Deck 6: Income Taxes

Question 1

Schedule A can be filed with any tax form to itemize deductions for items such as property taxes and charitable contributions paid.

Answer 1

False

Question 2

Jennifer's employer withholds $1,500 of her pre-tax wages in a plan that Jennifer can use to pay for unreimbursed medical expenses,childcare,and parental care.What is this plan called?

A) Individual retirement account
B) Flexible spending account
C) Deferred compensation plan
D) Medical spending account

Answer 2

Flexible spending account

Question 3

Dawn is verifying the accuracy of her paycheck.She earns $12 an hour and works 40 hours each week.Her biweekly deductions are Social Security 6.2%,Medicare 1.45%,federal withholding tax $73.25,state withholding tax $22.50,and health insurance $37.47.What is her net pay if she is paid biweekly?

A) $753.34
B) $779.44
C) $784.34
D) $826.78

Answer 3

$753.34

Question 4

The filing status of head of household is for married taxpayers who have dependents.

Question 5

Use the 2006 tax schedule for married taxpayers filing jointly below.Which equation represents the taxable income in the interval over $123,700 but not over $188,450? ​ ​

A) y = 0.28x - 10,596
B) y = 0.28x + 10,596
C) y = 0.25x - 10,596
D) y = 0.25x + 10,596

Question 6

Conrad and Jill have a taxable income of $63,670.They discovered that they can receive a $1,500 tax credit for purchasing an energy -efficient furnace.How will this tax credit affect their taxes?

A) The tax credit will increase their taxable income by $1,500.
B) The tax credit will reduce their taxable income by $1,500.
C) The tax credit is added to the tax owed,not the taxable income.
D) The tax credit is subtracted from the tax owed,not taxable income.

Question 7

An exemption is an allowable amount that reduces a person's taxable income.Examples of an exemption are the taxpayer and his or her dependents.

Question 8

Tax tables list taxable income in intervals.

Question 9

Income tax is paid on earned income such as wages and tips.Income tax is also paid on unearned income such as interest,dividends,rental income,capital gains,and winnings.

Question 10

Roland had $10,500 in medical expenses last year and has no medical insurance.The IRS allows medical expense deductions for the amount that exceeds 7.5% of a taxpayer's adjusted gross income.If Roland's adjusted gross income is $31,000,how much can he claim as a medical deduction?

A) $10,500
B) $8,175
C) $7,500
D) $750

Question 11

The long form,also called a 1040,is the only form that a filer can use if he or she has interest income from dividends,alimony,or prize money.

Question 12

The Mancuso family consists of five children,two parents,and a live-in great aunt.Mr.Mancuso supports each family member;therefore,he can take eight exemptions on his 1040 tax form.

Question 13

Janine rented an apartment for $900 a month.After a year,she bought a house with a monthly mortgage of $1,250.At the end of the year,she is able to deduct $4,900 in real estate taxes and $8,400 in interest.Janine's taxable income is $42,000.Using the tax schedule below,how much was she able to save on her taxes due to her home ownership? ​ ​

A) $2,940.00
B) $3,101.25
C) $3,903.75
D) $6,843.75

Question 14

Look at the W-2 below.What is the total amount of federal,state,and local taxes that were withheld? ​ ​

A) $13,830.25
B) $18,669.38
C) $19,679.38
D) $23,955.64

Question 15

A W-2 is an income statement that lists any money earned from interest.

Question 16

John and Loretta Smith are in the 28% tax bracket.Their joint taxable income is $134,899.If the first $16,050 is taxed at 10%,with the remainder at 28%,how much tax will they owe?

A) $29,371.72
B) $30,271.75
C) $34,882.72
D) $38,724.75

Question 17

In a progressive tax system,taxes decrease as income increases.

Question 18

Lynn is a single mother with two children.She qualifies to file as head of household.Her total income before deductions was $38,900 last year.Her total deductions were $11,450.Her employer withheld $3,150 from her pay for tax.Use the tax table below.How much more will Lynn owe in taxes? ​ ​

A) $570
B) $563
C) $407
D) $399

Question 19

Which statement is NOT true about the differences between the income on a W-2 and that on a 1099 form?

A) 1099 income is untaxed where the income on a W-2 is already taxed.
B) A 1099 form is for income other than wages.
C) The income on a 1099 is money from interest,royalties,rents,and more.
D) The 1099 income is not reported to the IRS while the W-2 income is reported.

Question 20

An income tax filer who is single or married filing jointly,with no dependents and income less than $100,000,may be able to file a 1040EZ form.

