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A state or local sales tax is an example of a
 
Proportional rate structure.
   
A tax rate structure where the tax rate remains at the same rate regardless of the tax base is
 
A proportional rate structure.
   
A tax rate that increases as the tax base decreases is an example of what kind of tax rate structure?
 
Regressive
   
A tax rate that increases as the tax base increases is an example of what kind of tax rate structure?
 
Progressive
   
A tax rate that remains the same as the tax base increases is an example of what kind of tax rate structure?
 
Proportional.
   
Alice is an employee of Valley Company.
Alice properly completed her Form 1040 tax return and received a refund from the IRS of $1,244.
Alice had income tax withholdings during the year of $4,782. Alice's tax liability for the year was
 
$3,538.
   
Alice is an employee of Valley Company.
She properly completed her Form 1040 tax return and received a refund from the IRS of $1,293.
Alice had income tax withholding during the year of $4,881. Her tax liability for the year was
 
$3,588.
   
Circular 230
 
Establishes penalties for failure to comply with its provisions.
   
Employers report wage income to employees on a
 
Form W-2.
   
Federal tax legislation generally originates in which body?
 
House Ways and Means Committee.
   
For equivalent amounts of taxable income, the total tax liability of a single individual
 
Will be more than married filing jointly.
   
For equivalent amounts of taxable income, the total tax liability of a couple using the married filing jointly status
 
Will be less than single filing status.
   
Hamad is an employee of Mountain Company. He properly completed his Form 1040 tax return and was required to pay the
IRS $1,374 at the time of filing. He had income tax withholding during the year of $4,429. His tax liability for the year was
 
$5,803.
   
Horace properly completed his Form 1040 tax return and received a refund from the IRS of $649.
Horace had income tax withholding during the year of $2,985. His tax liability for the year was
 
$2,336
   
In terms of dollars, wage-earning taxpayers will normally pay the majority of their tax liability
 
Through withholding from their wages.
   
Interest payers (banks, savings and loans, insurance companies, etc.) report interest earnings to taxpayers on a
 
Form 1099-INT.
   
Jake earned $15,000 and paid $1,500 of income tax, while Jill earned $40,000 and paid $3,000 of income tax.
The structure of the tax their income is subject to is
 
Regressive.
   
Jake earned $15,000 and paid $1,500 of income tax, while Jill earned $40,000 and paid $6,000 of income tax.
The tax rate structure they are subject to is
 
Progressive.
   
On Form 1040, the standard deduction from income for a married filing jointly taxpayer is
 
1,500
12,000
23,000
None of these
   
On Form 1040, the standard deduction from income for a married taxpayer filing jointly is:
 
$24,400.
   
On Form 1040, the standard deduction from income for a single taxpayer is
 
$12,200.
   
On Form 1040, the standard deduction from income for married taxpayers is
 
$24,400.
   
Paid tax preparers must comply with all of the following EXCEPT
 
Charge a contingent fee.
   
Peter and Penelope are married and have combined W-2 income of $76,861. They paid an additional $529 when they filed their taxes.
How much income tax did their employers withhold during the year?
 
$5,380.
   
Sallie earned $25,000 and paid $2,000 of income tax; Theodore earned $35,000 and paid $2,900 of income tax.
The tax rate structure they are subject to is
 
Progressive.
   
Sallie earned $85,000 and paid $5,950 of income tax; Theodore earned $33,000 and paid $2,310 of income tax.
The tax rate structure they are subject to is
 
Proportional.
   
Taxpayers can file a Form 1040 if they file using which of the following
 
Married filing jointly.
   
The federal income tax is an example of a
 
Progressive rate structure.
   
The following court hears only tax cases
 
U.S. Tax Court.
   
The tax liability for a married couple filing jointly with taxable
income of $55,747 is
 
$6,299.
   
The tax liability for a married couple with taxable income of $73,209 is
 
$8,399.
   
The tax liability for a single individual with taxable income of $67,293 is
 
$10,659.
   
The tax liability for a single individual with taxable income of $58,312 is
 
$8,690.
   
Under the provisions of Circular 230, paid tax preparers must Inform the client if the client has made an error in a document
 
submitted to the IRS.
   
Unemployment compensation income is reported to a taxpayer on a Form
 
1099-G.
   
Victoria determined her tax liability was $6,145. Her employer withheld $6,451 from her paychecks during the year. Victoria's tax return would show
 
A refund of $306.
   
Victoria determined her tax liability was $6,451. Her employer withheld $6,145 from her paychecks during the year. Victoria's tax return would show
 
Tax due of $306.
   
Which court hears most of the litigated tax disputes between the IRS and taxpayers?
 
U.S. Tax Court.
   
The federal income tax is an example of a regressive tax system.
 
false
   
Taxes influence personal decisions such as whether to buy or rent a house.
 
true
   
Which of the following are permitted filing statuses for taxpayers filing a Form 1040?
 
MARRIED
FILING JOINTLY
SINGLE HEAD OF HOUSEHOLD
All of the above are permitted.
   
