BUSI 223 Smartbook Chapter 4 solutions complete answers

BUSI 223 Smartbook Chapter 4 solutions complete answers 

 

Target your tax planning efforts toward paying your fair share of taxes while taking advantage of tax benefits appropriate to your personal and financial situation.

 

Real estate property taxers are a major source of revenue for:

 

Estate taxes are calculated on the ______ of a person’s property at death.

 

The two main types of federal taxes on wages and salary are ______ tax and Social Security tax.

 

True or false: Income includes only those earnings that you are actively involved in earning, such as salaries and income from managing a business.

 

On average, the portion of a person’s earnings that goes to taxes is:

 

True or false: Income tax is calculated on income less deductions and exemptions.

 

Real estate ______ taxes are based on the value of land and buildings.

 

When calculating total tax due, _____ are subtracted.

 

A tax imposed on the value of a person’s property upon that person’s death is called a(n):

 

You calculate taxable income by reducing gross income by adjustments, exemptions, and standard or       deductions.

 

True or false: The two main taxes on salary are income taxes and estate taxes.

 

Salary is an example of ______ income.

 

Which of the following would be included in gross income?

 

A tax ______ is an amount subtracted from adjusted gross income to arrive at taxable income.

 

Investment income in the form of dividends, interest, and rent from investments is also called (found in discussion of types of income):

 

For calculating your total tax due, your taxable income is to be used in conjunction with either tax tables or tax rate      .

 

True or false: Adjusted gross income is gross income reduced for such things as IRA contributions and alimony payments.

 

True or false: Taxable income is calculated as salaries minus adjustments, such as IRA contributions, Keogh retirement plan contributions, and alimony.

 

A tax ______ reduces taxable income, thereby reducing the tax liability.

 

Which of the following are examples of earned income?

 

Medical costs, taxes, and interest are all examples of       deductions that are subtracted from adjusted gross income.

 

Which of the following items are included in gross income?

 

Which of the following are types of investment income?

 

State and local income taxes are deductible for

 

Adjusted gross income is gross income ______ by IRA contributions, alimony, and other adjustments.

 

Which of the following types of interest expense is not deductible?

 

True or false: A tax deduction reduces tax liability directly, dollar for dollar.

 

True or false: Only cash contributions to qualified charitable organizations are deductible.

 

True or false: If you itemize your deductions, you can deduct contributions made to charities and amounts paid for real estate taxes.

 

Generally, you should keep your tax records for at least three years after filing your return. However, you may be held responsible for providing back documentation.

 

The tax rate that is used to calculate the tax on the last (or next) dollar of taxable income is

 

Which of the following taxes are deductible?

 

If your adjusted gross income is $150,000 while your taxable income is $90,000 and your tax liability is $18,000, your average tax rate would be:

 

Investment interest expense is deductible up to _____________.

 

Which of the following might trigger alternative minimum tax?

 

Charitable contributions greater than __ percent of adjusted gross income are subject to limitations on deductibility.

 

A tax       is directly subtracted from taxes owed. This is a one word answer.

 

Financial planners recommend that copies of home ownership documents should be kept for:

 

Taxpayers pay income taxes through

 

True or false: A marginal tax rate is found by dividing the amount of taxes owed by the taxable income.

 

True or false: Many taxpayers view an annual tax refund as a “windfall,” extra money they can count on each year.

 

If you are in the 28% tax bracket and owe $20,000 on $100,000 of taxable income, your average tax rate and marginal tax rate would be, respectively:

 

True or false: If you owe $10,000 in taxes but have paid $8,000 in withholding payments and $1,900 in estimated payments, you will have a refund.

 

Which of the following best describes the purpose of the alternative minimum tax? This is found in the discussion of calculating taxes owed.

 

Which of the following is NOT a wise financial decision regarding an income tax refund?

 

True or false: A tax credit is an amount subtracted directly from taxes owed.

 

You can ______ a six-month extension on filing an income tax return by filing the proper forms with the IRS before the April 15 filing deadline.

 

Which statement best describes how taxpayers pay their taxes to the IRS?

 

Head of household is a filing status for a(n) ______ individual or a(n) ______ spouse who maintains a household for a child or dependent relative.

 

The purpose of the W-2 is to:

 

CPAs and enrolled agents both offer tax services including return preparation while a(n) ______ will represent you in the case of an IRS lawsuit.

 

You received your W-2 and it had the following information: Wages, tips, other compensation: $35,000 Federal income tax withheld: $4,500 Social security tax withheld: $1,850 Medicare tax withheld: $725 You do your 1040 and find that your taxes owed are $3,500. Which of the following is true?

 

Many taxpayers have found filing

 

If you get a large tax refund, it is wise to:

 

Tax       means using legitimate strategies to reduce taxes while tax       involves using illegal means to lower tax liability.

 

You filed a Form 4868 and received a six month extension on your taxes for 2018. Which of the following is true?

 

Which of the following best describes why the home can be a tax shelter?

 

True or false: Anyone can file as single status.

