Deck 9: Tax Management

Question 1

Which of the following is not a type of tax we typically have to pay?

A) Gift tax
B) Sales tax
C) Retirement tax
D) Property tax

Answer 1

Retirement tax

Question 2

Which product has an excise tax on it?

A) Milk
B) Cigarettes
C) Fire department services
D) Land

Answer 2

Cigarettes

Question 3

A fee levied directly on personal income is what kind of tax?

A) Regressive tax
B) Direct tax
C) Indirect tax
D) Reform tax

Answer 3

Direct tax

Question 4

The military,fire departments,police departments,public schools,libraries,FEMA,and the Department of Homeland Security are examples of what?

A) Direct taxes
B) Regressive jobs
C) Property goods and services
D) Public goods and services

Question 5

Hank makes $70,000 a year.Lilly makes $45,000 a year.They are each taxed at 10%.This type of tax is called:

A) Regressive
B) Progressive
C) Gift
D) Property

Question 6

A regressive tax would be imposed on which of the following?

A) Tobacco
B) Alcohol
C) Gas
D) All of the choices are correct

Question 7

If you earn a salary of $30,000,what will your total FICA taxes be?

A) $435
B) $1,860
C) $2,297
D) Unknown

Question 8

A direct tax is:

A) A charge levied by the state on consumption,expenditure,privilege,or right but not on income or property
B) A fee levied directly on personal income
C) A fee that is applied uniformly,thus imposing a greater burden on the poor than on the rich
D) A fee designed to help create equity among the citizens; the wealthy are taxed at a higher tax rate than the poor

Question 9

What is a fee charged by the government on a product,income,or activity?

A) Public goods and service tax
B) Direct tax
C) Regressive tax
D) Taxes

Question 10

What is a dollar amount allowed by law as a reduction from your adjusted gross income that would otherwise be taxed?

A) Deduction
B) Exemption
C) Taxable incomes
D) Tax credit

Question 11

Explain the difference between a regressive tax and a progressive tax.

A) A regressive tax is a fee that's applied uniformly,while a progressive tax is a fee designed to help create equity among citizens
B) A progressive tax is also referred to as a "Robin Hood" tax
C) A regressive tax imposes a greater burden on the rich than the poor
D) All of the choices are correct

Question 12

Which of the following is not an example of a regressive tax?

A) Income tax
B) Sales tax
C) Excise tax
D) Property tax

Question 13

If you made $25,000 last year in income and paid $100 in gasoline tax,what rate of income was your 'gasoline' tax?

A) 0.004%
B) 0.4%
C) 0.025%
D) 0.25%

Question 14

Which tax is applied uniformly,thus imposing a greater burden on the poor than on the rich?

A) Progressive
B) Regressive
C) Gift
D) Estate

Question 15

What is a direct tax?

A) A fee levied directly on personal income
B) A charge levied by the state on consumption,expenditure,privilege,or right but not on income or property
C) A fee charged by the government on a product,income,or activity
D) A highway toll

Question 16

What type of tax is an accounting of everything you own or have an interest in on the day you die?

A) Gift
B) Social Security
C) Estate
D) Progressive

Question 17

Who pays 6.2% of an employee's salary toward Social Security tax and 1.45% toward Medicare?

A) The employee
B) The employer
C) Both the employee and the employer
D) The employee and the employer split it

Question 18

All of the following are examples of regressive taxes except:

A) Sales tax
B) Excise tax
C) Income tax
D) Property tax

Question 19

Which of the following principles accurately describes a regressive tax?

A) A regressive tax is a fee that is applied uniformly,thus imposing a greater burden (relative to resources)on the poor than on the rich
B) There is an inverse relationship between the tax rate and the taxpayer's ability to pay
C) A regressive tax is often referred to as a fixed tax where every person has to pay the same amount of money; examples include sales tax,taxes on tobacco and alcohol,and property taxes
D) All of the choices are correct

Question 20

What is a type of indirect tax?

A) Sales tax
B) Income tax
C) Property tax
D) Reform tax

Question 21

There are _________________ filing statuses.

A) 7
B) 6
C) 5
D) 4

Question 22

If total tax deductions are greater than the standard deduction allowed by the IRS,you can itemize or list them on Form 1040,thus reducing your overall income tax bill.This is known as:

A) Adjusted gross income
B) Itemized deductions
C) A tax credit
D) An exemption

Question 23

Why is your filing status important?

