___________________________________________________________________________
1.
The ch2
Student: federal individual income tax returns are the 1040ES, 1040A and 1040. True False
2.
The tax code defines adjusted gross income (AGI) as gross income minus a list of permitted deductions. True False
3.
The amount of tax liability for a taxpayer depends on many factors, including the filing status of the taxpayer. True False
4.
A married couple can file a joint return if they are married and if both have earned income. True False
5.
A married couple in the process of obtaining a divorce cannot file a joint tax return. True False
6.
A taxpayer filing separately must show the name and social security number of the spouse on the tax return. True False
7.
To qualify for head of household, a taxpayer must maintain a household that is the principal place of abode of a qualifying person for more than half the year. True False
8.
A taxpayer can qualify for head of household even though his or her parents are living in a separate household from that of the taxpayer (assume all other requirements are met). True False
9.
If a taxpayer's spouse dies during the tax year, the taxpayer must file as a qualifying widow(er). True False
10. The exemption amount is subject to annual adjustment for inflation. True False
11. The personal exemption for 2009 is $3,750. True False
12. A taxpayer can be claimed as a dependent on another return and still he or she can claim a personal exemption on his or her tax return. True False
13. To be claimed as a dependent, a person must be a qualifying child or a qualifying relative. True False
14. A qualifying child does not have to meet the support test in order to be claimed as a dependent. True False
15. A qualifying relative must be related to the taxpayer (as listed by the IRS), or be a member of the taxpayer's household for the entire year. True False
16. A taxpayer who either is 65 or older or blind can claim an additional standard deduction. True False
17. The standard deduction in 2009 for a married couple, under 65 and not blind, is $11,400. True False
18. In 2009, the additional standard deduction for a single taxpayer, who is 65 or older and not blind, is $1,400. True False
19. Even if the total of the itemized deductions is lower than the standard deduction, a taxpayer should choose to itemize on his or her tax return. True False
20. The tax tables stop at taxable income of $110,000. True False
21. Most taxpayers make payments to the IRS through income tax withholdings and quarterly estimated tax payments. True False
22. A taxpayer may request an automatic seven-month extension of time to file his or her tax return. True False
23. An extension to file a tax return is an extension of time to file, not an extension of time to pay. True False
24. The maximum penalty for failure to file a tax return is 25%. True False
25. The IRS can impose a 75% penalty on any portion of understatement of tax that is attributable to negligence. True False
26. A single taxpayer is 45 years old and has wages of only $15,000. Which is the simplest form this person can file? A. B. C. D. 1040A. 1040EZ. 1040. 1040ES.
27. A 35 - year - old taxpayer with a dependent child and claiming head of household status has received $24,000 in alimony payments and earned wages of $45,000. Which is the simplest form this person can file? A. B. C. D. 1040. 1040A. 1040ES. 1040EZ.
28. A taxpayer is married with a qualifying child (dependent), but she has been living separate from her spouse for the last five months of the year. However, she paid for more than half of the cost of keeping up the household. Her spouse does not want to file jointly. What filing status must she use when filing her tax return? She wants to obtain the maximum legal benefit. A. B. C. D. Single. Head of Household. Qualifying Widow(er). Married Filing Separately.
29. The taxpayer's spouse died at the beginning of 2008. He has no qualifying child. Which status should the taxpayer select when filing his tax return for 2009? A. B. C. D. Married Filing Jointly. Married Filing Separately. Single. Qualifying Widow(er).
30. A legally divorced taxpayer maintains a household for himself and maintains a separate household that is the principal place of abode of his dependent widowed mother. What filing status should he use when filing his tax return? A. B. C. D. Head of Household. Single. Qualifying widow(er). Married Filing Separately.
31. For tax purposes, marital status is determined as of the __________ day of the year. A. B. C. D. first last third None of the above
32. What was the amount of the personal exemption for 2009? A. B. C. D. $3,100. $3,400. $3,750. $3,650.
33. Tina is 21 years of age and a full-time student living with her parents. She had wages of $550 ($60 of income tax withholding) for 2009. Can Tina claim her exemption on her return even though her parents will claim her as a dependent on their tax return? A. B. C. D. Tina and her parents can both claim the exemption. No, Tina cannot claim the exemption. No one can claim the exemption for Tina. Yes, Tina can claim the exemption.
