Question 1

An exclusion is earnings not included in gross income.

Accepted Answer

A) True 
 B)False

Question 2

Tim Bridges owns a fishing boat.His state imposes an annual 3.25 percent tax on the current value of this boat.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) C) and D)
G) A) and B)

Question 3

One of the most frequently overlooked tax deductions is:

Accepted Answer

A)  student loan interest paid by parents.
B)  real estate taxes.
C)  federal income tax you paid last spring.
D)  tax preparation fees.
E)  state income taxes.F) B) and E)
G) A) and D)

Question 4

An exclusion affects a person's taxes by:

Accepted Answer

A)  not including tax-exempt income in gross income.
B)  increasing itemized deductions.
C)  decreasing itemized deductions.
D)  decreasing the number of exemptions a person can claim.
E)  increasing the number of exemptions a person can claim.F) A) and C)
G) None of the above

Question 5

To minimize taxes owed,you should do the following if you expect to have a higher tax rate next year:

Accepted Answer

A)  Accelerate deductions into the current year
B)  Delay the receipt of income until next year
C)  Delay deductions until next year
D)  Get a loan for the additional taxes
E)  Quit work at the end of the current yearF) A) and C)
G) All of the above

Question 6

Al Barkley is single and earns $40,000 in taxable income.He uses the following tax rate schedule to calculate the taxes he owes.  What is Al's average tax rate?

Accepted Answer

A)  11.85%
B)  18.27%
C)  21.35%
D)  23.87%
E)  25.00%F) A) and B)
G) B) and D)

Question 7

An 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) A) and D)
G) A) and E)

Question 8

In 2018,the Form 1040 is not appropriate for someone who:

Accepted Answer

A)  is single with no children.
B)  makes less than $50,000 with no interest or dividends.
C)  had no taxable income and no tax withheld.
D)  has a complex tax situation.
E)  has a simple tax situation.F) C) and D)
G) A) and B)

Question 9

Mary Garcia is a U.S.citizen that worked in Mexico for part of the year and earned $50,000 while she was there.This foreign earned income will not be included in her gross income for the year.This represents a tax:

Accepted Answer

A)  deduction.
B)  exclusion.
C)  exemption.
D)  credit.
E)  refund.F) C) and D)
G) D) and E)

Question 10

Randal Snyder is 55 years old,and has adjusted gross income of $40,000.He has medical expenses for the year ending 2018 of $7,000.How much of these expenses can he include as an itemized deduction?

Accepted Answer

A)  $0
B)  $3,000
C)  $4,000
D)  $6,000
E)  $7,000F) B) and C)
G) A) and E)

Question 11

Money received in the form of dividends or interest is commonly called:

Accepted Answer

A)  earned income.
B)  investment income.
C)  passive income.
D)  tax-deferred income.
E)  tax-exempt income.F) A) and B)
G) A) and D)

Question 12

The Affordable Care Act of 2010,or Obamacare,required taxpayers to pay a tax penalty if they were not able to confirm that they had health care coverage.This penalty has been eliminated by the Tax Cuts and Jobs Act for tax years starting in:

Accepted Answer

A)  2017
B)  2018
C)  2019
D)  2020
E)  2021F) B) and D)
G) A) and B)

Question 13

Which one of the following is most likely to qualify as an itemized deduction?

Accepted Answer

A)  Interest on a credit card or charge account
B)  Charitable contributions
C)  Losses reimbursed by insurance
D)  Life insurance premiums
E)  Traffic violation feeF) A) and E)
G) A) and D)

Question 14

Which statement is true regarding a tax credit?

