Deck 1: Introduction to Taxation, the Income Tax Formula, and Form 1040EZ

Question 1

With a progressive rate structure,the average tax rate is always smaller than the marginal tax rate.

Answer 1

False

Question 2

The tax liability of a single individual with taxable income of $89,542 is $18,120.

Answer 2

True

Question 3

One of the criteria to file a Form 1040EZ is that the total taxable income of the taxpayer cannot exceed $100,000.

Answer 3

True

Question 4

The amount of tax liability is affected by the filing status of the taxpayer.

Question 5

A proportional tax rate structure is a tax where the tax rate remains at the same rate regardless of the tax base.

Question 6

Individuals who file a Form 1040EZ should determine their tax liability with reference to a tax rate schedule.

Question 7

All individual income tax returns follow the basic structure of the simplified tax formula.

Question 8

The average tax rate is the total tax liability divided by the taxable income.

Question 9

Federal unemployment compensation benefits are not taxable.

Question 10

At high levels of taxable income,the average tax rate and the marginal tax rate will always be the same.

Question 11

State and local taxes levied on either property or sales are examples of progressive taxes.

Question 12

A single taxpayer cannot file a Form 1040EZ if she is age 65 or older.

Question 13

With a regressive tax,the tax rate decreases as the tax base gets larger.

Question 14

The U.S.individual income tax system is an example of a progressive tax rate structure.

Question 15

Wages,salaries,and tips are compensation for services rendered.However,commissions,bonuses,and severance pay are not taxable.

Question 16

Taxpayers normally pay their tax liability when they file their income tax return.

Question 17

Employers report wage income to employees on a Form W-3.

Question 18

The marginal tax rate is the total tax liability divided by the taxable income.

Question 19

Tax liability is calculated using taxable income.Permitted deductions are then subtracted from the tax liability.

Question 20

Under a flat tax,the marginal tax rate and the average tax rate are different.

Question 21

Circular 230 applies only to Certified Public Accountants and Enrolled Agents.

Question 22

The U.S.individual income tax system is an example of a proportional tax rate structure.

Question 23

The courts issue Private Letter Rulings when a taxpayer requests a ruling on a certain tax situation.

Question 24

The definition of wages includes tips received.

Question 25

Paid preparers must obtain a preparer tax identification number.

Question 26

The marginal tax rate is the proportion of tax paid on the first dollar of taxable income.

Question 27

Typically,federal tax legislation is introduced in the Senate Finance Committee.

Question 28

To be eligible to file the 1040EZ form,the taxpayer can only have taxable wages.

Question 29

Rev.Proc.87-56 was the 56^th Revenue Procedure issued in 1987.

Question 30

IRS Regulations are by far the strongest administrative authority.

Question 31

The Affordable Care Act requires all individuals to have health care insurance coverage.

Question 32

All paid tax preparers must follow the rules provided in Circular 230.

Question 33

There are two types of primary tax authority: statutory and judicial.

Question 34

For equivalent amounts of gross income,a single person will have a higher tax liability than will married persons filing jointly.

Question 35

Individuals who file a Form 1040EZ should determine their tax liability with reference to the tax tables.

Question 36

The Sixteenth Amendment to the U.S.Constitution provides the legal and statutory authority for the administration and enforcement of income taxes.

Question 37

One major disadvantage the taxpayer has when filing a petition with the Tax Court is that the IRS's proposed tax assessment must be paid prior to trial.

Question 38

The simplified tax formula can only be used by individuals with simple income tax returns.

Question 39

A Private Letter Ruling is considered to be tax authority only to the taxpayer to whom it is issued.

Question 40

If a taxpayer is covered by Medicare,they are deemed to have qualifying health care insurance coverage.

Question 41

The tax rate is applied against the tax base to determine the amount of tax liability.

Question 42

A tax rate that increases as the tax base increases is an example of what kind of tax rate structure?

A)Proportional.
B)Recessive.
C)Regressive.
D)Progressive.

Question 43

Circular 230 applies only to paid tax preparers.

Question 44

A tax rate that remains the same as the tax base increases is an example of what kind of tax rate structure?

