Chapter 01
Introduction to Taxation, the Income Tax Formula, and Form 1040EZ
True / False Questions
1. The U.S. individual income tax system is an example of a progressive tax rate structure.
True False
2. A proportional tax rate structure is a tax where the tax rate remains at the same rate
regardless of the tax base.
True False
3. Under a flat tax, the marginal tax rate and the average tax rate are different.
True False
4. State and local taxes levied on either property or sales are examples of progressive taxes.
True False
,5. With a regressive tax, the tax rate decreases as the tax base gets larger.
True False
6. The marginal tax rate is the total tax liability divided by the taxable income.
True False
7. The average tax rate is the total tax liability divided by the taxable income.
True False
8. All individual income tax returns follow the structure of the simplified tax formula.
True False
9. With a progressive rate structure, the average tax rate is always smaller than the marginal tax
rate.
True False
10. At high levels of taxable income, the average tax rate and the marginal tax rate will be the
same.
True False
,11. Wages, salaries, and tips are compensation for services rendered. However, commissions,
bonuses, and severance pay are not taxable.
True False
12. Federal unemployment compensation benefits are not taxable.
True False
13. A single taxpayer cannot file a Form 1040EZ if she is age 65 or older.
True False
14. One of the criteria to file a Form 1040EZ is that the total taxable income of the taxpayer
cannot exceed $100,000.
True False
15. Employers report wage income to employees on a Form W-3.
True False
16. Individuals who file a Form 1040EZ will determine their tax liability with reference to a tax rate
schedule.
True False
, 17. Taxpayers normally pay their tax liability when they file their income tax return.
True False
18. The amount of tax liability is affected by the filing status of the taxpayer.
True False
19. The tax liability of a single individual with taxable income of $89,542 is $18,243.
True False
20. Tax liability is calculated using income before permitted deductions. Permitted deductions are
then subtracted from the tax liability.
True False
21. There are two types of primary tax authority: statutory and judicial.
True False
22. Typically, federal tax legislation is introduced in the Senate Finance Committee.
True False
Introduction to Taxation, the Income Tax Formula, and Form 1040EZ
True / False Questions
1. The U.S. individual income tax system is an example of a progressive tax rate structure.
True False
2. A proportional tax rate structure is a tax where the tax rate remains at the same rate
regardless of the tax base.
True False
3. Under a flat tax, the marginal tax rate and the average tax rate are different.
True False
4. State and local taxes levied on either property or sales are examples of progressive taxes.
True False
,5. With a regressive tax, the tax rate decreases as the tax base gets larger.
True False
6. The marginal tax rate is the total tax liability divided by the taxable income.
True False
7. The average tax rate is the total tax liability divided by the taxable income.
True False
8. All individual income tax returns follow the structure of the simplified tax formula.
True False
9. With a progressive rate structure, the average tax rate is always smaller than the marginal tax
rate.
True False
10. At high levels of taxable income, the average tax rate and the marginal tax rate will be the
same.
True False
,11. Wages, salaries, and tips are compensation for services rendered. However, commissions,
bonuses, and severance pay are not taxable.
True False
12. Federal unemployment compensation benefits are not taxable.
True False
13. A single taxpayer cannot file a Form 1040EZ if she is age 65 or older.
True False
14. One of the criteria to file a Form 1040EZ is that the total taxable income of the taxpayer
cannot exceed $100,000.
True False
15. Employers report wage income to employees on a Form W-3.
True False
16. Individuals who file a Form 1040EZ will determine their tax liability with reference to a tax rate
schedule.
True False
, 17. Taxpayers normally pay their tax liability when they file their income tax return.
True False
18. The amount of tax liability is affected by the filing status of the taxpayer.
True False
19. The tax liability of a single individual with taxable income of $89,542 is $18,243.
True False
20. Tax liability is calculated using income before permitted deductions. Permitted deductions are
then subtracted from the tax liability.
True False
21. There are two types of primary tax authority: statutory and judicial.
True False
22. Typically, federal tax legislation is introduced in the Senate Finance Committee.
True False