34. A taxpayer can deduct a(an) __________ amount from AGI for each dependent. A. B. C. D. exemption deduction itemized adjustment
35. Maria is 21 years of age and a full-time student living by herself. She had wages of $19,000 for 2009. Can Maria claim the exemption for herself on her tax return? A. B. C. D. Maria's parents can claim the exemption. Both, Maria and her parents can claim the exemption. Yes, Maria can claim the exemption. No one can claim the exemption for Maria.
36. To be a qualifying child, the taxpayer must meet three general tests and five specific tests. Which one is not part of the five specific tests? A. B. C. D. Relationship test. Gross income test. Residency test. Special test for qualifying child of more than one taxpayer.
37. To be a qualifying child, the taxpayer must meet three general tests and five specific tests. What are the three general tests? A. B. C. D. Relationship test, residency test and gross income test. Dependent taxpayer test, joint return test and citizen or resident test. Dependent taxpayer test, relationship test and citizen or resident test. Support test, age test and relationship test.
38. To be a qualifying relative, the taxpayer must meet three general tests and four specific tests. Which one is not part of the four specific tests? A. B. C. D. Age test. Gross income test. Support test. Relationship test or member of household test.
39. For a qualifying relative to be claimed as a dependent, this person must either be related to the taxpayer, or be a member of the taxpayer's household for the entire year. Select the relative who must be part of the taxpayer's household for the entire year. A. B. C. D. Father. Sister. Cousin. Son-in-law.
40. The taxpayer must provide over ________ of the qualifying relative's support to be able to claim a dependency exemption. A. B. C. D. 49% 50% 51% 75%
41. Which of the following items would not be considered as support for a dependency exemption? A. B. C. D. Medical insurance premiums. Food. Life insurance premiums. Clothing.
42. Carl, James and Thomas are supporting their mother who lives in a separate apartment. Their contributions towards her support are 10%, 40% and 50%, respectively. In a multiple support agreement, who would be entitled to claim the mother as a dependent? A. B. C. D. James or Thomas. Carl. Carl, James or Thomas. None of the above.
43. For head of household status, personal and dependency exemptions are reduced when AGI exceeds: A. B. C. D. $331,000. $166,800. $125,100. $208,500.
44. The basic standard deduction in 2009 for a single taxpayer, under 65 and not blind, is: A. B. C. D. $5,450. $5,700. $7,100. $8,350.
45. The basic standard deduction in 2009 for a taxpayer, under 65 and not blind, filing married filing jointly is: A. B. C. D. $12,500. $10,900. $11,400. $8,350.
46. The basic standard deduction in 2009 for a taxpayer, 67 and not blind, filing head of household is: A. B. C. D. $8,350. $9,450. $7,100. $9,750.
47. When a taxpayer can be claimed as a dependent on the tax return of another individual, the basic standard deduction for the taxpayer is limited to the greater of (a)_______, or (b) the taxpayer's earned income plus $300, but not more than the amount of the basic standard deduction. A. B. C. D. $950. $900. $1,000. $300.
48. Luisa's parents can claim her as a dependent on their tax return. In 2009, her only source of income was a part-time job as a medical clerk where she earned $2,100 during the year. What is Luisa's standard deduction? A. B. C. D. $2,100. $2,300. $2,400. $5,150.
49. Tom's parents can claim him as a dependent on their tax return. In 2009, his only source of income was $1,000 of interest income received from Global Bank. What is Tom's standard deduction? A. B. C. D. $5,700. $950. $1,000. $300.
50. What is the amount of the social security wage limitation for 2009? A. B. C. D. $97,500. $102,000. $95,700. $106,800.
51. What is the amount of the tax liability for a married couple having taxable income of $143,500? All answers should be rounded to the nearest dollar. A. B. C. D. $28,250. $28,444. $26,638. $21,525.
52. What is the amount of the tax liability for a single person having taxable income of $62,300? All answers should be rounded to the nearest dollar. A. B. C. D. $11,769. $11,763. $15,575. $15,581.
53. What is the amount of the tax liability for a head of household person having taxable income of $86,483? All answers should be rounded to the nearest dollar. A. B. C. D. $12,375. $16,473. $16,471. $21,621.
