Question 1

Michele Walsh is considering an additional charitable contribution of $2,000 to a tax-deductible charity,bringing her total itemized deductions to $16,000.If Michele is in a 28 percent tax bracket,how much will this $2,000 contribution reduce her taxes?

Accepted Answer

A)  $0
B)  $560
C)  $1,600
D)  $2,000
E)  $4,480F) B) and E)
G) A) and E)

Question 2

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

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

Which one of these investments produces tax-exempt income?

Accepted Answer

A)  U.S.savings bonds
B)  Corporate stock
C)  Stock mutual fund
D)  Municipal bond
E)  Corporate bondF) A) and C)
G) A) and B)

Question 5

Ms.Nelson is a single mom with three children; Dana is 18 and a high school senior,Derrick is 20 and a full-time college student,and Tonya is 25 and unemployed.All three children live at home.How many exemptions can Ms.Nelson claim on her tax return?

Accepted Answer

A)  1
B)  2
C)  3
D)  4
E)  0F) B) and E)
G) A) and B)

Question 6

For which of the following types of credit plans is the interest tax deductible?

Accepted Answer

A)  Home equity loan
B)  Auto loan
C)  Credit card
D)  Life insurance policy cash value loan
E)  Personal cash loan from a credit unionF) C) and D)
G) All of the above

Question 7

A person has $4,000 in medical expenses and an adjusted gross income of $32,000.If taxpayers are allowed to deduct the amount of medical expenses that exceed 7.5 percent of adjusted gross income,what would be the amount of the deduction in this situation?

Accepted Answer

A)  $300
B)  $1,600
C)  $2,400
D)  $4,000
E)  $32,000F) C) and D)
G) A) and B)

Question 8

Alex Bates goes on The Price Is Right and earns $875,000 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) All of the above
G) A) and C)

Question 9

A person's filing status is affected by marital status and dependents.

Accepted Answer

A) True 
 B)False

Question 10

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 D)
G) B) and D)

Question 11

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 an exchange student.F) None of the above
G) A) and C)

Question 12

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

Accepted Answer

A)  Interest on a credit card or charge account
B)  Unreimbursed job-related travel expenses
C)  Cost of commuting to work
D)  Life insurance premiums
E)  Traffic violation feeF) All of the above
G) C) and D)

Question 13

Taxpayers with high incomes and high amounts of certain deductions may be subject to an additional tax referred to as the ________________ tax.

Accepted Answer

A)  deferred
B)  bonus
C)  excess
D)  capital gains
E)  alternative minimumF) A) and B)
G) A) and C)

Question 14

Which type of audit is the least complicated 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) A) and C)

Question 15

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 16

Elaine's Embroidery Emporium which is run out of Elaine's home is visited by an IRS agent who wants to verify the office expenses Elaine claims are valid.What type of IRS audit is this?

Accepted Answer

A)  Correspondence audit
B)  Office audit
C)  Field audit
D)  Detailed audit
E)  Research auditF) All of the above
G) A) and C)

Question 17

The main purpose of taxes is to:

Accepted Answer

A)  generate revenue for funding 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) C) and D)
G) B) and E)

Question 18

Haley Thomas has adjusted gross income of $40,000.She paid $3,600 in property taxes during the year.How much of the tax can she include as an itemized deduction?

Accepted Answer

A)  $3,600
B)  $3,000
C)  $1,800
D)  $600
E)  $0F) B) and E)
G) C) and E)

Question 19

A ______ allows a taxpayer to put pre-tax dollars into an employer-sponsored program to cover medical expenses and child care costs.

Accepted Answer

A)  tax credit
B)  tax deduction
C)  flexible spending account
D)  tax deferred investment
E)  tax exempt investmentF) A) and E)
G) None of the above

Question 20

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

Accepted Answer

A)  accelerate the receipt of income into the current year.
B)  delay the receipt of income until next year.
C)  accelerate deductions into the current year.
D)  All of these
E)  None of theseF) A) and E)
G) B) and E)

Exam 4: Planning Your Tax Strategy

The main purpose of taxes is to:

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Which one of these investments produces tax-exempt income?

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Approximately what percent of tax filers are audited each year?

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A person has $4,000 in medical expenses and an adjusted gross income of $32,000.If taxpayers are allowed to deduct the amount of medical expenses that exceed 7.5 percent of adjusted gross income,what would be the amount of the deduction in this situation?

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A ______ allows a taxpayer to put pre-tax dollars into an employer-sponsored program to cover medical expenses and child care costs.

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

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Haley Thomas has adjusted gross income of $40,000.She paid $3,600 in property taxes during the year.How much of the tax can she include as an itemized deduction?

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

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A person's filing status is affected by marital status and dependents.

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

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Elaine's Embroidery Emporium which is run out of Elaine's home is visited by an IRS agent who wants to verify the office expenses Elaine claims are valid.What type of IRS audit is this?

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For which of the following types of credit plans is the interest tax deductible?

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

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Taxpayers with high incomes and high amounts of certain deductions may be subject to an additional tax referred to as the ________________ tax.

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Ms.Nelson is a single mom with three children; Dana is 18 and a high school senior,Derrick is 20 and a full-time college student,and Tonya is 25 and unemployed.All three children live at home.How many exemptions can Ms.Nelson claim on her tax return?

Correct AnswerverifiedShow Answer

Michele Walsh is considering an additional charitable contribution of $2,000 to a tax-deductible charity,bringing her total itemized deductions to $16,000.If Michele is in a 28 percent tax bracket,how much will this $2,000 contribution reduce her taxes?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Alex Bates goes on The Price Is Right and earns $875,000 in winnings.What type of income is this?

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Which type of audit is the least complicated for taxpayers?

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

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