#1
Which of the following is not a characteristic of a progressive income tax system?
Higher income earners pay a higher percentage of their income in taxes
Lower income earners pay a lower percentage of their income in taxes
Tax rates increase as income increases
All taxpayers pay the same percentage of their income in taxes
#2
Which of the following is considered a deductible expense for individual taxpayers?
Grocery bills
Entertainment expenses
Medical expenses
Purchasing clothing
#3
What is the purpose of Form W-4 in the context of individual income taxation?
To report income from self-employment
To calculate the amount of taxes owed at the end of the tax year
To withhold the correct amount of federal income tax from an employee's paycheck
To claim tax deductions for charitable contributions
#4
What is the purpose of IRS Form 1040?
To report dividend income
To claim tax deductions for medical expenses
To report federal income tax withheld from wages
To file an individual income tax return
#5
What is the purpose of the IRS Form W-2?
To report income earned from self-employment
To report income earned as an employee and taxes withheld by the employer
To report income earned from investments
To claim tax deductions for charitable contributions
#6
What is the purpose of IRS Form 1099?
To report income earned from self-employment
To report income earned as an employee and taxes withheld by the employer
To report income earned from investments
To claim tax deductions for charitable contributions
#7
What is the purpose of IRS Form 1098?
To report income earned from self-employment
To report mortgage interest paid by a taxpayer
To report income earned from investments
To claim tax deductions for charitable contributions
#8
What does AGI stand for in the context of individual income taxation?
Adjusted Gross Income
Average Gross Income
Annual Gross Income
Aggregate Gross Income
#9
Which of the following tax credits is aimed at encouraging higher education?
Earned Income Tax Credit (EITC)
Child Tax Credit
Lifetime Learning Credit
Child and Dependent Care Credit
#10
What is the purpose of the standard deduction in individual income taxation?
To reduce the taxable income for all taxpayers equally
To provide a deduction for specific expenses such as medical bills
To encourage taxpayers to itemize their deductions
To simplify the tax filing process for taxpayers
#11
Which of the following types of income is typically not subject to federal income tax?
Wages and salaries
Interest income from savings accounts
Dividend income from investments
Social Security benefits
#12
Which of the following filing statuses is not recognized by the IRS?
Single
Married filing jointly
Married filing separately
Married filing independently
#13
Which of the following is a characteristic of a regressive tax?
Tax rates decrease as income increases
Tax rates increase as income increases
All taxpayers pay the same percentage of their income in taxes
Lower income earners pay a higher percentage of their income in taxes
#14
Which of the following is a tax-deferred retirement account?
Roth IRA
Traditional IRA
Brokerage account
Savings account
#15
What is the purpose of the Alternative Minimum Tax (AMT)?
To ensure that high-income earners do not exploit tax loopholes to avoid paying taxes
To provide tax breaks for low-income earners
To encourage investment in renewable energy
To simplify the tax system for individuals
#16
What is the tax treatment for capital gains and losses?
Capital gains are taxed at a lower rate than ordinary income, while capital losses can be fully deducted against other income
Capital gains are fully taxable at the same rate as ordinary income, while capital losses cannot be deducted
Capital gains are tax-exempt, while capital losses are fully deductible
Capital gains are taxed at a higher rate than ordinary income, while capital losses can only be partially deducted
#17
What is the tax treatment for gifts given by an individual?
Gifts are tax-deductible for the donor
Gifts are tax-exempt for the recipient
Gifts are subject to federal income tax for the recipient
Gifts above a certain annual exclusion amount may be subject to gift tax for the donor