54. What is the amount of the tax liability for a qualifying widow(er) with a dependent child and having taxable income of $17,854? All answers should be rounded to the nearest dollar. A. B. C. D. $1,785. $1,843. $1,788. $1,846.
55. Failure to make required estimated payments will subject the taxpayer to a potential underpayment penalty plus interest. However, if the difference between the tax shown on the return and the amount of tax withheld for wages is less than _______, the taxpayer will not be assessed a penalty. A. B. C. D. $1,250 $1,000 $850 $500
56. The interest charged by IRS for the first three months of 2009 was: A. B. C. D. 7%. 6%. 4%. 5%.
57. John forgot to file his tax return by April 15. He did not file an extension. John finally filed his tax return on July 1 and had a remaining tax liability of $1,500. What is John's failure to file penalty? Assume he made all his payments on time. A. B. C. D. $375. $300. $233. $225.
58. The failure to pay penalty is ________ of the tax shown on the return for each month (or fraction of a month) the tax is unpaid, up to a maximum of 25%. A. B. C. D. 0.25% 0.5% 5.0% 5.5%
59. The IRS can impose a _______ penalty on any portion of understatement of tax that is attributable to fraud. A. B. C. D. 75% 50% 25% 5%
60. Criminal penalties only apply to: A. B. C. D. Tax evasion. Willful failure to file a return. Careless disregard for tax authority. a and b.
61. Why is the concept of "Adjusted Gross Income (AGI)" important?
62. What is the simplest tax return form a taxpayer should file if he or she has only $32,000 in wages and is claiming head of household with a dependent child?
63. David and Martha were divorced on December 31, 2009. Can they file their 2009 income tax return using married filing jointly? Why or Why not? What other filing status choices do they have, if any?
64. What qualifications are necessary to file as qualifying widow(er)?
65. How many personal exemptions can the taxpayer claim? What is the amount of the personal exemption for 2009?
66. Can Robert, who is a full-time student and earns $1,500 working as a clerk, claim an exemption for himself on his tax return? Assume his parents are claiming him as a dependent.
67. A taxpayer can claim a dependency exemption if the person is a qualifying child or a qualifying relative and the person meets three tests. List the three tests this person must meet.
68. List and describe the five tests that a person must meet to qualify as a qualifying child.
69. List and describe the four tests that a person must meet to qualify as a qualifying relative.
70. Determine the amount of the standard deduction for each of the following taxpayers for tax year 2009. 1. John and Carol who are under 65 and filing a joint return. They have no dependents. 2. Peter who is single. 3. Joseph who is over 65 and single. 4. Rose who is 38 and filing as head of household with a dependent child. 5. Henry who is 45 and blind and is filing as married filing separately.
71. What is the amount of the standard deduction for Evelyn who is a full-time student and claimed as a dependent by her parents? She earned $2,100 in wages in 2009.
72. What does the withholding amount on a taxable payment made to the taxpayer represent?
73. Using the appropriate tax tables or tax rate schedules, determine the amount of tax liability in each of the following instances. All answers should be rounded to the nearest dollar. 1. A single person with taxable income of $102,300. 2. A married couple filing jointly with taxable income of $32,800. 3. A head of household with taxable income of $86,725. 4. A person filing married filing separately with taxable income of $54,000. 5. A married couple filing jointly with taxable income of $134,600.
74. Can the taxpayer avoid the failure to pay on time penalty by just filing an automatic extension to file his or her tax return?
75. The IRS can assess criminal penalties if fraud is found on a tax return. Name and describe at least two of those criminal penalties.
ch2 Key
1. The federal individual income tax returns are the 1040ES, 1040A and 1040. FALSE
Cruz - Chapter 02 #1 Learning Objective: 1
2.
The tax code defines adjusted gross income (AGI) as gross income minus a list of permitted deductions. TRUE
Cruz - Chapter 02 #2 Learning Objective: 1
3.
The amount of tax liability for a taxpayer depends on many factors, including the filing status of the taxpayer. TRUE
Cruz - Chapter 02 #3 Learning Objective: 2
4.
A married couple can file a joint return if they are married and if both have earned income. FALSE
Cruz - Chapter 02 #4 Learning Objective: 2
5.