A)Proportional.
B)Recessive.
C)Regressive.
D)Progressive.

Question 45

Which of the following statements is true with respect to marginal and average tax rates under a progressive tax structure?

A)Marginal rates are always larger than average rates.
B)Marginal rates are always smaller than average rates.
C)Average rates can only be calculated for taxpayers with income over $100,000.
D)Average rates are never more than marginal rates.

Question 46

Jordan and Paul,a married couple,have taxable income of $46,625,which is taxed as follows: $\begin{array}{lr}\$ 18,650 \times 10 \%=&\$1,865.00\\(\$ 46,625-\$ 18,650) \times 15 \%=&4,196.25\\\text { Total tax liability }&\$6,061.25\end{array}$
Their average tax rate is:

A)10%.
B)12.5%.
C)13%.
D)15%.

Question 47

The average tax rate is the taxable income divided by the total tax liability.

Question 48

Jake earned $15,000 and paid $1,500 of income tax,while Jill earned $40,000 and paid $3,000 of income tax.The structure of the tax their income is subject to is:

A)Regressive.
B)Progressive.
C)Proportional.
D)Flat.

Question 49

The amount of tax liability calculated using the tax tables will always be the same as the amount calculated using the tax rate schedules.

Question 50

Which statement is correct with respect to marginal and average tax rates under a progressive tax structure?

A)At very high levels of taxable income,a taxpayer's marginal and average tax rates will be the same.
B)At very low levels of taxable income,a taxpayer's marginal and average tax rates will be the same.
C)For most taxpayers,the average tax rate is larger than the marginal tax rate.
D)Generalizations cannot be made.The question can only be answered with reference to the tax situation of a specific taxpayer.

Question 51

Which of the following would disqualify a taxpayer from filing a Form 1040EZ?

A)The taxpayer is married.
B)The taxpayer has interest income of $1,400.
C)The taxpayer is age 66.
D)The taxpayer received unemployment compensation income of $1,700.

Question 52

Which of the following is an example of a regressive tax?

A)Social security tax.
B)State and local taxes levied on property.
C)Federal income tax.
D)Sales tax.

Question 53

A tax rate structure where the tax rate remains at the same rate regardless of the tax base is:

A)A regressive rate structure.
B)A proportional rate structure.
C)A progressive rate structure.
D)None of these.

Question 54

Legislative regulations do not have the full effect of law.

Question 55

The federal income tax is an example of a:

A)Flat tax structure.
B)Proportional rate structure.
C)Regressive rate structure.
D)Progressive rate structure.

Question 56

Jordan and Paul,a married couple,have taxable income of $46,625,which is taxed as follows: $\begin{array}{lr}\$ 18,650 \times 10 \%=&\$1,865.00\\(\$ 46,625-\$ 18,650) \times 15 \%=&4,196.25\\\text { Total tax liability }&\$6,061.25\end{array}$
Their marginal tax rate is:

A)10%.
B)12.5%.
C)13%.
D)15%.

Question 57

A tax rate that increases as the tax base decreases is an example of what kind of tax rate structure?

A)Proportional.
B)Recessive.
C)Regressive.
D)Progressive.

Question 58

A paid tax preparer who violates the provisions of Circular 230 can be subject to civil,but not criminal,penalties.

Question 59

Joe is an employee of Adams Company.Joe properly completed his Form 1040EZ tax return and was required to pay the IRS $1,372 at the time of filing.Joe's tax liability for the year is $1,372.

Question 60

With respect to the income tax formula,which of the following statements is correct?

A)The simplified income tax formula is only applicable to taxpayers with taxable income less than $100,000.
B)Tax liability is determined by applying an appropriate tax rate to total income.
C)Certain deductions from income are permitted before calculating tax liability.
D)Tax payments are ignored when calculating the tax refund or tax due with the return.

Question 61

Taxpayers who do not have qualifying health care insurance coverage can receive an exemption.Which of the following is NOT a permitted exemption?

A)Gross income greater than $10,400 for single taxpayers.
B)The cost of the lowest-cost coverage exceeds 8% of household income.
C)If the taxpayer went without coverage for one month during the year.
D)Income is below the level required to file an income tax return.

