.. .
tax shelter
an IRA, Keough plan, and 401k plans are examples of...
tax-deferred retirement plans
the net amount of income, after allowable deductions, on which income tax is computed
taxable income
a person's filing status is affected by marital status and dependents
true
a tax credit is an amount subtracted directly from the amount of taxes owed
true
an ESTATE TAX is imposed on the value of an individual's property at the time of his or her death
true
an office audit requires that a tax payer visit an IRS office to clarify some aspect of his or her tax return
true
capital gains refer to profits from the sale of investments (profits from the sale of a capital asset such as stocks, bonds, or real estate)
true
real-estate property taxes are a major source of revenue for local governements
true
parents can reduce their taxes by...
using a child-care tax credit