A) Because it determines your tax bracket and therefore the amount you must pay; your tax bracket is determined by marital status,number of children,occupation,and other factors
B) It helps determine your standard deductions
C) It has no effect on your taxes
D) A and B

Question 24

Which form does your employer send to you and the IRS every year to show what you have earned and what taxes you have paid?

A) W-2 form
B) W-4 form
C) 1040 EZ
D) 1040 A

Question 25

Which of the following is a way to avoid the alternative minimum tax?

A) Decrease deductions
B) Decrease itemizations
C) Keep your income out of the range of $75,000 to $415,000 (depending on filing status)
D) All of the choices are correct

Question 26

By January 31 of each year,what form must employers file to report your wages and tips to you and the government?

A) W-2 form
B) W-4 form
C) 1040A
D) 1099

Question 27

What is (are)considered adjustments to gross income?

A) Pension contributions
B) IRA contributions
C) Alimony
D) All of these

Question 28

What reduces your tax liability,dollar-for-dollar?

A) Deduction
B) Taxable income
C) Tax credit
D) Exemption

Question 29

Which of the following is an example of a refundable credit?

A) Child tax credit
B) Adoption credit
C) Earned income credit
D) All of the choices are correct

Question 30

You buy a house for $111,999 and 10 years later,you sell the house for $135,678.You received a:

A) Capital gain
B) Capital loss
C) Gross income
D) Tax credit

Question 31

Which tax form is available for anyone to use?

A) 1040EZ
B) 1040A
C) 1040
D) 43110

Question 32

What is the extra tax a person has to pay on top of his or her regular income tax?

A) Average tax rate
B) Alternative minimum tax
C) Marginal income tax
D) None of the answers are correct

Question 33

What does AMT stand for?

A) Alternative minimum tax
B) After Mountain Time
C) Alternative maintenance tax
D) Ambient mean time

Question 34

A taxpayer who chooses not to take the standard deduction may choose which of the following alternatives?

A) Special deduction
B) Itemized deduction
C) Exemption
D) Adjusted deduction

Question 35

Why would you check the filing status "married but filing separately"?

A) To get a better tax rate
B) Because you are not legally divorced yet
C) Because you and your spouse live in separate states/countries
D) You should never check this filing status

Question 36

You can use this tax form if you have no dependents and are 65 years old.

A) 1040A
B) 1040EZ
C) 1040
D) W-4

Question 37

Define exemption.

A) It reduces your gross income
B) It reduces your tax liability
C) It is the dollar amount allowed by law as a reduction from your adjusted gross income (AGI)
D) Adjusted gross income (AGI)minus deductions

Question 38

What is gross income?

A) Wages,bonuses,tips,interest earnings,dividends,and gains from selling investments
B) What you spent throughout the year
C) The dollar amount allowed by law as a reduction from your adjusted gross income that would otherwise be taxed
D) An amount that reduces your tax liability,dollar-for-dollar

Question 39

What would your filing status be if you were single with no dependents?

A) Single
B) Married filing jointly
C) Married filing separately
D) Head of household

Question 40

The difference between the sales price and the purchase price of an investment asset is called:

A) Capital gain/loss
B) Total assets
C) Net worth
D) Liability

Question 41

How do you calculate your average tax rate?

A) Divide your total income taxes paid by your total income
B) Divide your total income by your deductions
C) The difference between your income and taxes paid
D) The difference between your deductions and total income

Question 42

Which of the following will save you more money on your taxes?

A) Standard deductions
B) Itemized deductions
C) Not filing
D) Filing the 1040EZ

Question 43

How often do tax credits and deductions change?

A) Every 10 years
B) Every 5 years
C) Every 2 years
D) Every year

Question 44

What is a cafeteria plan?

A) A meal plan at work
B) An employee-selected benefit plan
C) Mutual funds
D) None of these

Question 45

Being able to choose from a pool of choices for benefit plans is called:

A) A cafeteria plan
B) Credit for income benefits
C) Itemized deduction
D) Adjusted benefit plan

Question 46

The _________________ can be calculated by dividing the total income taxes paid by the total income.

A) Alternative minimum tax
B) Average income
C) Marginal income tax
D) Average tax rate

Question 47

Which of the following investments is not tax deferred?

A) Municipal bonds interest income
B) Pension plans
C) Homeownership
D) Health savings account

Question 48

What is the time limit on short-term gain?

A) 24 months
B) 18 months
C) 12 months
D) 6 months

Question 49

What is the marginal income tax rate?

A) The tax rate levied on your last dollar of taxable income
B) The tax rate levied on your capital gains
C) The taxes raised on differential cost structures
D) The normal tax rate

Question 50

Which of the following is not a way to lower income for tax purposes?

