Chapter 3 Quiz
Which of the following can be adjustment(s) to gross income on the 1040 form? Health insurance premiums paid by self-employed individuals Alimony paid Moving expenses
All
Which of the following offer tax preparation services? National and local tax services Certified public accountants (CPAs) Enrolled agents (EAs) Tax attorneys
All
____ income is subject to federal taxes.
Taxable
The standard deduction is a blanket deduction that depends on the taxpayers filing status age vision
all
You have no employer provided pension plan; your traditional-IRA contributions are treated as
an adjustment to gross income.
Your average tax rate is your
tax liability divided by taxable income.
Tax credits reduce your
tax liability.
A progressive tax system is one in which higher-income people pay ____ than lower-income people.
tax at a higher rate
____ would be considered taxable income.
Alimony received
You made an error when you filed your tax return last year. You can correct this error by filing Form
1040X.
In 2014, the total social security tax was
15.3%.
____ would not be considered taxable income.
Child support payments
A declaration of estimated taxes is made by filing
Form 1040 ES.
You are preparing your own tax return. The least costly source for answering your questions would be
IRS 800 numbers.
A tax audit is a(n)
IRS attempt to verify the accuracy of a return.
Henry is married to Lillian, and they have two dependent children. Henry can legally file using which of the following filing statuses?
Married filing jointly
Ben and Jack both earned $60,000 this year. Ben (age 30) is married with two children, and Jack (age 61) is single with no dependents. Which of the following is true regarding the amount of Social Security taxes they will pay?
They will pay the same amount of Social Security taxes.
On which of the following types of income would you normally have income tax withheld? Tips Interest Dividends Capital gains Self-employment income
Tips
For tax purposes, head of household refers to
a single individual with dependents.
The tax rate on capital gains for most people is
dependent on the time the asset was owned.
Your take-home pay is what you are left with after subtracting withholdings from your
gross earnings.
Which of the following is not one of the three basic categories for individual income?
gross income
Your income tax withholding is dependent on
income level and number of withholding allowances.
Which of the following are legal methods of reducing your current tax liability? not reporting taxable income you receive investing in a tax deferred annuity shifting income to your children writing off deductions above the actual amount(s) spent
investing in a tax deferred annuity shifting income to your children
You would typically not include ____ in your gross income.
life insurance death benefit payments
Itemized nonbusiness expenses do not include
life insurance premiums.
Pete and Pam are married with four dependent children. Pete and Pam can legally file using which of the following filing statuses? married filing jointly married filing separately head of household
married filing separately married filing jointly
You have owned and lived in your home for 8 years. Now you have received an excellent promotion, but you will have to sell your home and move to another community. You expect to realize a capital gain of $100,000 on the home's sale. The capital gain will
not be taxable because the home was your principal residence.
For those under the age of 65, medical and dental expenses may be included as itemized deductions
only in the amount in excess of 10% of adjusted gross income.
The federal income tax is
progressive.
Mandi and Thomas were married and had one child, age 7. Mandi died in 2013 leaving Thomas a single parent. In 2014, the most favorable filing status for Thomas would be
qualifying widow(er).
A ____ would be most likely to have to pay estimated taxes.
self-employed plumber
A capital gain is the result of
selling an asset for more than its purchase price.
Molly and Jason were married. Their only "dependent" was Spot, their black standard poodle. Jason died in 2013. Assuming she does not remarry, in 2014 the only legal filing status for Molly would be
single.
If you do not wish to itemize deductions, you can use the
standard deduction.