 

Which of the following do NOT offer for-profit tax services?

 

True or false: While municipal bonds pay a lower rate of interest than other types of bonds, the after-tax income may be higher than other types of bonds.

 

Which of the following is not true about filing your income tax return online?

 

Which of the following are tax-deferred investments?

 

Which of the following is a tax avoidance strategy?

 

From a tax standpoint, which of the following is most beneficial?

 

Real estate taxes and ______ are tax deductible by the homeowner.

 

As of 2018, the IRA contribution limit was

 

Which of the following are the filing status categories for federal income tax purposes?

 

Interest income from       bonds, which are issued by state and local governments, is not subject to federal income taxes.

 

A premature withdrawal from an IRA may be subject to a tax penalty. What is the age considered “premature.”

 

Which of the following is a tax-deferred investment?

 

The biggest difference between a(n)       IRA and a Roth IRA is that the Roth IRA contribution is not tax deductible, but after five years, its earnings are tax free.

 

True or false: A tax-exempt investment generates income to be taxed in later years while a tax-deferred investment produces tax-free income.

 

A Coverdell Education Savings Account is most similar to a

 

True or false: The contribution limit for an IRA (as of 2018) is $5,500 for workers under the age of 50.

 

Taking advantage of tax credits, deferring capital gains and accelerating capital losses, and considering tax-exempt investments are all strategies to lower income      .

 

True or false: There are five filing statuses for your tax return, and they are affected by marital status and number of dependents.

 

A premature withdrawal from a traditional IRA will result in taxable income and a penalty of ______% of the withdrawn amount.

 

Which of the following is a difference between a traditional IRA and a Roth IRA?

 

True or false: The advantage of a Coverdell Education Savings Account is that the contribution of $2,000 per year is tax deductible.

 

One way to reduce your tax liability is to

 

 

The goals of tax planning include:

 

Which of the following are categories of taxes?

 

Automobiles, boats, furniture, and farm equipment may be assessed 

 

Tax planning involves knowing the current laws, maintaining good records, and making purchase and ______ decisions that minimize income taxes.

 

______ tax is calculated on the value of property bequeathed by a deceased person to heirs. This is found in the discussion of taxes on wealth.

 

The major categories of taxes are taxes on ______, property, wealth, and earnings. This is found near the beginning of the chapter in the discussion of taxes and financial planning.

 

Gift amounts greater than $15,000 are subject to

 

The types of properties upon which personal property taxes may be assessed include:

 

Which of the following statements are true with regard to taxes on wages?

 

True or false: An inheritance tax is paid for the right to acquire the inherited property.

 

True or false: If you are an employee, your employer should withhold a certain amount for taxes from your paycheck while self-employed individuals should make estimated tax payments.

 

For 2016, the amount of money or the value of property that can be gifted without being subject to federal gift taxes is:

 

True or false: Social Security taxes are calculated based on the value of your property to fund retirement benefits, while income taxes are imposed on wages.

 

True or false: Income tax is paid during the year through withholding from paychecks and/or estimated payments.

 

Components of income include earned, investment, and ____ income.

 

An example of tax-exempt income is the interest from ______ bonds issued by cities or states while an example of tax-deferred income is an IRA.

 

Which of the following are adjustments to gross income?

 

True or false: Passive income results from business activities in which you participate regularly.

 

Adjustments to income include contributions to ___ or _____.

 

True or false: Casualty and theft deductions are allowed for financial losses resulting from federally declared disasters only. Deductions are for the amount exceeding 10 percent of AGI, less $100, for losses not reimbursed by an insurance company or other source.

 

Moving expenses are deductible when a change in residence is associated with a new job that is at least ___ miles farther from your former home than your old main job location.

 

For job related expenses to be deductible, they must exceed ______ of adjusted gross income.

 

Financial losses resulting from ________ are deductible for amounts exceeding AGI, less $100, if they are not reimbursed by an insurance company or other source.

 

True or false: A filing system stores records that help provide proof of payment of charitable expenses, medical expenses, and other itemized deductions.

 

True or false: A deduction for moving expenses is allowed if you move for any reason at least 25 miles away from your current residence.

 

Mortgage interest is reported to you by your mortgage lender on form

 

Which of the following expenses can be deducted as job-related expenses?

 

Interest, dividend, and capital gain income are reported to the taxpayer and IRS by financial institution on form ______. The taxpayer reports this to the IRS on a Schedule B form.

 

True or false: Travel expenses can be documented in a daily log with records of mileage, tolls, parking fees, and lodging costs.

 

Form 1098 reports 

 

Exemptions are deducted from _________________ for yourself, your spouse, and qualified dependents.

 

John owed $10,000 in taxes on taxable income of $40,000. If John earns an additional $1,000, he will pay an additional $280. Therefore:

 

Which of the following is (are) reported on the W-2?

 

True or false: An exemption is a deduction from adjusted gross income for you, your spouse, and dependents.

 

Salary and wages are reported on 

 

Very low-income workers can benefit from the:

 

Which of the following are tax credits to reduce the amount of taxes owed?

