Question 1

A taxpayer who has income that is not subject to withholding is never required to make estimated payments during the year.

Accepted Answer

A taxpayer who has income that is not subject to withholding, such as self-employment income or rental income, may be required to make estimated tax payments throughout the year to avoid penalties and interest.

Question 2

The taxpayer's brother must live with the taxpayer for the entire year to meet the relationship or member of household test under qualifying relatives.

Accepted Answer

The relationship test for qualifying relatives does not require the relative (such as a brother) to live with the taxpayer for the entire year.

Question 3

A taxpayer must be married to claim Head of Household status.

Accepted Answer

A taxpayer does not necessarily have to be married to claim Head of Household status. They must, however, meet certain requirements such as supporting a qualifying dependent and paying for more than half of the household expenses.

Question 4

If the taxpayer still owes tax after April 15,the IRS assesses interest based on the remaining amount owed.

Accepted Answer

This statement is true. The IRS assesses interest on any remaining tax owed after the April 15 deadline.

Question 5

Even though the taxpayer is claimed as a dependent on another tax return,he or she can still receive an exemption amount for himself or herself when filing his or her tax return.

Accepted Answer

A taxpayer claimed as a dependent on someone else's tax return cannot claim a personal exemption for themselves on their own tax return.

Question 6

Most taxpayers make payments to the IRS through income tax withholdings and quarterly estimated tax payments.

Accepted Answer

Most taxpayers have income tax withholdings taken out of their paychecks by their employers, and also make quarterly estimated tax payments if they have income that is not subject to withholdings.

Question 7

Taxable income (TI)is computed after subtracting from adjusted gross income (AGI),the standard deduction or itemized deductions and personal and dependency exemptions.

Accepted Answer

This statement is true. Taxable income is calculated by subtracting either the standard deduction or itemized deductions and personal and dependency exemptions from adjusted gross income.

Question 8

When a taxpayer's AGI exceeds certain levels,certain tax benefits are reduced or eliminated.

Accepted Answer

This is true. The IRS limits or phases out certain tax benefits, such as deductions, credits, and retirement account contributions, for taxpayers whose AGI exceeds certain thresholds. These thresholds vary depending on the tax benefit.

Question 9

If a married couple files separate returns and one of them itemizes,the other spouse must also itemize.

Accepted Answer

If one spouse itemizes deductions on their separate tax return, the other spouse must also itemize, even if their itemized deductions are less than the standard deduction.

Question 10

Personal exemptions are for the taxpayer and spouse.

Accepted Answer

Personal exemptions are for the taxpayer and their spouse.

Question 11

The accuracy-related penalty applies when negligence or any substantial understatement occurs.

Accepted Answer

The accuracy-related penalty can apply if there is negligence, a substantial understatement, or certain other types of errors or omissions on a tax return.

Question 12

The maximum penalty for failure to file a tax return that is not due to fraud is 25%.

Accepted Answer

This is true according to the IRS penalties for failure to file a tax return. However, if the failure is due to fraud, the penalty can be much higher.

Question 13

Marital status of a taxpayer is determined on the last day of the tax year.

Accepted Answer

The marital status of a taxpayer is determined on the last day of the tax year according to IRS guidelines.

Question 14

A taxpayer may request an automatic seven-month extension of time to file his or her tax return.

Accepted Answer

The IRS typically allows an automatic six-month extension of time to file a tax return upon request, not seven months.

Question 15

The IRS can impose a 75% penalty on any portion of understatement of tax that is attributable to negligence.

Accepted Answer

The IRS can impose a 20% penalty on any portion of an understatement of tax that is attributable to negligence or disregard of rules or regulations, not 75%. The 75% penalty is specifically for cases of fraud.

Question 16

A couple who is legally married on the last day of the tax year cannot file married filing separately.

Accepted Answer

A couple who is legally married on the last day of the tax year can file married filing separately if they choose to do so.

Question 17

In a multiple support agreement,the taxpayer who will receive the exemption must file all the forms 2120 with his or her tax return.

Accepted Answer

In a multiple support agreement, the designated recipient of the exemption must file Form 2120 with their tax return to claim the exemption.

Question 18

The amount of the standard deduction increases for people who are age 62 and have retired.

Accepted Answer

There is no specific increase in the standard deduction for those who are age 62 and have retired. The standard deduction amount is determined by the IRS each year and is based on factors such as filing status, age, and income level. The 2021 standard deduction for those who are age 65 or older or blind is $1,350 higher than the standard deduction for those who are younger and not blind. However, retirement status does not play a direct role in determining the standard deduction amount.

Question 19

An extension to file a tax return is an extension of time to file and an extension of time to pay.

Accepted Answer

An extension to file a tax return grants additional time to file the return but does not extend the time to pay any taxes owed. Taxes owed are still due by the original deadline.

Question 20

Many deductions and credits are determined with reference to adjusted gross income (AGI).

Accepted Answer

Many deductions and credits such as the standard deduction, IRA contributions, and education-related deductions and credits are determined with reference to adjusted gross income (AGI).

Quiz 2: Expanded Tax Formula, Forms 1040a and 1040, and Basic Concepts