Personal Finance Final CH 1-4

Due to the 21st Century Act (also called Check 21), the processing time for deposited checks has increased.

false

Federal income tax returns must typically be filed by April 1 of each year.

false

If your tax payments are less than the amount of income tax you owe, you are entitled to a refund.

false

Interest paid on a home equity loan is not deductible.

false

Liquidity and rate of return refer to the same thing

false

Making transactions using a credit card will immediately reduce your bank balance.

false

Using tax software typically will not save a taxpayer any time when preparing Form 1040.

false

An IRS agent visited Henry's home to verify some information on his tax return. This visit was called a(n):

field audit

As of 2021, taxpayers can only deduct expenses that are greater than 10% of adjusted gross income for:

medical and dental expenses

Justin needs to have access to his money in five months. The best option for his savings is a:

money market account

When Jack picked up a personal computer from the _____, he was really leasing it.

rent-to-own center

A time deposit is also known as:

savings account

Common payment choices for everyday activities include all of the following except:

short-term loan

Most states do not require state income taxes.

false

Reconciling a checking account is not really necessary since the bank statement includes all activity from the bank's perspective.

false

The "safety" concern with banks and credit unions refers to the potential loss of money due to investors' bad spending habits

false

The average tax rate is the tax paid on the next dollar of taxable income.

false

The best option for borrowing money at a low rate is to use a payday loan organization.

false

When Imogene brought a necklace to a _______, she received a loan based on its proportional value.

pawnshop

Income that is not subject to tax is called:

tax-exempt income

According to Tax Service Warnings, who is responsible for supplying accurate and complete information for completing a tax return?

taxpayer

"Tax Freedom Day" represents how long the average person works to pay her or his taxes each year.

true

A loan from a pawnshop will typically be more expensive than one from a bank.

true

Adjusted gross income is reduced by the itemized or standard deduction.

true

Amounts given for tuition payments or medical expenses are not subject to gift taxes.

true

As inflation rates increase, the interest rates offered to savers usually increase.

true

Cash and prizes won on television game shows are subject to both federal and state taxes.

true

Financial service activities through your smartphone or tablet include text banking, mobile web banking, and banking apps.

true

For 2020, the seven-rate system for federal income tax ranges from 10% to 37%

true

Lydia found a check that she was given for her birthday nine months earlier. Her bank should refuse to cash the check.

true

Social Security is an example of a tax on earnings.

true

Some tax disputes have gone to the U.S. Supreme Court.

true

Tax rate schedules show marginal tax rates.

true

The IRS has made online filing free for millions of taxpayers through the Free File Alliance.

true

Patrick is interested in opening a different account that will allow him to write a few checks each month for a fee per check, but he is unable to maintain a minimum balance. He should open a(n):

Activity checking account

A tax due on the purchase of gasoline is called a(n):

Excise tax.

At the end of the year, employees receive a ____ form that reports annual earnings and the amounts deducted for taxes from their employers.

W-2

You may be required to make estimated tax payments if:

You are an independent contractor.

Billy accepted a job at a company that specializes in providing money for short-term retail lending. Where did he go to work?

a credit card company

Aidan wants to be able to tap or wave his phone at the point-of-sale terminal sensor to complete purchases. Which of the following tools should he use?

a mobile transfer

Franklin is planning for a purchase of a vehicle in two years. Since he wants to be certain that his funds are safe (insured), which of the following should he use?

a savings account

Gross income less adjustments to income equals:

adjust gross income

If Diane was in a 25% tax bracket and received a $1,000 tax credit, by how much would her taxes be reduced?

$1,000

Victor read the fine print for a checking account he was thinking about using. The fine print said, "A minimum balance of $500 is required. If your balance falls below this level, you will be assessed a monthly fee of $10." Since Victor was planning to keep only a $50 balance in his account, how much could he be charged each year?

$120.00

Peter filed his federal income taxes, but he needs to make a correction to his income. Which form should he use?

1040x

Evan is not concerned about immediate tax benefits but instead wants his investment to grow in value on a tax-free basis. Which of these would be the best for him to invest in today?

A Roth IRA

Cathy needs a full range of financial services, including checking, savings, and lending. To which of the following should she go?

A commercial bank

Which of the following is correct?

Bank customers typically are provided with online access to view and print checks that have been paid.

Logan paid a bill with a special form. He received this form at his financial institution and had to pay the amount of the check plus a fee. He used a:

Cashier's check.

Which of the following is NOT a tax that most people pay?

Federal taxes on possessions

Which of the following is correct about inflation?

In order to increase buying power, you need to earn a rate higher than the rate of inflation.

This tax is a major financial planning factor for most people because it is sometimes imposed at the federal, state, and local levels.

