Ch. 4: Planning Taxes

Social Security is an example of a tax on earnings.

True

A tax due on the purchase of gasoline is called a(an)

Excise tax

The tax that is a major source of revenue for local governments is called a(n)

Real Estate Property Tax

This tax is a major financial planning factor for most people because it is sometimes imposed at the federal, state, and local levels

Income Tax

Income that is not subject to tax is called

Tax-Exempt Income

Gross income less adjustments to income equals

Adjusted Gross Income

Federal income tax returns must typically be filed by April 1st of each year

False: April 15th

How many years back is a person responsible for providing documentation for an audit?

6 years

The tax based on the total tax due divided by taxable income is called the:

average tax rate

At the end of the year, employees receive a ____ form that reports annual earnings and the amounts deducted for taxes from their employer.

W-2

What form do you fill out for an automatic 6month extension on taxes if you cannot file by April 15?

4868

Using tax software typically will not save a taxpayer any time when preparing a Form 1040

False: it typically saves lots of time for taxpayers.

The IRS has made online filing free for millions of taxpayers through the Free File Alliance

True

Some tax disputes have gone to the US Supreme Court.

True

Annie was required to clarify or document minor questions about her tax form by a mail inquiry. She participated in a(n

Correspondence Audit

If Brenda wants to pay her fair share of taxes, no more no less, she should practice:

Tax Avoidance

According to Tax Service Warnings, who is responsible for supplying accurate and complete information for completing a tax return?

The Taxpayer

Tax assistance sources include

Publications, Tax Guides, IRS Hotlines, The internet

The maximum that an individual can contribute to a Roth IRA for the year 2020 is:

$6k

An advantage of investing in a 401(k) plan is the

possibility of receiving an employer match on your contributions