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| 1 | |
In most states, taxes you pay on the majority of your purchases at the store are called: |
| | A) | Income taxes |
| | B) | Personal property taxes |
| | C) | Excise taxes |
| | D) | Sales taxes |
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| 2 | |
The difference between taxes on wealth and taxes on earnings is that: |
| | A) | Taxes on wealth refer to assets left to you as an inheritance and taxes on earnings are on income you earned at a job. |
| | B) | Taxes on earnings refer to assets left to you as an inheritance and taxes on wealth are on income you earned from investments. |
| | C) | Taxes on wealth are on interest you earned from investments and taxes on earnings are on income you earned at a job. |
| | D) | Taxes on wealth are on real estate you own and taxes on earnings are on income you earn from investments. |
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| 3 | |
Which of the following are added to gross income to calculate adjusted gross income (AGI)? |
| | A) | Contributions to an IRA |
| | B) | Received pension benefits |
| | C) | Contributions to a Keogh retirement plan |
| | D) | Alimony payments |
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| 4 | |
Is taxable income the same as adjusted gross income? |
| | A) | Yes, they are exactly the same. |
| | B) | No, taxable income is higher than adjusted gross income. |
| | C) | No, taxable income is less than adjusted gross income. |
| | D) | Yes, but they have different methods of computation. |
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| 5 | |
What is the difference between a tax deduction and tax credit? |
| | A) | A tax deduction directly reduces your tax dollar for dollar and a tax credit reduces your taxable income. |
| | B) | A tax credit directly reduces your tax dollar for dollar and a tax deduction reduces your taxable income. |
| | C) | There is no difference; both reduce your tax liability in the same way. |
| | D) | There is no difference, both result in refunds. |
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| 6 | |
Which of the following people must file an income tax return? |
| | A) | Dependents of wage earners that are not working in 2008. |
| | B) | A Canadian citizen that works for an American company in Toronto in 2008. |
| | C) | A teenager that earned $7,000 working at Burger King in 2008. |
| | D) | A teenager that earned $9,000 working at Burger King in 2008. |
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| 7 | |
Which of the following are true? |
| | A) | If you file a federal income tax return you may need to file a state income tax return if your state collects income taxes. |
| | B) | If you file a federal income tax return you do not need to file a state income tax return. |
| | C) | All states collect income taxes from their residents. |
| | D) | The federal income taxes include state income taxes. |
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| 8 | |
Which of the following is a benefit of filing taxes electronically? |
| | A) | It is error free. |
| | B) | You will not be audited. |
| | C) | It takes less time and you receive your refund faster. |
| | D) | You pay less in taxes. |
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| 9 | |
Tax avoidance differs from tax evasion because |
| | A) | With tax avoidance, you use illegal means, rather than legitimate sources to reduce your taxes. |
| | B) | With tax avoidance, you use legal means to reduce your taxes. |
| | C) | Your refund is larger with tax avoidance. |
| | D) | Your refund is larger with tax evasion. |
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| 10 | |
A retirement account that has tax free withdrawals after age 59 ½ is called: |
| | A) | An Education IRA |
| | B) | Keogh Plan |
| | C) | Traditional IRA |
| | D) | Roth IRA |
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