Deck 3: Preparing Your Taxes

Question 1

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement.
Tax avoidance is legal,tax evasion is illegal.

Answer 1

True

Question 2

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement.
The Federal personal income tax is a flat tax.

Answer 2

False

Question 3

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement.
Income tax refunds are automatically sent to those who qualify for refunds no later than April 15.

Answer 3

False

Question 4

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement.
Recent changes in the tax law have lessened the severity of the marriage tax penalty.

Question 5

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement.
A couple will usually incur a lower tax liability if they choose "married,filing jointly" rather than "married,filing a separately."

Question 6

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement.
A child must file a joint return with his/her parents until age 14.

Question 7

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement.
Dwayne and Gayle were divorced September 29,have not remarried,and have no dependents.Their filing status for the year will each be "married" since they were married for more than half of the year.

Question 8

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement.
If you have any earned income,you are required to file a tax return.

Question 9

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement.
A husband and wife would be the only couple combination that could file a joint return.

Question 10

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement.
The Internal Revenue Service is responsible for writing the federal income tax codes.

Question 11

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement.
Tax rates,standard deductions,and personal exemptions are now tied to the Consumer Price Index to prevent "bracket creep."

Question 12

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement.
If you are married,you can legally file a single tax return.

Question 13

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement.
One's average tax rate is typically lower than one's marginal tax rate.

Question 14

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement.
The Federal personal income tax is a progressive tax.

Question 15

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement.
As a single taxpayer with no dependents,one is generally eligible to file as "head of household."

Question 16

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement.
If you are eligible to receive a tax refund,you will have to file a tax return to get the refund.

Question 17

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement.
One's marginal tax rate is typical lower than one's average tax rate.

Question 18

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement.
The main objective of tax planning is to maximize the amount of money you keep by minimizing the amount of taxes you pay.

Question 19

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement.
Russ and Lois got married December 30.Since they were single for most of the year,however,they can legally file as married taxpayers in the year of the wedding.

Question 20

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement.
The Congress writes and passes the Internal Revenue Code.

Question 21

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement.
The Medicare portion of the Social Security tax is paid on 100% of earnings.

Question 22

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement.
A long-term capital gain,a investment held for more than 6 months,would be taxed at the same rate as earned income.

Question 23

An investment must be owned over two years in order to qualify for long-term capital gains treatment.

Question 24

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement.
Your marital status will affect the amount of social security you must pay in a year.

Question 25

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement.
Social security taxes are paid on earned income but not on investment income.

Question 26

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement.
Gross income minus tax exempt income equals adjusted gross income.

Question 27

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement.
Qualified dividends are taxed at the same rates as long-term capital gains.

Question 28

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement.
Portfolio-related expenses can be written off against passive income.

Question 29

An investment must be owned over one year in order to qualify for long-term capital gains treatment.

Question 30

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement.
Child support received is included in gross income.

Question 31

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement.
There is no limit on the amount of Social Security withheld annually.

Question 32

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement.
Alimony received is included in gross income for the receiver and a tax deduction for the payer.

Question 33

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement.
Gifts received from family and friends are included in gross income.

Question 34

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement.
Dividends received from the stock you own will be taxable income.

Question 35

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement.
Social Security taxes are paid on earned income and investment income.

Question 36

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement.
Social security taxes are deducted from all wages and salaries earned in a year.

Question 37

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement.
A short-term capital gain would be taxed at the same rate as your salary.

Question 38

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement.
The sale of your home will rarely result in a taxable capital gain.

Question 39

A taxpayer can write off a maximum of $3,000 of capital losses in one tax year.

Question 40

One's home must typically be owned at least three years to receive the most favorable capital gains treatment.

Question 41

State income taxes and state sales taxes paid can both be included as itemized deductions in the same tax year.

Question 42

Mortgage interest and paid home property taxes are both itemized deduction items.

Question 43

When a child qualifies as a dependent on her parent's return,the child cannot take a personal exemption for herself.

Question 44

A person with a significant amount of investment income would have a high probability of needing to make estimated tax payments.

Question 45

The alternative minimum tax is an issue only for high-income taxpayers.

Question 46

You have up to three years after mailing your tax return to file an amended tax return (1040X).

Question 47

Itemized deductions could include certain taxes,medical expenditures,and home mortgage interest.

Question 48

If your AGI is less than $100,000 and you do not itemize deductions,the IRS will compute your taxes for you.

Question 49

All taxpayers have an equal probability of having their tax returns audited.

Question 50

Adjustments to income will decrease your taxable income.

Question 51

To get favorable tax treatment,the taxpayer must own and occupy the residence as a principle residence for at least 2 of the 5 years prior to the sale.

Question 52

You should itemize deductions when total itemized deductions are less than the standard deduction.

Question 53

The personal exemption for a student can be taken both by the parent and by the child.

Question 54

Tax credits are dollar-for-dollar reductions in taxable income.

Question 55

Personal exemptions are tax deductions based on the number of taxpayers and dependents in the taxpayer's household.

Question 56

Federal income taxes paid can be deducted the following year.

Question 57

State income taxes and real estate taxes are both itemized deduction items.

Question 58

Estimated tax payments must be made by those who do not have taxes deducted from their earnings.

Question 59

You should itemize deductions when total itemized deductions exceed the standard deduction.

Question 60

Qualifying interest on a student loan can be written off as an itemized deduction.

Question 61

The federal government gets the majority of its revenue from the ____ tax.

A) sales
B) property
C) excise
D) income
E) estate

Question 62

Most states generate the majority of their revenues from property taxes.

Question 63

The amount of one personal exemption in 2008 was $3,500.

Question 64

A married couple filing a joint return has Ms.Cindy Cook,a CPA,complete their return.The IRS will hold only Ms.Cook responsible for any errors on the return.

Question 65

The standard deduction in 2008 for a single filer is $5,450 and for married persons filing jointly is $10,900.

Question 66

The regular income tax filing deadline is April 1 of each year.

Question 67

Opening a traditional IRA would allow you to take advantage of tax free earnings.

Question 68

Tax avoidance is a legal means to minimize tax liabilities.

Question 69

Tax-deferred income is better than tax-free income.

Question 70

Tax preparers must be licensed by either the state of federal government.

Question 71

Income shifting refers to the process of transferring income from the taxpayer to the IRS.

Question 72

Anyone can legally prepare tax returns and charge a fee for that service.

Question 73

Municipal bond investments typically provide tax-free interest income.

Question 74

Opening a traditional IRA would allow you to defer taxes on the earning.

Question 75

By filing a tax extension,one does not have to pay his income tax liability until August 15.

Question 76

Marginal tax and average tax rate refer to the same thing.

Question 77

If you earn less than $15,000,you probably pay more in social security taxes than in federal income taxes.

Question 78

Persons who work for more than one employer in any year will owe more Social Security taxes than if all their income was earned from a single employer.

Question 79

Over 75% of the revenue received by the federal government is from ____ and ____ taxes.

A) sales and income
B) income and excise
C) Social Security and estate
D) estate and sales
E) income and Social Security

Question 80

Tax evasion is a legal means to avoid tax liabilities.