Question 1

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

Accepted Answer

The standard deduction does not increase for individuals who are age 62 and have retired.

Question 2

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

Accepted Answer

Marital status for tax purposes is determined on the last day of the tax year, regardless of changes during the year.

Question 3

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 4

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, is generally required to make estimated tax payments throughout the year to avoid penalties for underpayment of taxes.

Question 5

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

Accepted Answer

Adjusted gross income (AGI) is an important factor in determining eligibility for many tax deductions and credits. AGI is calculated by subtracting certain deductions from total income, and it is used as a threshold in determining eligibility for various tax benefits.

Question 6

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 7

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

Accepted Answer

If a couple is legally married on the last day of the tax year, they can choose to file either jointly or separately.

Question 8

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

Accepted Answer

This is true. Most taxpayers have taxes withheld from their paychecks by their employer and also make quarterly estimated tax payments if necessary.

Question 9

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 10

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 11

Personal exemptions are for the taxpayer and spouse.

Accepted Answer

Personal exemptions are for the taxpayer and their spouse.

Question 12

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

Accepted Answer

This is true. The IRS does charge interest on any unpaid tax after the April 15 deadline. The interest rate can vary but is typically calculated daily and compounded on a monthly basis until the owed amount is paid in full.

Question 13

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 or member of household test under qualifying relatives only requires that the taxpayer's brother is a member of the household for the entire year, not necessarily living with the taxpayer for the entire year.

Question 14

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 15

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.

Question 16

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

Accepted Answer

A taxpayer does not need to be married to claim Head of Household status. They must, however, be unmarried or considered unmarried (i.e. separated from their spouse for the last 6 months of the year, providing more than half of the cost of maintaining a household for a qualifying person, and have that person live with them for more than half of the year).

Question 17

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

Accepted Answer

This is true. When a taxpayer's AGI exceeds certain levels, they may be subject to the phase-out of certain tax benefits such as the deduction for student loan interest, the child tax credit, and the deduction for IRA contributions. In some cases, the tax benefit may be completely eliminated.

Question 18

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

The taxpayer who will receive the exemption must file all the Forms 2120 with his or her tax return under a multiple support agreement.

Question 19

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

Accepted Answer

This is correct according to the IRS. The maximum penalty for failure to file a tax return that is not due to fraud is 25% of the amount of tax owed.

Question 20

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

Accepted Answer

The accuracy-related penalty is imposed when there is negligence or a substantial understatement of tax liability.

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