Question 1

When a taxpayer's income increases $1,000 and the taxes owed increases from $7,850 to $8,200,the marginal tax rate is ________ percent.

Accepted Answer

A)  12
B)  22
C)  24
D)  32
E)  35F) A) and D)
G) A) and E)

Question 2

Taxpayers should beware of tax preparers who offer your refund in advance (refund anticipation loans)and charge interest rates exceeding 300 percent.

Accepted Answer

A) True 
 B)False

Question 3

Which type of audit is the simplest and most common for taxpayers?

Accepted Answer

A)  A field audit
B)  An office audit
C)  A research audit
D)  A correspondence audit
E)  A documentation auditF) A) and B)
G) C) and E)

Question 4

Which one of these statements correctly applies to a Roth IRA?

Accepted Answer

A)  Earnings on the account are tax-free after five years.
B)  Annual contributions may exceed $7,000.
C)  Deposits must be in federally-insured accounts.
D)  Funds are only to be used for educational expenses.
E)  Only self-employed workers can contribute to a Roth IRA.F) B) and C)
G) A) and E)

Question 5

A short-term capital gain is profit earned on an investment that is:

Accepted Answer

A)  made involving small companies.
B)  not taxed as ordinary income.
C)  held for less than a year.
D)  in foreign companies.
E)  made only from real estate.F) B) and E)
G) C) and D)

Question 6

Thomas Franklin claimed an additional $3,000 in deductions he knowingly knew he did not qualify for so he could reduce his tax bill.This is referred to as tax:

Accepted Answer

A)  avoidance.
B)  acceleration.
C)  evasion.
D)  delaying.
E)  deferment.F) A) and B)
G) All of the above

Question 7

A general sales tax is also referred to as an excise tax.

Accepted Answer

A) True 
 B)False

Question 8

Mr.and Mrs.Keating want to give their son Dudley a total of $30,000.They each write him a check for $15,000 so they won't have to pay any gift tax.This is an example of:

Accepted Answer

A)  fraud.
B)  tax evasion.
C)  tax exclusion.
D)  tax avoidance.
E)  tax deferred income.F) B) and C)
G) A) and E)

Question 9

Michele Walsh is considering an additional charitable contribution of $1,500 to a tax-deductible charity,bringing her total itemized deductions to $16,000.If Michele is in a 24 percent tax bracket,how much will this $1,500 contribution reduce her taxes?

Accepted Answer

A)  $0
B)  $360
C)  $1,500
D)  $1,600
E)  $3,840F) A) and E)
G) A) and C)

Question 10

The Tax Cuts and Jobs Act simplified the basic form used when filing your taxes,so that there is now only one form,Form 1040,to report your income.

Accepted Answer

A) True 
 B)False

Question 11

Alex Bates goes on The Price Is Right and earns $525,000 in winnings.What type of income is this?

Accepted Answer

A)  Earned income
B)  Investment income
C)  Passive income
D)  Other income
E)  Deferred incomeF) A) and E)
G) A) and B)

Question 12

Which one of the following is a tax-deferred retirement plan sponsored by an employer?

Accepted Answer

A)  Roth IRA
B)  Education savings account
C)  Keogh plan
D)  401(k) plan
E)  529 planF) A) and B)
G) A) and C)

Question 13

The principal purpose of taxes is to:

Accepted Answer

A)  finance government activities.
B)  reduce the chances of inflation.
C)  create jobs.
D)  discourage use of certain goods and services.
E)  decrease competition from foreign companies.F) A) and E)
G) A) and B)

Question 14

Which of the following good or service is subject to an excise tax?

Accepted Answer

A)  Gasoline
B)  Tires
C)  Cigarettes
D)  Air travel
E)  All of theseF) All of the above
G) A) and B)

Question 15

Which one of the following items is a set amount of income on which no taxes are paid?

Accepted Answer

A)  Medical expenses
B)  Standard deduction
C)  Deferred income
D)  Withholding
E)  Capital gainsF) C) and D)
G) A) and B)

Question 16

What kind of audit requires that a taxpayer visit an IRS office to clarify some aspect of his or her tax return?

