#1
Which of the following is not a type of tax?
Expense tax
ExplanationExpense tax is not a recognized type of tax.
#2
What does VAT stand for?
Value Added Tax
ExplanationVAT stands for Value Added Tax.
#3
Which of the following statements about tax deductions is true?
Tax deductions reduce taxable income, leading to lower overall taxes paid
ExplanationTax deductions lower taxable income, resulting in lower overall taxes paid.
#4
What is the purpose of the Internal Revenue Service (IRS) in the United States?
To collect federal taxes and enforce tax laws
ExplanationThe IRS collects federal taxes and enforces tax laws in the United States.
#5
Which of the following is not a tax-deductible expense for businesses?
Personal groceries
ExplanationPersonal groceries are not a tax-deductible expense for businesses.
#6
Which of the following taxes is levied on the transfer of property or wealth from one individual to another?
Estate tax
ExplanationThe estate tax is levied on the transfer of property or wealth from one individual to another.
#7
Which of the following taxes is typically paid by employers?
Payroll tax
ExplanationPayroll tax is typically paid by employers.
#8
What is the purpose of Form W-2 in the United States tax system?
To report income earned by an employee
ExplanationForm W-2 is used to report income earned by an employee.
#9
What is the difference between tax avoidance and tax evasion?
Tax avoidance involves reducing tax liability through legal means, while tax evasion involves illegally evading taxes
ExplanationTax avoidance is legal reduction of tax liability, while tax evasion is illegal avoidance of taxes.
#10
What is the Alternative Minimum Tax (AMT) in the United States?
A supplementary tax intended to prevent high-income earners from avoiding taxes
ExplanationAMT is a supplementary tax to prevent high-income earners from avoiding taxes.
#11
What is the difference between a progressive tax system and a regressive tax system?
In a progressive tax system, higher-income individuals pay a higher percentage of their income in taxes, while in a regressive tax system, lower-income individuals pay a higher percentage of their income in taxes.
ExplanationProgressive tax system taxes higher-income individuals at a higher rate; regressive tax system taxes lower-income individuals at a higher rate.
#12
What is the purpose of a tax audit?
To review taxpayer records and ensure compliance with tax laws
ExplanationA tax audit reviews taxpayer records to ensure compliance with tax laws.
#13
What is the 'double taxation' principle in taxation?
Taxing the same income or financial transaction twice
ExplanationDouble taxation involves taxing the same income or financial transaction twice.
#14
What is the primary objective of tax compliance?
To ensure taxpayers pay the correct amount of tax owed
ExplanationTax compliance aims to ensure taxpayers pay the correct amount of tax owed.