Personal Fin Planning Ch. 4
Select all that apply Select all the accurate observations below about different types of audits.
With an office audit, you must visit the IRS office to answer questions about your return. The simplest audit is a correspondence audit. A field audit involves an IRS agent visit to your home or office and is the most complex type of audit.
Financial planners recommend that copies of home ownership documents should be kept for:
an indefinite period.
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
Which of the following do not offer for-profit tax services?
universities
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.
One way to reduce your tax liability is to:
maximize contributions to tax-deferred retirement programs.
Which of the following taxes are deductible?
state income taxes real estate property taxes
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.
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.
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: 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
The simplest type of IRS audit is the _____ audit. This is a one-word answer
correspondence
The simplest type of IRS audit is the ______ audit. This is a one-word answer
correspondence
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.
Generally, you should keep your tax records for at least three years after filing your return. However, you may be held responsible for providing back documentation.
for up to six years
Interest income from _______bonds, which are issued by state and local governments, is not subject to federal income taxes.
municipal
Head of household is a filing status for a(n) ______ individual or a(n) ______ 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
Taking advantage of tax credits, deferring capital gains and accelerating capital losses, and considering tax-exempt investments are all strategies to lower income
tax
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
True or false: The contribution limit for an IRA (as of 2018) is $5,500 for workers under the age of 50.
true
Tax _______ means using legitimate strategies to reduce taxes, while tax _______ involves using illegal means to lower tax liability. (Enter only one word per blank.)
Avoidance; evasion
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.
As of 2018, the IRA contribution limit was
$5500
If you want to amend (change) a previous return, you would need to file a ______ form.
1040X
Two possible tax planning activities for April are filing the tax return by April ____ , and, if necessary, filing for an automatic six-month_______ .
15th; extension