Accepted Answer

A)  Office audit
B)  Correspondence audit
C)  Field audit
D)  Taxpayer compliance measurement program audit
E)  Random auditF) B) and D)
G) A) and B)

Question 17

Most people pay the following taxes:

Accepted Answer

A)  taxes on purchases.
B)  taxes on property.
C)  taxes on wealth.
D)  taxes on earnings.
E)  All of theseF) A) and E)
G) A) and C)

Question 18

Factors that affect a person's filing status include marital status and:

Accepted Answer

A)  employment status.
B)  age.
C)  occupation.
D)  dependents.
E)  place of residence.F) B) and C)
G) A) and B)

Question 19

Which one of these terms is defined as the use of legitimate methods to reduce one's taxes?

Accepted Answer

A)  Tax evasion
B)  Tax avoidance
C)  Tax exemption
D)  Tax deferral
E)  Tax deductionF) A) and E)
G) B) and D)

Question 20

________ are expenses that a taxpayer is allowed to deduct from adjusted gross income.

Accepted Answer

A)  Exemptions
B)  Exclusions
C)  Itemized deductions
D)  Tax credits
E)  Passive incomeF) B) and D)
G) None of the above

Exam 4: Planning Your Tax Strategy

Which one of these terms is defined as the use of legitimate methods to reduce one's taxes?

Correct AnswerverifiedShow Answer

Which of the following good or service is subject to an excise tax?

Correct AnswerverifiedShow Answer

Alex Bates goes on The Price Is Right and earns $525,000 in winnings.What type of income is this?

Correct AnswerverifiedShow Answer

________ are expenses that a taxpayer is allowed to deduct from adjusted gross income.

Correct AnswerverifiedShow Answer

Michele Walsh is considering an additional charitable contribution of $1,500 to a tax-deductible charity,bringing her total itemized deductions to $16,000.If Michele is in a 24 percent tax bracket,how much will this $1,500 contribution reduce her taxes?

Correct AnswerverifiedShow Answer

When a taxpayer's income increases $1,000 and the taxes owed increases from $7,850 to $8,200,the marginal tax rate is ________ percent.

Correct AnswerverifiedShow Answer

Factors that affect a person's filing status include marital status and:

Correct AnswerverifiedShow Answer

The Tax Cuts and Jobs Act simplified the basic form used when filing your taxes,so that there is now only one form,Form 1040,to report your income.

Correct AnswerverifiedShow Answer

Which one of the following is a tax-deferred retirement plan sponsored by an employer?

Correct AnswerverifiedShow Answer

Which one of the following items is a set amount of income on which no taxes are paid?

Correct AnswerverifiedShow Answer

A short-term capital gain is profit earned on an investment that is:

Correct AnswerverifiedShow Answer

The principal purpose of taxes is to:

Correct AnswerverifiedShow Answer

Taxpayers should beware of tax preparers who offer your refund in advance (refund anticipation loans)and charge interest rates exceeding 300 percent.

Correct AnswerverifiedShow Answer

Which one of these statements correctly applies to a Roth IRA?

Correct AnswerverifiedShow Answer

A general sales tax is also referred to as an excise tax.

Correct AnswerverifiedShow Answer

What kind of audit requires that a taxpayer visit an IRS office to clarify some aspect of his or her tax return?

Correct AnswerverifiedShow Answer

Most people pay the following taxes:

Correct AnswerverifiedShow Answer

Mr.and Mrs.Keating want to give their son Dudley a total of $30,000.They each write him a check for $15,000 so they won't have to pay any gift tax.This is an example of:

Correct AnswerverifiedShow Answer

Which type of audit is the simplest and most common for taxpayers?

Correct AnswerverifiedShow Answer

Thomas Franklin claimed an additional $3,000 in deductions he knowingly knew he did not qualify for so he could reduce his tax bill.This is referred to as tax:

Correct AnswerverifiedShow Answer

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