Question 1

Money received by an individual for personal effort is classified as ______________ income.

Accepted Answer

A)   passive
B)   earned
C)   portfolio
D)   excluded
E)   capital gainsF) C) and D)
G) B) and E)

Question 2

The Form 1040 is most helpful to a person who:

Accepted Answer

A)   is single with no other exemptions.
B)   makes less than $50,000 with no interest or dividends.
C)   itemizes deductions.
D)   has exempt income.
E)   has a simple tax situation.F) A) and D)
G) A) and C)

Question 3

An expense that would be included in the itemized deductions of a taxpayer is:

Accepted Answer

A)   personal postage expenses.
B)   life insurance premiums.
C)   real estate property taxes.
D)   a driver's license fee.
E)   annual interest paid on credit cards.F) D) and E)
G) B) and C)

Question 4

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) A) and B)
G) None of the above

Question 5

Not included in the recent tax credits is a/an _______________ tax credit.

Accepted Answer

A)   energy-saving
B)   adoption
C)   elderly and disabled
D)   credit card
E)   retirement savingsF) D) and E)
G) C) and D)

Question 6

For a dependent to qualify as an exemption, he or she must:

Accepted Answer

A)   be married.
B)   be under age 16.
C)   be registered in school.
D)   receive more than one half of his or her support from the taxpayer.
E)   be a relative.F) A) and E)
G) A) and D)

Question 7

What are the advantages of a 401K?

Accepted Answer

The answer of What are the advantages of a 401K?...

Question 8

Which one of the following is not included in gross income?

Accepted Answer

A)   Tax credit
B)   Exemption
C)   Exclusion
D)   Earned income
E)   Portfolio incomeF) A) and D)
G) B) and C)

Question 9

Kelly Vernon wants her tax return prepared by a government approved tax expert. Which of the following tax preparers should Kelly use?

Accepted Answer

A)   CPA
B)   Enrolled agent
C)   Nationally-certified tax preparer
D)   Tax attorney
E)   Local tax preparerF) C) and D)
G) A) and E) B

Question 10

Itemized deductions are recorded on:

Accepted Answer

A)   Form 1040A.
B)   Schedule A.
C)   Schedule B.
D)   Form 2106.
E)   Form 1040B.F) D) and E)
G) C) and D)

Question 11

A person with a total tax liability of $4,350 and withholding of federal taxes of $3,975 would:

Accepted Answer

A)   receive a refund of $3,975.
B)   owe $4,350.
C)   owe $375.
D)   receive a refund of $4,350.
E)   receive a refund of $375.F) A) and C)
G) A) and B)

Question 12

Which of the following would result in a reduction of taxable income?

Accepted Answer

A)   Portfolio income
B)   Tax credits
C)   Exclusions
D)   Passive income
E)   Earned incomeF) A) and D)
G) A) and C)

Question 13

Capital gains refer to profits from the sale of investments.

Accepted Answer

A) True 
 B)False  True

Question 14

A tax ____________ is an amount subtracted directly from the amount of taxes owed.

Accepted Answer

A)   credit
B)   exemption
C)   deduction
D)   exclusion
E)   shelterF) None of the above
G) B) and E) A

Question 15

Real-estate property taxes are a major source of revenue for local governments.

Accepted Answer

A) True 
 B)False

Question 16

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) D) and E)
G) A) and B)

Question 17

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

Accepted Answer

A)   Itemized deductions
B)   Standard deduction
C)   Earned tax credit
D)   Withholding
E)   Capital gainsF) None of the above
G) A) and B)

Question 18

A traditional IRA, Keogh plan, and 401(k)  plan are examples of:

Accepted Answer

A)   tax-exempt retirement plans.
B)   tax-deferred retirement plans.
C)   capital gains.
D)   self-employment insurance programs.
E)   job-related expenses that are tax deductible.F) D) and E)
G) All of the above

Question 19

The state of Oklahoma imposes a tax of $.17 per gallon on gasoline. What type of tax is this most likely to be?

Accepted Answer

A)   General sales tax
B)   Excise tax
C)   Personal property tax
D)   Income tax
E)   Estate taxF) A) and C)
G) A) and E)

Question 20

Which of the following is a major source of revenue for local governments?

Accepted Answer

A)   Real estate property tax
B)   Excise tax
C)   Estate tax
D)   Inheritance tax
E)   Social Security taxF) B) and C)
G) A) and D)

Exam 4: Planning Your Tax Strategy

Money received by an individual for personal effort is classified as ______________ income.

Correct AnswerverifiedShow Answer

The Form 1040 is most helpful to a person who:

Correct AnswerverifiedShow Answer

An expense that would be included in the itemized deductions of a taxpayer is:

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

Not included in the recent tax credits is a/an _______________ tax credit.

Correct AnswerverifiedShow Answer

For a dependent to qualify as an exemption, he or she must:

Correct AnswerverifiedShow Answer

What are the advantages of a 401K?

Correct AnswerverifiedShow Answer

Which one of the following is not included in gross income?

Correct AnswerverifiedShow Answer

Kelly Vernon wants her tax return prepared by a government approved tax expert. Which of the following tax preparers should Kelly use?

Correct AnswerverifiedB

Itemized deductions are recorded on:

Correct AnswerverifiedShow Answer

A person with a total tax liability of $4,350 and withholding of federal taxes of $3,975 would:

Correct AnswerverifiedShow Answer

Which of the following would result in a reduction of taxable income?

Correct AnswerverifiedShow Answer

Capital gains refer to profits from the sale of investments.

Correct AnswerverifiedTrue

A tax ____________ is an amount subtracted directly from the amount of taxes owed.

Correct AnswerverifiedA

Real-estate property taxes are a major source of revenue for local governments.

Correct AnswerverifiedShow Answer

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

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 traditional IRA, Keogh plan, and 401(k) plan are examples of:

Correct AnswerverifiedShow Answer

The state of Oklahoma imposes a tax of $.17 per gallon on gasoline. What type of tax is this most likely to be?

Correct AnswerverifiedShow Answer

Which of the following is a major source of revenue for local governments?

Correct AnswerverifiedShow Answer

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B

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True

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A

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