Which of the following are primary sources of tax authority?
 
STATUTORY SOURCES
ADMINISTRATIVE SOURCES
JUDICIAL SOURCES
All of these.
   
Which of the following courts has the highest tax validity?
 
Court of Appeals for the Fifth Circuit.
   
Which of the following courts hears only tax cases?
 
U.S. Tax Court.
   
Which of the following is a statutory source of tax authority?
 
Internal Revenue Code.
   
Which of the following is an administrative source of tax law?
 
REVENUE RULING
IRS REGULATION
PRIVATE LETTER RULING
All of these
   
Which of the following is an example of a regressive tax?
 
Social security tax
   
Which of the following is correct with respect to Private Letter Rulings?
 
Both issued when a taxpayer wants to know the tax treatment of a specific tax situation and provides tax authority
only to the taxpayer to whom it is issued.
   
Which of the following is not an example of a proportional tax?
 
Federal income tax.
   
Which of the following refers to an income tax regulation?
 
Reg. §1.162-5.
   
Judging the sufficiency of a tax system is best described by which of the following?
 
Considering whether tax revenues generated are adequate to meet the financial needs of the government
   
Which of the following statements is correct regarding state income tax?
 
Many states also impose an income tax on corporations.
   
Which of the following refers to an income tax regulation?
 
Reg. §1.162-1.
   
Which of the following statements is correct?
 
Paid preparers must inform the client if the client has made an error
in a document submitted to the IRS.
   
Which of the following statements is correct?
 
Temporary Regulations expire three years after issuance.
   
What criteria are often used to evaluate a good tax system?
 
convenience, sufficiency, economy, equity, certainty
   
Which of the following statements is false with respect to marginal and average tax rates?
For most taxpayers, the average rate is larger than the marginal rate.
   
Economy is listed as one criteria of a good tax system. What is meant by economy in this context?
 
Economy requires that the system should minimize compliance and administration costs.
   
Which of the following statements is true with respect to marginal and
average tax rates under a progressive tax structure?
 
Average rates are never more than marginal rates.
   
Which of the following statements is true?
 
Compensation for services includes bonuses and severance pay.
   
Which of the following trial courts hear tax cases?
 
U.S. TAX COURT
U.S. DISTRICT COURT
U.S. COURT OF FED CLAIMS
All of these
   
Which of the following types of Regulations is the strongest tax authority?
 
Legislative.
   
Which of the following types of Regulations take the place of the
Internal Revenue Code and have the full effect of law?
 
Legislative.
   
Which statement is correct with respect to marginal and average tax rates under a progressive tax structure?
 
At very low levels of taxable income, a taxpayer's marginal and average tax rates will be the same.
   
With respect to the income tax formula, which of the following statements is correct?
 
Certain deductions from income are permitted before calculating tax liability.
   
With respect to the income tax formula, which of the following statements is correct?
 
It is almost always the case that the tax return will either show a tax refund or an additional tax liability.
   
With respect to the income tax formula, which of the following statements is incorrect?
 
The simplified income tax formula is only applicable to taxpayers with taxable income less than $100,000.
   
Xavier is single and has taxable income of $47,375. His marginal tax rate is
 
22%.
   
Xavier is single and has taxable income of $59,175. His average tax rate is
 
15%.
   
Yvonne earned $75,000 and paid $4,500 of income tax; Jasmine earned $43,000 and paid $3,000 of income tax.
The tax rate structure they are subject to is
 
Regressive.
   
When was the first income tax enacted?
1861, which was later repealed after the Civil War.
   
When was the second income tax enacted?
 
1894 it was passed but then rejected by the Supreme Court in 1895.
   
What Amendment to the constitution was passed in 1913?
 
16th amendment -- this is the basis of modern income tax law.
   
For Tax year 2017 what proportion of individual income tax returns was electronically filed?
88.8% of total returns.
   
What are the 3 types of tax rate structures?
 
Progressive: U.S Federal income tax
Proportional: "flat-tax" usually levied on property or sales at the state or local level.
Regressive: Social Security Tax
   
Effected Tax Rate
 
Total tax paid on a certain amount of taxable income.  (total tax / taxable income = average tax rate)
   
Marginal Tax Rate
 
Rate of tax that will be paid on the next dollar of income.  (a married couple will pay a marginal rate of 22%
on their $78,951st dollar of income.)
   
Which of the following common decisions would most likely NOT be influenced by the United States income tax laws?
 
choosing a public school for your children
   
The Income Tax Formula
 
Income - Permitted Deductions from Income = Taxable Income x Appropriate Tax Rates = Tax Liability
- Tax Payments and Tax Credits = Tax refund or Tax Due with Return
   
The Income Tax Formula Concept
The marginal tax rate is the rate of tax imposed on the next dollar of taxable income.


True

 
What is the marginal tax rate for a married couple with taxable income of $97,350?


22%

 
Average tax rate and marginal tax rate mean the same thing.


False

 
Complex tax returns do not follow the basic income tax formula.


False
   
What form do taxpayers use to annually file their income tax?
 