A married couple in the process of obtaining a divorce cannot file a joint tax return. FALSE
Cruz - Chapter 02 #5 Learning Objective: 2
6.
A taxpayer filing separately must show the name and social security number of the spouse on the tax return. TRUE
Cruz - Chapter 02 #6 Learning Objective: 2
7.
To qualify for head of household, a taxpayer must maintain a household that is the principal place of abode of a qualifying person for more than half the year. TRUE
Cruz - Chapter 02 #7 Learning Objective: 2
8.
A taxpayer can qualify for head of household even though his or her parents are living in a separate household from that of the taxpayer (assume all other requirements are met). TRUE
Cruz - Chapter 02 #8 Learning Objective: 2
9.
If a taxpayer's spouse dies during the tax year, the taxpayer must file as a qualifying widow(er). FALSE
Cruz - Chapter 02 #9 Learning Objective: 2
10.
The exemption amount is subject to annual adjustment for inflation. TRUE
Cruz - Chapter 02 #10 Learning Objective: 3
11.
The personal exemption for 2009 is $3,750. FALSE
Cruz - Chapter 02 #11 Learning Objective: 3
12.
A taxpayer can be claimed as a dependent on another return and still he or she can claim a personal exemption on his or her tax return. FALSE
Cruz - Chapter 02 #12 Learning Objective: 4
13.
To be claimed as a dependent, a person must be a qualifying child or a qualifying relative. TRUE
Cruz - Chapter 02 #13 Learning Objective: 4
14.
A qualifying child does not have to meet the support test in order to be claimed as a dependent. FALSE
Cruz - Chapter 02 #14 Learning Objective: 4
15.
A qualifying relative must be related to the taxpayer (as listed by the IRS), or be a member of the taxpayer's household for the entire year. TRUE
Cruz - Chapter 02 #15 Learning Objective: 4
16.
A taxpayer who either is 65 or older or blind can claim an additional standard deduction. TRUE
Cruz - Chapter 02 #16 Learning Objective: 5
17.
The standard deduction in 2009 for a married couple, under 65 and not blind, is $11,400. TRUE
Cruz - Chapter 02 #17 Learning Objective: 5
18.
In 2009, the additional standard deduction for a single taxpayer, who is 65 or older and not blind, is $1,400. TRUE
Cruz - Chapter 02 #18 Learning Objective: 5
19.
Even if the total of the itemized deductions is lower than the standard deduction, a taxpayer should choose to itemize on his or her tax return. FALSE
Cruz - Chapter 02 #19 Learning Objective: 5
20.
The tax tables stop at taxable income of $110,000. FALSE
Cruz - Chapter 02 #20 Learning Objective: 6
21.
Most taxpayers make payments to the IRS through income tax withholdings and quarterly estimated tax payments. TRUE
Cruz - Chapter 02 #21 Learning Objective: 6
22.
A taxpayer may request an automatic seven-month extension of time to file his or her tax return. FALSE
Cruz - Chapter 02 #22 Learning Objective: 6
23.
An extension to file a tax return is an extension of time to file, not an extension of time to pay. TRUE
Cruz - Chapter 02 #23 Learning Objective: 6 Learning Objective: 7
24.
The maximum penalty for failure to file a tax return is 25%. TRUE
Cruz - Chapter 02 #24 Learning Objective: 7
25.
The IRS can impose a 75% penalty on any portion of understatement of tax that is attributable to negligence. FALSE
Cruz - Chapter 02 #25 Learning Objective: 7
26.
A single taxpayer is 45 years old and has wages of only $15,000. Which is the simplest form this person can file? A. B. C. D. 1040A. 1040EZ. 1040. 1040ES.
Cruz - Chapter 02 #26 Learning Objective: 1
27.
A 35 - year - old taxpayer with a dependent child and claiming head of household status has received $24,000 in alimony payments and earned wages of $45,000. Which is the simplest form this person can file? A. B. D. C. 1040. 1040A. 1040ES. 1040EZ.
Cruz - Chapter 02 #27 Learning Objective: 1
28.