Income tax

Earnings on savings can be measured by the:

Rate of return

If a check is lost or stolen, you should use a:

Stop-payment order

Earning interest on previously earned interest is called:

compounding

Quentin wants his retail purchases to be deducted directly from his checking account. Which of the following tools should he use?

debit card

Fees, tips, and bonuses are forms of:

earned income

A benefit of investing in a certificate of deposit is the penalty for early withdrawal.

false

A worker's primary goal should be to:

Pay his or her fair share of taxes while taking advantage of appropriate tax benefits.

An advantage of investing in a 401(k) plan is the:

Possibility of receiving an employer match on your contributions.

Which of the following is NOT an action that can reduce your taxes?

Taking out a consumer loan

The Truth in Savings Act requires financial institutions to disclose the _____ on savings accounts.

annual percentage yield (APY)

A commercial bank is the same thing as a credit union.

false

A savings account is also known as a demand deposit

false

Adjusted gross income is increased by the itemized or standard deduction.

false

If Brenda wants to pay her fair share of taxes, no more and no less, she should practice:

tax avoidance

A tax credit has a full dollar effect in lowering taxes.

true

Brandon lost his debit card. When he realized it was gone, his account had $238 in unauthorized charges. Since he was embarrassed about his loss, he didn't contact his financial institution for 70 days. What is the most that he is liable for?

$238

If Jack was in a 25% tax bracket and received a $1,000 tax deduction, by how much would his taxes be reduced?

$250

Evan had three accounts as listed below. In 2020, how much was his total insurance coverage by the FDIC? Bank A: $150,000 Bank B: $50,000 Bank C: $350,000

$450,000

Brenda lost her debit card. When she realized it was gone, her account had $173 in unauthorized charges. She notified her financial institution within two days. How much is she potentially liable for?

$50

David thinks that his salary and tax rate for next year will be higher than for this year. What step should he take minimize taxes for this year and next year?

Accelerate receipt of income

All of the following are non-deposit institutions except:

A credit union

When Angela wanted to provide financial security for her dependents, she considered purchasing a product that would provide income replacement in the event of her untimely death and also provide a savings/investment component while she is alive. Which company would she most likely do business with?

A life insurance company

Which of the following primarily provides loans for home purchases?

A mortgage company

Claudette's grandchildren are 7 and 9 years old. When Claudette passed away, her grandchildren inherited her money. However, the will stipulated that they should not get control of the money until age 25. Which of the following should be set up to provide for the management and control of the funds?

A trust

Connie thinks that her salary and tax rate for next year will be lower than for this year. What step should she take to minimize her taxes in the current year?

Accelerate deductions

The types of tax services available that offer professional tax assistance include:

All of these choices are correct.

Preston never opened his bank statements, so he was surprised to see that he had incurred a service charge because his balance went below a required minimum balance. In addition, he did not earn interest for this month. What kind of account does Preston have?

An interest-earning checking account

Chloe signed the back of her check with just her signature. She used a(n):

Blank endorsement.

Many people make mistakes when managing current cash needs. Which of these is NOT a frequently made mistake?

Budgeting Spending

When you select a financial services provider, you may find all of the following to be major factors except:

Company logo

When calculating federal income taxes, "gross income" includes all of the following except:

Earned income credit.

Tanya is a single low-income working parent, and Fred is a single high-income working parent. Because of her status, Tanya, but not Fred, may be eligible for the:

Earned-income credit.

Nancy is married to Jerry and needs to complete her tax form. They both earn about the same amount of money each year. What filing status would be best for them?

Married, filing a joint return

Athena wants to determine if she should itemize her deductions. She has identified several possible deductions. Which of the following is NOT a proper itemized deduction?

Miscellaneous expenses less than 2% of AGI

Kylie went to a post office to obtain a

Money order

Another name for a regular savings account is a:

Passbook or statement account

The tax that is a major source of revenue for local governments is called a(n):

Real estate property tax.

Zoe signed the back of her check with the words "for deposit only." She used a(n):

Restrictive endorsement.

Margaret signed the back of her check with the words "pay to the order of Penelope." She used a(n):

Special endorsement

Joseph needs to complete his income taxes for the year. He has already calculated his adjusted gross income. What does he need to do next?

Subtract his itemized deductions.

A tax imposed on the value of a person's property at the time of death is called a(n):

estate tax

All citizens of the United States are required to file a federal income tax return if their income falls below a certain level.

false

An example of an excise tax is Social Security.

false

As inflation rates increase, the interest rates offered to savers usually decrease.

false

Determining adjusted gross income is the final step in calculating federal income tax.

false

Smishing is a scam that uses email spam or pop-up messages to deceive you into revealing your credit card number, social security number, passwords, or other private information.

false

When Marissa completes her taxes, she can include her qualified dependent children, her husband, and herself as exemptions.

true

When Ted needs more cash than he has available, his choices include liquidating savings and borrowing.

true