Form 1040 - There are three schedules that apply to a form 1040.
Taxpayers will use between zero and three of the schedules, depending on the complexity of their tax return.
   
What is the first item on a Form 1040?
 
Wages - include salaries, tips, and other items.
Taxpayers receive a Form W-2 from their employer which lists the number of wages received as well as other items.
   
What form is interest income reported?
 
Form 1099-INT
   
Which of the following sentences describes the average tax rate?
The average level of taxation on each dollar of the taxpayer's taxable income
   
The social security tax is an example of a(n) ___________ tax structure because as the tax base increases, the taxes paid increase, but the marginal tax rate decreases.
Regressive
   
Which tax is assessed to provide medical insurance for individuals who are elderly or disabled?
Medicare tax
   
Fergie has the choice between investing in a State of New York bond at 5 percent and a Surething
Inc. bond at 8 percent. Assuming that both bonds have the same nontax characteristics and that
Fergie has a 30 percent marginal tax rate, in which bond should she invest?
 
Surething bond
   
A sales tax is an example of a tax that uses a(n) ________ tax rate structure when compared to its tax base.
Proportional
   
Which of the following taxes are commonly assessed by state and/or local governments? (Check all that apply.)


sales
property
gift
income
estate
   
Which tax is assessed to provide monthly retirement, survivor, and disability benefits for qualifying individuals?
 
social security
   
What are the three types of tax rate structures?
 
progressive, proportional, and regressive.
   
Which tax rate structure for the tax rate remains the same for all levels of the tax base?
 
The tax rate structure for which the tax rate remains the same for all levels of the tax base is the proportional rate structure.
   
What type of tax structure does the federal individual income tax system in the United States use?
 
The federal individual income tax system in the United States uses a progressive tax structure.
   
Sales tax is an example of what tax rate structure?
 
A sales tax is an example of a tax that uses a proportional tax rate structure when compared to its tax base.
   
Roger purchased a new suit for $350. The sales tax rate was 6%. What is the total cost of the suit to Roger?
 
$371
   
Marc, a single taxpayer, earns $100,000 in taxable income and $10,000 in interest from an
investment in city of Birmingham Bonds. Using the U.S. tax rate schedule for year 2019,
what is his average tax rate (rounded)?
 
average tax rate = 18.18%
   
Horizontal equity means that two taxpayers with different amounts of income should pay
different amounts of tax but fairly in relation to their ability to pay.
 
false
   
The marginal tax rate is often used in tax planning.
 
true
   
The reduced pre-tax rate of return on municipal bonds is an example of an explicit tax.
 
false
   
Which of the following decisions would most likely NOT be influenced by our tax system?


estate planning
saving for college education
choosing a vacation destination
choosing investments
choosing a vacation destination
 
James invests $100,000 in a city of Athens bond that pays 8% interest. Alternatively, James
could have invested the $100,000 in a bond recently issued by HighTech Inc. that pays 10%
interest with similar risk as the city of Athens bond. Assume that James's marginal tax rate
 is 25%. Which bond should James should choose and why?
 
The city of Athens bond because it earns a higher after-tax rate of return.
   
The gift tax is imposed on the fair market value of items transferred upon death.
 
false
   
Which of the following definitions describes a tax?
 
a payment required by a government that is unrelated to any specific benefit or service received from the government
   
The _____ tax rate measures the average percentage of tax on only taxable income.
 
Average
   
The _____ tax rate indicates the rate of tax on the next additional increment of income.
 
Marginal
   
Which of the following definitions describes a tax?
 
a payment required by a government that is unrelated to any specific benefit or service received from the government
   
Which of the following taxes uses a progressive tax rate structure?
Federal individual income tax
   
Which of the following taxes uses a proportional tax rate structure?
State Sales Tax
   
Blade pays tax of $5,000 on taxable income of $50,000 while Caden pays tax of $12,000
on taxable income of $100,000. What type of tax rate structure appears to be in force?
 
progressive
   
Put the following items in the order in which they are found in the individual income tax formula.


1. Taxable Income
2. Times Tax Rate
3. Equals Income Tax Liability
4. Minus Tax Credits and Prepayments
5. Equals Tax Due or Refunded
   
Tax policy rarely plays an important part in presidential campaigns.
 
false
   
One key characteristic of a tax is that it is a required payment to a governmental agency.
 
true
   
A taxpayer's average tax rate is the most appropriate tax rate to use in tax planning.
 
false
   
The effective tax rate expresses the taxpayer's total tax as a percentage of the taxpayer's taxable
and nontaxable income.
 
true
   
In a proportional (flat) tax rate system, the marginal tax rate will always equal the average tax rate.
 
true
   
In a progressive tax rate system, the marginal tax rate will often be greater than the average tax rate.
 
true
   
A sales tax is a common example of a progressive tax rate structure.
 
false
   
While state sales taxes are quite common, currently the U.S. federal government does not impose a sales tax.
 
true
   
The 9th Amendment to the U.S. Constitution removed all doubt that a federal income tax was
allowed under the U.S. Constitution.
 
false