Deck 3: Preparing Your Taxes

Question 1

The Internal Revenue Service is responsible for writing the federal income tax codes.

Answer 1

False

Question 2

Tax avoidance is legal,tax evasion is illegal.

Answer 2

True

Question 3

If you have any earned income,you are required to file a tax return.

Answer 3

False

Question 4

If you are eligible to receive a tax refund,you will have to file a tax return to get the refund.

Question 5

One's average tax rate is typically lower than one's marginal tax rate.

Question 6

Social security taxes are deducted from all wages and salaries earned in a year.

Question 7

A couple will usually incur a lower tax liability if they choose "married,filing jointly" rather than "married,filing a separately."

Question 8

Social security taxes are paid on earned income but not on investment income.

Question 9

As a single taxpayer with no dependents,one is generally eligible to file as "head of household."

Question 10

A husband and wife would be the only couple combination that could file a joint return.

Question 11

If you are married,you can legally file a single tax return.

Question 12

Income tax refunds are automatically sent to those who qualify for refunds no later than April 15.

Question 13

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 14

The Federal personal income tax is a progressive tax.

Question 15

The Federal personal income tax is a flat tax.

Question 16

There is no limit on the amount of Social Security withheld annually.

Question 17

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 18

One's marginal tax rate is typical lower than one's average tax rate.

Question 19

The Congress writes and passes the Internal Revenue Code.

Question 20

The main objective of tax planning is to maximize the amount of money you keep by minimizing the amount of taxes you pay.

Question 21

Qualified dividends are taxed at the same rates as long-term capital gains.

Question 22

Child support received is included in gross income.

Question 23

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

Question 24

Alimony received is included in gross income for the receiver and a tax deduction for the payer.

Question 25

Gifts received from family and friends are included in gross income.

Question 26

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

Question 27

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

Question 28

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

Question 29

The Medicare portion of the Social Security tax is paid on 100% of earnings.

Question 30

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

Question 31

Gross income minus tax exempt income equals adjusted gross income.

Question 32

Portfolio-related expenses can be written off against passive income.

Question 33

The sale of your home will rarely result in a taxable capital gain.

Question 34

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

Question 35

Dividends received from the stock you own will be taxable income.

Question 36

Social Security taxes are paid on earned income and investment income.

Question 37

A short-term capital gain would be taxed at the same rate as your salary.

Question 38

A long-term capital gain,a investment held for more than 6 months,would be taxed at the same rate as earned income.

Question 39

Your marital status will affect the amount of social security you must pay in a year.

Question 40

Adjustments to income will decrease your taxable income.

Question 41

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

Question 42

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

Question 43

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

Question 44

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

Question 45

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

Question 46

Federal income taxes paid can be deducted the following year.

Question 47

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

Question 48

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

Question 49

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

Question 50

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

Question 51

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

Question 52

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

Question 53

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

Question 54

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

Question 55

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

Question 56

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

Question 57

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

Question 58

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

Question 59

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 60

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

Question 61

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

Question 62

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 63

The standard deduction in 2011 for a single filer is $5,800 and for married persons filing jointly is $11,600.

Question 64

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

Question 65

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

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

Question 66

Tax evasion is a legal means to avoid tax liabilities.

Question 67

Tax avoidance is a legal means to minimize tax liabilities.

Question 68

Most major software providers have free online versions for preparing federal taxes for all taxpayers.

Question 69

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

Question 70

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

Question 71

You are more likely to have your tax return audited if you work for a for-profit company,compared to a non-profit organization.

Question 72

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

Question 73

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 74

The amount of one personal exemption in 2011 was $3,700.

Question 75

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

Question 76

The tax year corresponds to the April 15 filing deadline,with a new tax year beginning April 16th.

Question 77

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

Question 78

A special tax provision reduced the social security portion for the individual taxpayer by 2% in 2011 and 2012.

Question 79

Municipal bond investments typically provide tax-free interest income.

Question 80

The AMT includes in taxable income certain types of deductions otherwise allowed,such as state and local income and property taxes.