 

True or false: W-2, W-2P, and 1099 forms make up the proof of income documents for a taxpayer.

 

True or false: The EIC is a credit that low-income working families can claim to lower their taxes or receive a check from the IRS.

 

Identify the following as tax credits or tax deductions:

 

True or false: Underpayment penalties are usually avoided if you make sure you pay in, through withholding and estimated payments, an amount that is equal to or more than last year’s tax liability or pay in at least 90% of the current year’s tax liability.

 

You received a substantial sum from independent contracting. Which of the following is true?

 

You did some independent contracting in 2018 that resulted in a tax liability of $1,000. You did not make estimated tax payments. Your withholding for 2018 was $2,500 and your total tax liability is $3,200. Your tax liability for 2017 was $2,100. Will you incur penalties as a result of your underpayment in 2018?

 

Which of the following events might cause a taxpayer to make estimated tax payments?

 

Payments for ______ taxes are due by April 15, June 15, September 15, and January 15 of the following year.

 

IRS can impose a penalty of ______ of the tax liability for failure to file a tax return.

 

Assuming income is above the appropriate amount determined by filing status, which of the following must file a federal income tax return in the U.S.?

 

The due dates for quarterly estimated payments are April 15, June 15, and September 15 of the current year and ______ 15 of the following year.

 

Failure to file a tax return

 

If you find that you have income or deductions that you did not report on your tax return, you should

 

Every U.S. citizen who earns above a certain amount must file a tax return. The amount is determined by filing _____ and other factors.

 

True or false: Married, filing separate returns require that each spouse is responsible for his or her own income tax.

 

Which of the following tax activities must be completed by April 15?

 

Which of the following tax activities must be completed by September 15?

 

If you want to amend (change) a previous return, you would need to file a ______ form.

 

Which of the following tax activities must be completed by June 15?

 

Which of the following tax activities should be completed in February?

 

Two possible tax planning activities for April ___ are filing the tax return by April , and, if necessary, filing for an automatic six-month ____.

 

Two tax planning activities for the month of January include:

 

_____ 15 is the due date for the third installment for estimated tax.

 

The second installment for estimated tax is due by June

 

Which of the following tax activities should be completed in December?

 

Which of the following tax activities must be completed by October 15?

 

A tax planning activity for February would be to check to see if you have received all of your W-2 forms (salary and wages) and all of your ____ forms (interest and dividends) so you can begin to organize and prepare your income tax return.

 

Which of the following tax activities should be completed in January?

 

Which of the following statements are true about software and taxes?

 

The two key tax planning activities of December are deciding whether to make payments that would be to your ______ for this year while deferring ______ into the next tax year.

 

______ 15 is the deadline for filing a tax return for those who received the automatic six-month extension.

 

A(n) __________ can be helpful in maintaining and updating income and expense data.

 

Which of the following is an indicator of a good tax preparation service?

 

When a tax preparer promises a big refund, you should

 

A tax planning activity for February would be to check to see if you have received all of your ______ W-2 forms (salary and wages) and all of your forms (interest and dividends) so you can begin to organize and prepare your income tax return

 

The actions the IRS will take if you make an error could include recalculating your tax, sending you a(n) _____ or refund, or, in a worst case scenario, notifying you of a tax ______. These are one word answers.

 

Factors to consider when evaluating tax services include experience and training of the provider, the fee, and if the provider will represent you with the IRS in the case of an ____.

 

People who claim large or unusual deductions increase their chances of

 

The simplest type of IRS audit is the _____ audit. This is a one word answer.

 

Which of the following are typical tax scams that one should be wary of?

 

Which of the following strategies should you employ to help support your tax return in the event of an IRS audit?

 

True or False: The IRS reviews all returns for completeness and accuracy.

 

People who claim a large or unusually high amount of ______ increase their odds of getting audited.

 

Select all the accurate observations below about different types of audits.

 

In the event of an IRS audit, you should

 

Flexible spending accounts (FSAs) allow you to reduce your taxable _____ when paying for medical and _____ care expenses

 

A flexible spending account allows you to reduce your taxable _____ when paying for medical expenses or child care costs.

 

Two of the tax advantages of being self-employed are that you can deduct the cost of both health (medical) and ______ insurance as a business expense.

 

Income shifting strategies allows you to move investment income such as interest and dividends to the _____ tax brackets of your children.

 

True or false: The contribution limit for an IRA (as of 2018) is $5,500 for workers under the age of 50

 

Which of the following is a tax consequence of self-employment?

 

A child under 18 with investment income of more than ____ (as of 2018) is taxed at rates that are applicable to estates and trusts

 

True or false: A Keogh plan is a tax-deferred retirement plan designed for self-employed people.

 

Select all the reasons most planners advise people to contribute as much as possible to a Keogh or 401(k) plan.

 

A retirement plan designed for self-employed people is a

 

Which of the following accurately describes the contribution limits of a 401(k) plan for a 40 year old? This is found in the discussion of 401 (K) plans.