Accepted Answer

A)  A tax credit is the same as a tax deduction.
B)  A tax credit reduces the amount of taxes owed.
C)  Medical expenses is an example of a tax credit.
D)  A tax credit reduces taxable income.
E)  A charitable contribution is an example of a tax credit.F) All of the above
G) A) and C)

Question 15

Estimated quarterly tax payments must be made by people who:

Accepted Answer

A)  are employed in a foreign country.
B)  receive regular payroll checks.
C)  work for the government.
D)  do not have taxes withheld from their paychecks.
E)  itemize deductions.F) A) and D)
G) A) and B)

Question 16

The "head of household" filing status is for someone who is:

Accepted Answer

A)  recently divorced.
B)  recently widowed.
C)  unmarried and has a dependent child.
D)  married but only one spouse has income.
E)  married and each spouse makes about the same income.F) C) and E)
G) C) and D)

Question 17

Union dues,tax preparation fees,and other miscellaneous expenses are:

Accepted Answer

A)  partially deductible.
B)  fully deductible.
C)  deductible for self-employed individuals only.
D)  deductible for people in certain income categories.
E)  not deductible in 2018.F) A) and D)
G) C) and D)

Question 18

Taxable income is used to compute the amount of:

Accepted Answer

A)  exemptions.
B)  income tax owed.
C)  deductions.
D)  capital gains.
E)  exclusions.F) A) and B)
G) B) and D)

Question 19

Mike Hansen has adjusted gross income of $82,000.During the year,Mike decided he needed a larger home.He purchased a home on a golf course in the same town as his first home.Mike incurred $6,000 in moving expenses.How much of this can he include as an itemized deduction?

Accepted Answer

A)  $8,200
B)  $6,150
C)  $6,000
D)  $1,000
E)  $0F) A) and B)
G) A) and C)

Question 20

Elizabeth Gleason just died.At the time of her death the total value of her assets was $150,000.The federal government collected $7,500 in taxes based on this value.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) D) and E)
G) A) and B)

Exam 4: Planning Your Tax Strategy

An exclusion is earnings not included in gross income.

Correct AnswerverifiedShow Answer

Which one of the following is most likely to qualify as an itemized deduction?

Correct AnswerverifiedShow Answer

Elizabeth Gleason just died.At the time of her death the total value of her assets was $150,000.The federal government collected $7,500 in taxes based on this value.What type of tax is this most likely to be?

Correct AnswerverifiedShow Answer

Mike Hansen has adjusted gross income of $82,000.During the year,Mike decided he needed a larger home.He purchased a home on a golf course in the same town as his first home.Mike incurred $6,000 in moving expenses.How much of this can he include as an itemized deduction?

Correct AnswerverifiedShow Answer

Randal Snyder is 55 years old,and has adjusted gross income of $40,000.He has medical expenses for the year ending 2018 of $7,000.How much of these expenses can he include as an itemized deduction?

Correct AnswerverifiedShow Answer

The Affordable Care Act of 2010,or Obamacare,required taxpayers to pay a tax penalty if they were not able to confirm that they had health care coverage.This penalty has been eliminated by the Tax Cuts and Jobs Act for tax years starting in:

Correct AnswerverifiedShow Answer

Al Barkley is single and earns $40,000 in taxable income.He uses the following tax rate schedule to calculate the taxes he owes. What is Al's average tax rate?

Correct AnswerverifiedShow Answer

One of the most frequently overlooked tax deductions is:

Correct AnswerverifiedShow Answer

Taxable income is used to compute the amount of:

Correct AnswerverifiedShow Answer

Mary Garcia is a U.S.citizen that worked in Mexico for part of the year and earned $50,000 while she was there.This foreign earned income will not be included in her gross income for the year.This represents a tax:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Union dues,tax preparation fees,and other miscellaneous expenses are:

Correct AnswerverifiedShow Answer

In 2018,the Form 1040 is not appropriate for someone who:

Correct AnswerverifiedShow Answer

Money received in the form of dividends or interest is commonly called:

Correct AnswerverifiedShow Answer

An exclusion affects a person's taxes by:

Correct AnswerverifiedShow Answer

The "head of household" filing status is for someone who is:

Correct AnswerverifiedShow Answer

Estimated quarterly tax payments must be made by people who:

Correct AnswerverifiedShow Answer

Which statement is true regarding a tax credit?

Correct AnswerverifiedShow Answer

To minimize taxes owed,you should do the following if you expect to have a higher tax rate next year:

Correct AnswerverifiedShow Answer

Tim Bridges owns a fishing boat.His state imposes an annual 3.25 percent tax on the current value of this boat.What type of tax is this most likely to be?

Correct AnswerverifiedShow Answer

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