Question 21

Juan is a single father of 3,filing as a Head of Household.His income reported on his W-2 was $98,066 and he had interest and dividend income reported on a 1099 of $2,454.During the year,Juan had state and local taxes withheld $5,864,paid property tax of $6,487,paid $6,846 in mortgage interest,and had $8,147 in charitable contributions.The exemption amount for this year is $4,000.Use the table below to calculate their tax.If Juan's W-2 showed Federal Tax Withheld of $11,799,will he be receiving a refund or owe more taxes on April 15? How much?
​

Question 22

Kathy and Jeff Miller have a combined income of $93,366.They have 1099 forms which report $1,200 in interest.They also have $4,922 income from rental property.They can reduce their income by $3,500.What is their adjusted gross income?

Question 23

The tax equation for income over $74,900 but not over $151,200 is y = 10,312.50 + 0.25(x − 74,900).Simplify the equation and explain the numerical significance of the slope and the y-intercept.

Question 24

What word is synonymous with take-home pay?

Question 25

What is the term for a Wage and Tax statement and what is its purpose?

Question 26

Abraham is a single taxpayer with no dependents.He received $297 in bank interest and $1,500 for an educational expenses deduction.His charitable contributions were $2,000.
Use the information to complete the table below: Wages,tips,and other compensation: $47,513;Social Security withheld based on wages of $47,513;Medicare withheld based on wages of $47,513;federal tax withheld: $4,325;state tax withheld: $2,790.Assume $3,500 per exemption and use the tax rate for the income interval for $32,550 to $78,850 of $4,481.25 + 25% for taxable income over $32,550.
​

Question 27

A single mother who files head of household pays a tax of $10,881.Use the table to find her taxable income interval.
​

Question 28

Maria and Juan are married,filing jointly.Their taxable income is $154,849.Use the table below to write an equation to determine their tax.Then calculate their tax.
​

Question 29

Benjamin started a new job and wants to verify that his net pay has been computed correctly.His salary is $67,679.04 per year.Ben is paid semiannually and has the following deductions: Social Security tax 6.2%,Medicare tax 1.45%,federal withholding 8.4%,state withholding 2.2%,city withholding 1.5%,retirement contributions $474.15,and medical and dental insurance $72.07.What should his net pay be for this pay period?

Question 30

Chris's taxable income is $60,709.She is married,filing jointly.What is her tax?

Question 31

Jason and Lina are trying to decide whether they should get married in December or January.They have heard that there is a marriage penalty built into the federal tax system.If Jason has taxable income of $150,000 and Lina has taxable income of $90,000,determine whether they should file as single and get married in January,or move the wedding up to December so that they can file jointly.
​

Question 32

Brittany's W-2 reported total Medicare withholding based on wages of as $117,676.She contributed $72.07 biweekly to her FSA and 10% of each paycheck to her retirement plan.She received a 1099 from her bank for interest and dividends of $2,404 and a 1099 form in the amount of $4,600 from an employer for whom she did some consulting work.What is Brittany's adjusted gross income?

Question 33

Tanika is filing single and has a taxable income of $110,000.It took many hours throughout the year to keep records of deductions and to file her taxes at the end of the year.Use the table below to calculate her taxes.If an effective tax rate is the percentage of gross income paid in federal taxes,what is Tanika's effective tax rate?
​

Question 34

Cody filed as a single taxpayer and determined his taxes to be $19,671.25 using the following tax table.What was his taxable income?
​

Question 35

Nancy does her taxes herself.She filled out this portion of Schedule A below to deduct her mortgage interest of $7,310;her real estate taxes of $3,988;and her state income taxes of $4,080.What error did Nancy make?
​

Question 36

Asa is single and had taxable income last year of $40,375.At the beginning of the new year,he decided to save 12% of last year's taxable income in a tax -deferred savings plan.His company also started a flexible spending account for medical contributions.Asa's medical insurance is 72.07 per semi-monthly pay.How much can Asa expect to save in taxes this year due to these changes?
​

Question 37

Jennifer and Ken Citizen have a combined income of $145,148.They have 1099 forms which report $4,002 in interest and dividends.During the year,they paid $6,487 in property tax;$9,688 in state and local taxes;$17,573 in federal income tax;and $14,021 in Social Security and Medicare taxes.Tax Freedom Day has been discussed as a concept by which the taxes a family pays are paid first throughout the year until they are paid in full.What is the Tax Freedom Day for this family? Assume it is not a leap year.

Question 38

Angela's effective federal tax rate is 17%.Last year,she was able to reduce taxable income by contributing $250.00 per semi-monthly paycheck to her tax -deferred retirement account and $72.07 per semi-monthly paycheck to her flexible spending account.How much did she reduce her federal taxes by if her gross semi-monthly pay is $2,819.96?

Question 39

Lisa is a single taxpayer whose total income before deductions is $57,392.She was able to reduce her total income by $9,347 by filing Schedule A.Use the tax rate schedule below.How much did she save using Schedule A?
​

Question 40

What is the difference between a tax credit and a tax deduction?