Question 62

Employers report wage income to employees on a:

A)Form W-2.
B)Form W-3.
C)Form 1099-E.
D)Form 1099-G.

Question 63

Which of the following are primary sources of tax authority?

A)Statutory sources.
B)Administrative sources.
C)Judicial sources.
D)All of these.

Question 64

Which of the following would disqualify a taxpayer from filing a Form 1040EZ?

A)Has total taxable income under $100,000.
B)Has no dependents.
C)Be age 68 and not blind.
D)Has interest income less than $1,500.

Question 65

On Form 1040EZ,the permitted deduction from income for a single taxpayer is:

A)$0.
B)$1,500.
C)$10,400.
D)$20,800.

Question 66

Peter and Penelope are married and have combined W-2 income of $76,861.They paid an additional $529 when they filed their taxes.How much income tax did their employers withhold during the year?

A)$11,225.
B)$10,167.
C)$8,008.
D)$6,950.

Question 67

Victoria determined her tax liability was $6,145.Her employer withheld $6,451 from her paychecks during the year.Victoria's tax return would show:

A)A refund of $306.
B)A refund of $6,451.
C)Tax due of $306.
D)Tax due of $6,145.

Question 68

The tax liability for a single individual with taxable income of $67,293 is:

A)$9,159.
B)$11,071.
C)$12,558.
D)$12,562.

Question 69

Which of the following is a statutory source of tax authority?

A)Internal Revenue Code.
B)IRS Regulation.
C)Revenue Ruling.
D)Tax Court decision.

Question 70

In terms of dollars,wage-earning taxpayers will normally pay the majority of their tax liability:

A)When they file their tax return.
B)Through withholding from their wages.
C)In the following tax year.
D)In advance in January.

Question 71

Which of the following would disqualify a taxpayer from filing a Form 1040EZ?

A)The taxpayer has total income of $74,000.
B)The taxpayer has interest income of $500.
C)The taxpayer is age 63.
D)The taxpayer has one dependent.

Question 72

Which court hears most of the litigated tax disputes between the IRS and taxpayers?

A)U)S.Tax Court.
B)U)S.District Court.
C)U)S.Court of Federal Claims.
D)None of these.

Question 73

Alice is an employee of Valley Company.She properly completed her Form 1040EZ tax return and received a refund from the IRS of $1,293.Alice had income tax withholding during the year of $4,881.Her tax liability for the year was:

A)$6,174.
B)$4,881.
C)$3,588.
D)$1,293.

Question 74

Carla is age 64 and Xavier is age 66.They file their tax return as married filing jointly.During all of 2017 they did not have qualifying health coverage nor were they eligible for an exemption.Their household income was $84,990.What is the amount of shared responsibility payment they must report on their 2017 income tax return?

A)$695
B)$1,390
C)$1,573.50
D)$2,125

Question 75

The tax liability for a married couple filing jointly with taxable income of $55,747 is:

A)$9,670.
B)$8,184.
C)$7,430.
D)$7,426.

Question 76

Interest payers (banks,savings and loans,insurance companies,etc. )report interest earnings to taxpayers on a:

A)Form W-2-INT.
B)Form 1099-INT.
C)Form 1099-INC.
D)Form 4070.

Question 77

Hamad is an employee of Mountain Company.He properly completed his Form 1040EZ tax return and was required to pay the IRS $1,374 at the time of filing.He had income tax withholding during the year of $4,429.His tax liability for the year was:

A)$5,803.
B)$4,429.
C)$3,055.
D)$1,374.

Question 78

Which of the following is an administrative source of tax law?

A)Revenue Ruling.
B)IRS Regulation.
C)Private Letter Ruling.
D)All of these.

Question 79

For equivalent amounts of taxable income,the total tax liability of a single individual:

A)Will be less than married filing jointly.
B)Will be more than married filing jointly.
C)Will be more than married filing separately.
D)Cannot be determined with the information provided.

Question 80

Which of the following trial courts hear tax cases?

A)U)S.Tax Court.
B)U)S.District Court.
C)U)S.Court of Federal Claims.
D)All of these.