A taxpayer is married with a qualifying child (dependent), but she has been living separate from her spouse for the last five months of the year. However, she paid for more than half of the cost of keeping up the household. Her spouse does not want to file jointly. What filing status must she use when filing her tax return? She wants to obtain the maximum legal benefit. A. B. C. D. Single. Head of Household. Qualifying Widow(er). Married Filing Separately.
Cruz - Chapter 02 #28 Learning Objective: 2
29.
The taxpayer's spouse died at the beginning of 2008. He has no qualifying child. Which status should the taxpayer select when filing his tax return for 2009? A. B. C. D. Married Filing Jointly. Married Filing Separately. Single. Qualifying Widow(er).
Cruz - Chapter 02 #29 Learning Objective: 2
30.
A legally divorced taxpayer maintains a household for himself and maintains a separate household that is the principal place of abode of his dependent widowed mother. What filing status should he use when filing his tax return? A. B. C. D. Head of Household. Single. Qualifying widow(er). Married Filing Separately.
Cruz - Chapter 02 #30 Learning Objective: 2
31.
For tax purposes, marital status is determined as of the __________ day of the year. A. B. C. D. first last third None of the above
Cruz - Chapter 02 #31 Learning Objective: 2
32.
What was the amount of the personal exemption for 2009? A. B. C. D. $3,100. $3,400. $3,750. $3,650.
Cruz - Chapter 02 #32 Learning Objective: 3
33.
Tina is 21 years of age and a full-time student living with her parents. She had wages of $550 ($60 of income tax withholding) for 2009. Can Tina claim her exemption on her return even though her parents will claim her as a dependent on their tax return? A. B. C. D. Tina and her parents can both claim the exemption. No, Tina cannot claim the exemption. No one can claim the exemption for Tina. Yes, Tina can claim the exemption.
Cruz - Chapter 02 #33 Learning Objective: 3
34.
A taxpayer can deduct a(an) __________ amount from AGI for each dependent. A. B. C. D. exemption deduction itemized adjustment
Cruz - Chapter 02 #34 Learning Objective: 4
35.
Maria is 21 years of age and a full-time student living by herself. She had wages of $19,000 for 2009. Can Maria claim the exemption for herself on her tax return? A. B. C. D. Maria's parents can claim the exemption. Both, Maria and her parents can claim the exemption. Yes, Maria can claim the exemption. No one can claim the exemption for Maria.
Cruz - Chapter 02 #35 Learning Objective: 3
36.
To be a qualifying child, the taxpayer must meet three general tests and five specific tests. Which one is not part of the five specific tests? A. B. C. D. Relationship test. Gross income test. Residency test. Special test for qualifying child of more than one taxpayer.
Cruz - Chapter 02 #36 Learning Objective: 4
37.
To be a qualifying child, the taxpayer must meet three general tests and five specific tests. What are the three general tests? A. B. C. D. Relationship test, residency test and gross income test. Dependent taxpayer test, joint return test and citizen or resident test. Dependent taxpayer test, relationship test and citizen or resident test. Support test, age test and relationship test.
Cruz - Chapter 02 #37 Learning Objective: 4
38.
To be a qualifying relative, the taxpayer must meet three general tests and four specific tests. Which one is not part of the four specific tests? A. B. C. D. Age test. Gross income test. Support test. Relationship test or member of household test.
Cruz - Chapter 02 #38 Learning Objective: 4
39.
For a qualifying relative to be claimed as a dependent, this person must either be related to the taxpayer, or be a member of the taxpayer's household for the entire year. Select the relative who must be part of the taxpayer's household for the entire year. A. B. C. D. Father. Sister. Cousin. Son-in-law.
Cruz - Chapter 02 #39 Learning Objective: 4
40.
The taxpayer must provide over ________ of the qualifying relative's support to be able to claim a dependency exemption. A. B. C. D. 49% 50% 51% 75%
Cruz - Chapter 02 #40 Learning Objective: 4
41.
Which of the following items would not be considered as support for a dependency exemption? A. B. C. D. Medical insurance premiums. Food. Life insurance premiums. Clothing.
Cruz - Chapter 02 #41 Learning Objective: 4
42.
Carl, James and Thomas are supporting their mother who lives in a separate apartment. Their contributions towards her support are 10%, 40% and 50%, respectively. In a multiple support agreement, who would be entitled to claim the mother as a dependent? A. B. C. D. James or Thomas. Carl. Carl, James or Thomas. None of the above.
