Question 1

A person who owes total federal income taxes of $3,450 but had total withholdings of $3,125 would:

Accepted Answer

A)  receive a refund of $3,125.
B)  make a payment of $3,450.
C)  make a payment of $325.
D)  receive a refund of $3,450.
E)  receive a refund of $325.F) A) and B)
G) All of the above

Question 2

In recent years,how many states have not had a general sales tax?

Accepted Answer

A)  1
B)  4
C)  3
D)  5
E)  2F) A) and C)
G) B) and E)

Question 3

Capital gains refer to profits from the sale of stocks,bonds,or real estate.

Accepted Answer

A) True 
 B)False

Question 4

Although you should generally keep tax records for 3 years from the date you file your return,you may be held responsible for providing back documentation up to:

Accepted Answer

A)  3 years
B)  4 years
C)  5 years
D)  6 years
E)  10 yearsF) A) and B)
G) All of the above

Question 5

The interest paid on which type of loan is not tax deductible?

Accepted Answer

A)  Home equity loan interest for home improvements
B)  Credit card interest
C)  Mortgage interest to buy a home
D)  Mortgage interest to build a home
E)  Investment interest up to the amount of investment incomeF) B) and D)
G) B) and E)

Question 6

A drawback of Flexible Spending Accounts is that any account funds must be used to pay for expenses incurred before year's end or the money is lost.

Accepted Answer

A) True 
 B)False

Question 7

The pay-as-you-go system requires:

Accepted Answer

A)  paying the total amount of taxes owed on May 15.
B)  filing quarterly tax returns.
C)  having federal income tax deducted from your paychecks.
D)  earning tax credits for various deductions.
E)  filing the 1040 EZ form.F) A) and D)
G) A) and B)

Question 8

Which one of the following people is least likely to have to file a federal income tax return?

Accepted Answer

A)  A U.S.citizen who is a resident of Puerto Rico.
B)  A U.S.citizen earning $8,000 where taxes were withheld.
C)  A single person earning less than $5,000.
D)  A single person over age 65 earning $20,000.
E)  A 28-year old single college student earning more than $16,000.F) A) and B)
G) A) 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) B) and C)

Question 10

Explain the difference between a short-term capital gain and a long-term capital gain.

Accepted Answer

Capital gains are profits made from the ...

Question 11

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) A) and B)
G) A) and C)

Question 12

An office audit requires that a person visit an IRS office to clarify some aspect of his or her tax return.

Accepted Answer

A) True 
 B)False

Question 13

Effective personal tax strategies include:

Accepted Answer

A)  take advantage of tax credits for which you qualify.
B)  consider tax-exempt investments,such as municipal bonds.
C)  search out all possible itemized deductions.
D)  maximize contributions to tax-deferred retirement programs.
E)  All of theseF) C) and E)
G) A) and E)

Question 14

An itemized deduction of $800 with a 33 percent tax rate would reduce a person's taxes by:

Accepted Answer

A)  $800.
B)  $33.
C)  $200.
D)  $536.
E)  $264.F) A) and B)
G) A) and C)

Question 15

Tax avoidance refers to the use of illegal actions to reduce one's taxes.

Accepted Answer

A) True 
 B)False

Question 16

A taxpayer whose spouse recently died and who has a dependent is most likely to use the ________ filing status.

Accepted Answer

A)  single
B)  married filing joint return
C)  married filing separate return
D)  head of household
E)  qualifying widow or widowerF) A) and B)
G) A) and C)

Question 17

Michael closed on his new home December 31,2018 instead of January 1,2019.As a result,Michael:

Accepted Answer

A)  accelerated tax deductions in 2018.
B)  accelerated tax deductions in 2019.
C)  increased his adjusted gross income in 2018.
D)  delayed the receipt of income in 2018.
E)  delayed the receipt of income in 2019.F) A) and B)
G) B) and C)

Question 18

Reductions from gross income for such items as individual retirement account contributions and alimony payments will result in:

Accepted Answer

A)  adjusted gross income.
B)  taxable income.
C)  earned income.
D)  passive income.
E)  total exclusions.F) A) and B)
G) A) and C)

Question 19

Approximately what percent of tax filers are audited each year?

Accepted Answer

A)  1%
B)  3%
C)  5%
D)  10%
E)  15%F) A) and B)
G) A) and C)

Question 20

The standard deduction is a set amount on which no taxes are paid. For 2018,single people receive a standard deduction of:

Accepted Answer

A)  $24,000
B)  $22,000
C)  $15,000
D)  $12,000
E)  $0F) B) and C)
G) All of the above

Exam 4: Planning Your Tax Strategy

Tax avoidance refers to the use of illegal actions to reduce one's taxes.

Correct AnswerverifiedShow Answer

Capital gains refer to profits from the sale of stocks,bonds,or real estate.

Correct AnswerverifiedShow Answer

The interest paid on which type of loan is not tax deductible?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Michael closed on his new home December 31,2018 instead of January 1,2019.As a result,Michael:

Correct AnswerverifiedShow Answer

Effective personal tax strategies include:

Correct AnswerverifiedShow Answer

Although you should generally keep tax records for 3 years from the date you file your return,you may be held responsible for providing back documentation up to:

Correct AnswerverifiedShow Answer

A taxpayer whose spouse recently died and who has a dependent is most likely to use the ________ filing status.

Correct AnswerverifiedShow Answer

Reductions from gross income for such items as individual retirement account contributions and alimony payments will result in:

Correct AnswerverifiedShow Answer

Explain the difference between a short-term capital gain and a long-term capital gain.

Correct AnswerverifiedCapital gains are profits made from the ...View AnswerShow Answer

In recent years,how many states have not had a general sales tax?

Correct AnswerverifiedShow Answer

The pay-as-you-go system requires:

Correct AnswerverifiedShow Answer

An itemized deduction of $800 with a 33 percent tax rate would reduce a person's taxes by:

Correct AnswerverifiedShow Answer

Approximately what percent of tax filers are audited each year?

Correct AnswerverifiedShow Answer

An office audit requires that a person visit an IRS office to clarify some aspect of his or her tax return.

Correct AnswerverifiedShow Answer

The standard deduction is a set amount on which no taxes are paid. For 2018,single people receive a standard deduction of:

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 AnswerverifiedShow Answer

Which one of the following people is least likely to have to file a federal income tax return?

Correct AnswerverifiedShow Answer

A drawback of Flexible Spending Accounts is that any account funds must be used to pay for expenses incurred before year's end or the money is lost.

Correct AnswerverifiedShow Answer

A person who owes total federal income taxes of $3,450 but had total withholdings of $3,125 would:

Correct AnswerverifiedShow Answer

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Capital gains are profits made from the ...
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