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Exam 4: Tax Planning

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Question 41

Multiple Choice

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Barbara found a 1099-Int from her bank while spring cleaning. She knew right away that she did not give this to her accountant for her tax preparation. What can she expect from the IRS?

A) A bill from the IRS for underpayment of tax plus interest and penalty
B) A refund from the IRS
C) A bill from the IRS for underpayment of tax but no interest or penalty charges since she made the mistake unknowingly
D) A letter informing her that she submitted an incorrect tax return

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Question 42

Multiple Choice

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If your taxable income is $86,000, your gross income is $115,000, and you paid $18,000 in taxes, what is your average tax rate? (Round to the nearest percent.)

A) 17%
B) 21%
C) 26%
D) 48%

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Question 43

Multiple Choice

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Tom is retired and lives off the rent he collects from his properties. Which form will Tom need to include rental income with his return?

If you sell shares of stock that you have owned for 15 months, any profit made on the sale would be classified as

Some of the cost of child-care expenses can be subtracted from your taxes through which of the following mechanisms?

Which of the following tax credits best applies to a low-income family with two children?

Which of the following is most likely to trigger the alternative minimum tax (AMT) for a tax filer?

Greg and Jamie are married and both work part-time while in graduate school. Greg earns $12,000, and Jaimie earns 11,000. Based on Greg and Jamie's situation, which of the following is true?

Bill and Miley had an adjusted gross income of $75,000. They file taxes jointly and the standard deduction for married filing jointly is $24,400. They listed their itemized expenses as follows: home mortgage interest, $4,750; house property tax, $5,890; state income tax, $3,000; and charitable gifts (market value) , $245. How much do they owe in federal income tax?

FICA is a ________tax, which is _________.

Joe and Sally file for federal taxes as married filing jointly. They originally anticipated that they will pay a total of $28,765 in taxes on an estimated taxable income of $168,400. When they filed their taxes at the end of the year, they calculated their tax burden to be $30,193 on a taxable income of $174,351. What was Joe and Sally's actual average tax rate at the end of the year?

If you're a qualifying ______, you _____ file your own tax return .

Noncash contributions, such as food or clothing, given to charitable organizations are

The first step in calculating federal income taxes owed is to

Matthew is 16 years old and can be claimed as a dependent by his parents. He received $1,500 in dividends and $650 in interest and earned $4,800 from odd jobs during the year. Will Matthew need to file a separate tax return? Why?

The sales tax

Donald sold his primary residence for $198,425 after owning it for seven years. His profit on the sale was $24,500. The long-term capital gains tax rate is 0 percent for those in the 10 or 12 percent tax brackets, 20 percent for those with taxable income over $434,550 (single) , and 15 percent for everyone else. If Donald is in the 35 percent tax bracket, how much tax will he owe on the listed transactions? (Round to the nearest whole dollar.)

Judy is self-employed and is in the 24% federal marginal tax bracket. If she works an extra 20 hours during the year, billing $175 an hour, how much will her after-tax income increase if her Social Security tax is 6.2% and her Medicare tax is 1.45%? Assume that the state income tax rate is 3.5%. (Round to the nearest whole dollar.)

In 2020, the lowest marginal tax rate is ___ percent.

Which of the following tax credits best applies to a low-income person contributing to an IRA?