Cruz - Chapter 02 #42 Learning Objective: 4
43.
For head of household status, personal and dependency exemptions are reduced when AGI exceeds: A. B. C. D. $331,000. $166,800. $125,100. $208,500.
Cruz - Chapter 02 #43 Learning Objective: 3 Learning Objective: 4
44.
The basic standard deduction in 2009 for a single taxpayer, under 65 and not blind, is: A. B. C. D. $5,450. $5,700. $7,100. $8,350.
Cruz - Chapter 02 #44 Learning Objective: 5
45.
The basic standard deduction in 2009 for a taxpayer, under 65 and not blind, filing married filing jointly is: A. B. C. D. $12,500. $10,900. $11,400. $8,350.
Cruz - Chapter 02 #45 Learning Objective: 5
46.
The basic standard deduction in 2009 for a taxpayer, 67 and not blind, filing head of household is: A. B. C. D. $8,350. $9,450. $7,100. $9,750.
Cruz - Chapter 02 #46 Learning Objective: 5
47.
When a taxpayer can be claimed as a dependent on the tax return of another individual, the basic standard deduction for the taxpayer is limited to the greater of (a)_______, or (b) the taxpayer's earned income plus $300, but not more than the amount of the basic standard deduction. A. B. C. D. $950. $900. $1,000. $300.
Cruz - Chapter 02 #47 Learning Objective: 5
48.
Luisa's parents can claim her as a dependent on their tax return. In 2009, her only source of income was a part-time job as a medical clerk where she earned $2,100 during the year. What is Luisa's standard deduction? A. B. C. D. $2,100. $2,300. $2,400. $5,150.
Cruz - Chapter 02 #48 Learning Objective: 5
49.
Tom's parents can claim him as a dependent on their tax return. In 2009, his only source of income was $1,000 of interest income received from Global Bank. What is Tom's standard deduction? A. B. C. D. $5,700. $950. $1,000. $300.
Cruz - Chapter 02 #49 Learning Objective: 5
50.
What is the amount of the social security wage limitation for 2009? A. B. C. D. $97,500. $102,000. $95,700. $106,800.
Cruz - Chapter 02 #50 Learning Objective: 6
51.
What is the amount of the tax liability for a married couple having taxable income of $143,500? All answers should be rounded to the nearest dollar. A. B. C. D. $28,250. $28,444. $26,638. $21,525.
Cruz - Chapter 02 #51 Learning Objective: 6
52.
What is the amount of the tax liability for a single person having taxable income of $62,300? All answers should be rounded to the nearest dollar. A. B. C. D. $11,769. $11,763. $15,575. $15,581.
Cruz - Chapter 02 #52 Learning Objective: 6
53.
What is the amount of the tax liability for a head of household person having taxable income of $86,483? All answers should be rounded to the nearest dollar. A. B. C. D. $12,375. $16,473. $16,471. $21,621.
Cruz - Chapter 02 #53 Learning Objective: 6
54.
What is the amount of the tax liability for a qualifying widow(er) with a dependent child and having taxable income of $17,854? All answers should be rounded to the nearest dollar. A. B. C. D. $1,785. $1,843. $1,788. $1,846.
Cruz - Chapter 02 #54 Learning Objective: 6
55.
Failure to make required estimated payments will subject the taxpayer to a potential underpayment penalty plus interest. However, if the difference between the tax shown on the return and the amount of tax withheld for wages is less than _______, the taxpayer will not be assessed a penalty. A. B. C. D. $1,250 $1,000 $850 $500
Cruz - Chapter 02 #55 Learning Objective: 6
56.
The interest charged by IRS for the first three months of 2009 was: A. B. C. D. 7%. 6%. 4%. 5%.
Cruz - Chapter 02 #56 Learning Objective: 7
57.
John forgot to file his tax return by April 15. He did not file an extension. John finally filed his tax return on July 1 and had a remaining tax liability of $1,500. What is John's failure to file penalty? Assume he made all his payments on time. A. B. C. D. $375. $300. $233. $225.
Cruz - Chapter 02 #57 Learning Objective: 7
58.
