#1
What is the purpose of a tax return?
To report income and deductions to the IRS
ExplanationTax return serves to report income and deductions to the IRS for assessment.
#2
Which of the following is a tax-deductible expense?
Medical expenses
ExplanationMedical expenses can be deducted from taxable income, reducing the tax burden.
#3
What is the purpose of a W-2 form?
To report income earned as an employee
ExplanationW-2 form is used to report income earned as an employee to the IRS.
#4
What is the deadline for filing federal income tax returns in the United States?
April 15th
ExplanationApril 15th is the deadline for filing federal income tax returns in the US.
#5
What is the difference between a tax deduction and a tax credit?
A tax deduction reduces taxable income, while a tax credit reduces the amount of tax owed dollar-for-dollar
ExplanationTax deduction lowers taxable income, whereas tax credit directly reduces tax liability.
#6
Which of the following is an example of a regressive tax?
Sales tax
ExplanationSales tax imposes a higher burden on low-income earners, making it regressive.
#7
What is the purpose of Form 1099?
To report investment income
ExplanationForm 1099 is used to report various types of income, including investment income.
#8
Which of the following retirement accounts allows for tax-free withdrawals in retirement?
Roth IRA
ExplanationRoth IRA allows tax-free withdrawals in retirement, providing tax advantages.
#9
What is the capital gains tax rate for assets held longer than one year in the United States?
20%
ExplanationCapital gains tax rate for assets held longer than a year is 20% in the US.
#10
Which of the following is NOT considered a tax-favored investment account in the United States?
Individual Brokerage Account
ExplanationIndividual Brokerage Account is not designated as a tax-favored investment account.
#11
What is the penalty for not having health insurance in the United States (as of 2023)?
Flat fee of $695 per adult
ExplanationNot having health insurance incurs a flat fee penalty of $695 per adult in the US.
#12
What is the contribution limit for a Traditional IRA in the United States for individuals under age 50 in tax year 2023?
$6,000
ExplanationThe contribution limit for a Traditional IRA for individuals under 50 is $6,000.