Deck 3: Preparing Your Taxes

Question 1

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

Answer 1

False

Question 2

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

Answer 2

False

Question 3

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

Answer 3

False

Question 4

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

Question 5

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

Question 6

The federal personal income tax is a progressive tax.

Question 7

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

Question 8

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

Question 9

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

Question 10

The federal personal income tax is a flat tax.

Question 11

Tax avoidance is legal,tax evasion is illegal.

Question 12

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

Question 13

Russ and Lois got married on December 30.Even though they were single for most part of the year,they can legally file as married taxpayers in the year of the wedding.

Question 14

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

Question 15

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

Question 16

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

Question 17

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

Question 18

Dwayne and Gayle were divorced on 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 19

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

Question 20

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

Question 21

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

Question 22

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

Question 23

An investment must be owned over two years in order to qualify for 0 percent tax on capital gains.

Question 24

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

Question 25

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

Question 26

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

Question 27

Child support received is included in gross income.

Question 28

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

Question 29

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

Question 30

An investment must be owned over 12 months in order to qualify for 0 percent tax on capital gains.

Question 31

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

Question 32

A capital gain with a holding period of less than 12 months would be taxed at the same rate as your ordinary income.

Question 33

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

Question 34

Gross income minus tax exempt income equals adjusted gross income.

Question 35

A capital gain on an investment held for more than 12 months would be taxed at the same rate as ordinary income.

Question 36

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

Question 37

Residential mortgage interest and property taxes paid are both deductible items.

Question 38

Adjustments to gross income will decrease your taxable income.

Question 39

Qualified dividends are taxed at lower capital gains rates.

Question 40

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

Question 41

Exemptions are tax deductions from adjusted gross income based on the number of persons supported by the taxpayer's income.

Question 42

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

Question 43

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

Question 44

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

Question 45

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

Question 46

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 47

Local income taxes and local personal property taxes are both itemized deduction items.

Question 48

Federal income taxes paid can be deducted in the following year.

Question 49

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

Question 50

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

Question 51

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

Question 52

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

Question 53

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

Question 54

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

Question 55

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

Question 56

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

Question 57

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

Question 58

Estimated tax payments are made by those who have income from sources other than wages or salaries.

Question 59

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

Question 60

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

Question 61

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

Question 62

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

Question 63

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

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

Question 64

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

Question 65

Municipal bond investments typically provide tax-free interest income.

Question 66

Tax evasion is a legal means to avoid tax liabilities.

Question 67

The federal income tax is:

A) optional.
B) regressive.
C) progressive.
D) flat.
E) none of the above

Question 68

Tax avoidance is a legal means to minimize tax liabilities.

Question 69

The amount of each personal exemption in 2013 was $3,900.

Question 70

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

Question 71

The tax year begins at April 16 and ends at April 15,the usual filing deadline.

Question 72

A progressive tax system is one in which:

A) tax rates are directly proportional to the inflation rates.
B) higher-income people pay tax at a higher rate than lower-income people.
C) tax rates are inversely related to the inflation rates.
D) higher-income people pay tax at a lower rate than lower-income people.
E) there are no exemptions or deductions from taxable income.

Question 73

Federal government generates the majority of its revenues from property taxes.

Question 74

The standard deduction in 2013 for a single filer is $6,100 and for married people filing jointly is $12,200.

Question 75

Pete and Pam are married with four dependent children.Pete and Pam can legally file using which of the following filing statuses?

A) married filing separately only
B) married filing jointly only
C) head of household
D) a and b
E) a,b,and c

Question 76

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 77

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 78

Henry is married to Lillian,and they have two dependent children.Henry can legally file using which of the following filing statuses?

A) Single
B) Married filing jointly
C) Head of household
D) Qualifying widow
E) None of the above

Question 79

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

Question 80

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