The failure to pay penalty is ________ of the tax shown on the return for each month (or fraction of a month) the tax is unpaid, up to a maximum of 25%. A. B. C. D. 0.25% 0.5% 5.0% 5.5%
Cruz - Chapter 02 #58 Learning Objective: 7
59.
The IRS can impose a _______ penalty on any portion of understatement of tax that is attributable to fraud. A. B. C. D. 75% 50% 25% 5%
Cruz - Chapter 02 #59 Learning Objective: 7
60.
Criminal penalties only apply to: A. B. C. D. Tax evasion. Willful failure to file a return. Careless disregard for tax authority. a and b.
Cruz - Chapter 02 #60 Learning Objective: 7
61.
Why is the concept of "Adjusted Gross Income (AGI)" important? The concept of "Adjusted Gross Income (AGI)" is important because many deductions and credits reported on the tax return are computed based on the amount shown as AGI.
Cruz - Chapter 02 #61 Learning Objective: 1
62.
What is the simplest tax return form a taxpayer should file if he or she has only $32,000 in wages and is claiming head of household with a dependent child? The simplest tax return form he or she should file is the 1040A. A form 1040EZ can only be filed if the taxpayer is single or married filing jointly.
Cruz - Chapter 02 #62 Learning Objective: 1
63.
David and Martha were divorced on December 31, 2009. Can they file their 2009 income tax return using married filing jointly? Why or Why not? What other filing status choices do they have, if any? No, David and Martha must file as single because they were divorced on December 31. According to the IRS, marital status is determined as of the last day of the tax year. They might be able to file as head of household if certain qualifications are met, including maintaining a household that is the principal place of abode of a qualifying person for more than half the year.
Cruz - Chapter 02 #63 Learning Objective: 2
64.
What qualifications are necessary to file as qualifying widow(er)? The qualifications necessary to file as qualifying widow(er) are: 1. Taxpayer was eligible to file a joint return in the year the spouse died. 2. Taxpayer did not remarry before the end of the tax year in question. 3. Taxpayer paid more than half the cost of keeping up a household. 4. The household was the principal place of abode for the entire year (except for temporary absences) of both the taxpayer and a child, stepchild, or adopted child who can be claimed as a dependent by the taxpayer.
Cruz - Chapter 02 #64 Learning Objective: 2
65.
How many personal exemptions can the taxpayer claim? What is the amount of the personal exemption for 2009? The taxpayer can only claim a personal exemption for himself or herself and his or her spouse (if married). The amount for 2009 is $3,650 for each personal exemption.
Cruz - Chapter 02 #65 Learning Objective: 3
66.
Can Robert, who is a full-time student and earns $1,500 working as a clerk, claim an exemption for himself on his tax return? Assume his parents are claiming him as a dependent. No, if a taxpayer is claimed as a dependent on another return, no personal exemption is allowed on the return of the taxpayer.
Cruz - Chapter 02 #66 Learning Objective: 3
67.
A taxpayer can claim a dependency exemption if the person is a qualifying child or a qualifying relative and the person meets three tests. List the three tests this person must meet. The three tests that this person must meet to be claimed as a dependent are: 1. Dependent taxpayer test. 2. Joint return test. 3. Citizen or resident test.
Cruz - Chapter 02 #67 Learning Objective: 4
68.
List and describe the five tests that a person must meet to qualify as a qualifying child. To be a qualifying child, the person must meet five tests: 1. Relationship test. 2. Age test. 3. Residency test. 4. Support test. 5. Special test for qualifying child of more than one taxpayer. The relationship test is met if the dependent is one of the following: child or descendant of child; stepchild; eligible foster child; or brother, sister, stepbrother, or stepsister, or a descendant of them. The age test is met if, at the end of the year, the child is under the age of 19, under the age of 24 and a full - time student, or totally and permanently disabled regardless of age. Beginning in 2009, the child must be younger than the person claiming the dependency. The residency test is met if the child lived with the taxpayer for more than half of the year. The support test is met if the child did not provide more than half of his or her support. The special test for qualifying child of more than one taxpayer applies if the child meets the other four tests and can be the qualifying child for more than one taxpayer. In this case, only one individual can claim the exemption.