A) Health savings accounts
B) Reinvestments
C) Exemptions
D) Municipal bonds

Question 51

How many marginal federal tax rate brackets are there?

A) 5
B) 6
C) 7
D) 9

Question 52

The _________________ income tax rate is the tax rate levied on your last dollar of taxable income.

A) Gross
B) Adjusted
C) Marginal
D) Estimated

Question 53

What is the alternative minimum tax (AMT)?

A) The tax rate levied on your last dollar of taxable income
B) The tax rate that is calculated by dividing the total income taxes paid by the total income
C) The extra tax you have to pay on top of your regular income tax
D) An alternative tax you may opt for

Question 54

When is the standard deduction higher?

A) If you're 65 or older and/or if you're legally blind
B) When you get married
C) When you turn 16
D) After your first paycheck

Question 55

Cafeteria plan benefits do what to the qualified individual's taxable salary?

A) Reduce it
B) Increase it
C) Keep it the same
D) The cafeteria plan has nothing to do with taxable salary

Question 56

Why was the alternative minimum tax (AMT)designed?

A) To keep the rich from living tax-free
B) To get rid of regular income tax
C) So only one tax would be issued
D) So taxpayers with mortgage interest deductions could pay less

Question 57

A cafeteria plan could include which of the following?

A) Accident and health benefits
B) Health savings accounts
C) Adoption assistance
D) All of the choices are correct

Question 58

Which of the following is not included in a cafeteria plan?

A) Accident benefits
B) Car care
C) Dependent care
D) Adoption assistance

Question 59

What is the average tax rate?

A) It is calculated by dividing the total income taxes paid by the total income
B) It is the extra tax you have to pay on top of your regular income tax
C) It is the tax rate levied on your last dollar of taxable income
D) 33%

Question 60

Which tax was designed to target wealthy individuals who were trying to avoid paying taxes?

A) Average tax rate
B) Alternative minimum tax
C) Maximum tax
D) Adjusted tax rate

Question 61

It is possible to narrow the percentage difference between a couple's marginal and average tax rate,possibly resulting in a reduction of the total tax paid,depending on how they file their taxes.

Question 62

The difference between a regressive tax and a progressive tax is that a progressive tax imposes a greater burden (relative to resources)on the poor than on the rich.

Question 63

Boris wanted to reduce his tax liability by lowering the amount of income that is taxable through deductions and credits.To do this,he decided to use the cafeteria plan available through his employer.How is the cafeteria plan advantageous for Boris?

A) The cafeteria plan allows Boris to select from a pool of benefit choices,some or all of which may be tax-advantaged
B) These qualified benefits will be paid by Boris on a pretax basis,which reduces his taxable salary
C) It allows him to claim a higher number of exemptions on his taxes
D) A and B

Question 64

Only U.S.citizens are required to file Form 1040EZ,Form 1040A,or Form 1040.

Question 65

Taxes are a fee charged by the government based on which party is in office that year so as to finance the party's agenda.

Question 66

Exemptions and deductions reduce taxable income.

Question 67

Form 1040EZ is targeted for people who have only wages and a little bank interest income.

Question 68

The average tax rate is the tax rate levied on your last dollar of taxable income.

Question 69

What is the extra tax paid on top of regular income tax?

A) Gift tax
B) Alternative minimum tax
C) Retirement tax
D) Audit tax

Question 70

One way to reduce tax liability is to take advantage of your cafeteria plan at work.

Question 71

Which of the following is not included in a cafeteria plan?

A) Health savings account
B) Accident benefits
C) Chiropractor benefits
D) Health benefits
E) None of these

Question 72

If a person's tax liability is $12,000,their tax bracket is 25%,and their tax credit is $1,500,what amount of taxes is due?

A) $12,000
B) $10,500
C) $13,500
D) $11,625

Question 73

What are the two kinds of education credits?

A) Hope and lifetime learning
B) Early and late
C) First and second
D) First and last

Question 74

The goal of the government is to have a steady stream of income all year long; therefore,it wants you to pay a portion of your tax liability with each paycheck.

Question 75

Tax laws change each year.

Question 76

Taking a lump sum on your retirement pension will have no impact on your marginal tax rate.

Question 77

The 1040A is an intermediate form and can be used if you have paid student-loan interest,had dividend income,or contributed to an IRA.

Question 78

A progressive tax increases as the amount subject to taxation increases.

Question 79

Form 1040 is the most detailed form and is required if you are self-employed.

Question 80

You should consider your marginal tax rate when deciding how and when to sell investments.