Cruz - Chapter 02 #68 Learning Objective: 4
69.
List and describe the four tests that a person must meet to qualify as a qualifying relative. To be a qualifying relative, the person must meet four tests: 1. Not a qualifying child test. 2. Relationship or member of household test. 3. Gross income test. 4. Support test. The not a qualifying child test refers to a child who is the taxpayer's qualifying child or the qualifying child of another person, who cannot be claimed as a qualifying relative by the taxpayer. The relationship or member of household test is met if the person is related to the taxpayer (child or descendant; stepchild; eligible foster child; brother, sister, stepbrother, stepsister or descendant; father, mother; son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law) or a member of the taxpayer's household for the entire year. The gross income test is met if this person does not have income equal to or greater than the amount of the exemption ($3,650 for 2009). The support test is met if the taxpayer provides over 50 percent of this person's support.
Cruz - Chapter 02 #69 Learning Objective: 4
70.
Determine the amount of the standard deduction for each of the following taxpayers for tax year 2009. 1. John and Carol who are under 65 and filing a joint return. They have no dependents. 2. Peter who is single. 3. Joseph who is over 65 and single. 4. Rose who is 38 and filing as head of household with a dependent child. 5. Henry who is 45 and blind and is filing as married filing separately. 1. $11,400. 2. $5,700. 3. $7,100. 4. $8,350. 5. $6,800.
Cruz - Chapter 02 #70 Learning Objective: 5
71.
What is the amount of the standard deduction for Evelyn who is a full-time student and claimed as a dependent by her parents? She earned $2,100 in wages in 2009. Evelyn's standard deduction is $2,400. When a taxpayer can be claimed as a dependent on another return, the basic standard deduction for the taxpayer is limited to the greater of (a) $950, or (b) the taxpayer's earned income plus $300, but not more than the amount of the basic standard deduction.
Cruz - Chapter 02 #71 Learning Objective: 5
72.
What does the withholding amount on a taxable payment made to the taxpayer represent? The withheld amount represents an estimate of the amount of income tax that would be due for the year on the taxable payment. The IRS credits withholdings to the account of the appropriate taxpayer. Withholdings serve to reduce the amount otherwise due the IRS on the due date of the return.
Cruz - Chapter 02 #72 Learning Objective: 6
73.
Using the appropriate tax tables or tax rate schedules, determine the amount of tax liability in each of the following instances. All answers should be rounded to the nearest dollar. 1. A single person with taxable income of $102,300. 2. A married couple filing jointly with taxable income of $32,800. 3. A head of household with taxable income of $86,725. 4. A person filing married filing separately with taxable income of $54,000. 5. A married couple filing jointly with taxable income of $134,600. 1. $22,364. 2. $4,089. 3. $16,534. 4. $9,694. 5. $26,025.
Cruz - Chapter 02 #73 Learning Objective: 6
74.
Can the taxpayer avoid the failure to pay on time penalty by just filing an automatic extension to file his or her tax return? A taxpayer can file an automatic six-month extension of time to file his or her tax return but this extension will not extend the time to pay the applicable tax. If the taxpayer filing an extension determines that he or she owes additional tax, the payment must accompany the extension request (Form 4868).
Cruz - Chapter 02 #74 Learning Objective: 6 Learning Objective: 7
75.
The IRS can assess criminal penalties if fraud is found on a tax return. Name and describe at least two of those criminal penalties. 1. Any person who willfully attempts to evade or defeat any tax. The charge is a felony punishable by fines of not more than $100,000 or imprisonment of not more than five years or both. |2. Any person who fails to collect, account for, and pay over any tax. The charge is a felony punishable by fines of not more than $10,000 or imprisonment of not more than five years or both. 3. Any person who willfully fails to pay estimated tax or other tax or file a return. The charge is a misdemeanor punishable by fines of not more than $25,000 or imprisonment of not more than one year or both.
Cruz - Chapter 02 #75 Learning Objective: 7
ch2 Summary
Category Cruz - Chapter 02 Learning Objective: 1 Learning Objective: 2 Learning Objective: 3 Learning Objective: 4 Learning Objective: 5 Learning Objective: 6 Learning Objective: 7 # of Questions 75 6 13 8 16 12 13 10