FiCEP Final : CUNA Review Questions
with 100% Correct Answers
Select the statement that correctly describes a progressive tax. Correct Answer:
A progressive tax requires people to pay more as they earn more.
Pick the statement that best describes a regressive tax. Correct Answer: A
regressive tax charges the same tax rate regardless of the taxpayer's income.
Why are government fees and surcharges sometimes described as a form of
tax? Correct Answer: Because they generate income for the government.
Which taxing authorities are worthy of the member's attention? Correct Answer:
The member must attend to all tax authorities at all levels of government to
maintain their financial well-being.
How do taxes impact your personal spending? Correct Answer: Taxes can make
personal spending go up or down.
Which is larger: the penalty for failing to pay federal income taxes on time, or
the penalty for failing to file a tax return when taxes are owed? Correct Answer:
The penalty for failing to file a tax return is significantly higher.
What is the right attitude to take toward taxes to protect your financial well-
being? Correct Answer: Taxes are an essential financial responsibility.
When is the IRS most likely to impose the maximum penalty on taxpayers?
Correct Answer: When they are forced to track down the taxpayer.
What is a good rule to follow when dealing with a tax auditor or another issue
involving the IRS? Correct Answer: Never assume the IRS is always correct.
,What is the financial counselor's role in aiding members with complex tax issues?
Correct Answer: The counselor provides basic information and refers members
to tax programs or tax experts.
What happens when taxpayers who file a late return for any or all of the 4 most
recent tax years are owed a refund? Correct Answer: No penalty is charged
and the taxpayer gets the full refund amount.
What tax services are provided by the Volunteer Income Tax Assistance (VITA)
program? Correct Answer: Free tax return assistance to low- or moderate-
income taxpayers.
What benefit is offered when VITA services are combined with credit union
programs that encourage taxpayers to open accounts for direct deposit of tax
refunds? Correct Answer: Direct deposit reduces the time required to get a
refund, which counters the appeal of refund anticipation loans.
What is the name of the organization that offers free tax assistance to taxpayers
age 60 or older, those with disabilities or special needs, or who qualify for
earned income or homestead tax credits? Correct Answer: Tax Counseling for
the Elderly (TCE)
What percent of tax payers are eligible to use the "Free File Online" service
offered as a partnership between the IRS and tax software companies? Correct
Answer: 70% are eligible
When members use tax refunds to pay down debts, which debts should be paid
first? Correct Answer: Always pay the debts with high interest rates or that could
prompt garnishments.
How have education, information, and direct deposit programs impacted
taxpayers' use of refund anticipation loans? Correct Answer: The use of refund
anticipation loans is decreasing.
, What rule of thumb should be used when defining taxable income? Correct
Answer: If you benefit financially, you are likely to be taxed for it.
Which type of qualified IRA withdrawal is exempt from income tax? Correct
Answer: Roth IRA withdrawals are exempt.
How do different tax authorities treat items excluded from federal taxable
income? Correct Answer: Exclusions vary from state to state.
What is the first step for effectively managing income taxes? Correct Answer:
Determining your filing status.
What should be the goal of managing a taxpayer's income tax withholding?
Correct Answer: To maintain cash flow while avoiding a tax bill at filing time.
What happens to year-end balances "left over" in Section 125 plans or health
savings accounts (HSAs)? Correct Answer: Section 125 balances are forfeited,
while HSA balances are rolled over
How much can a member in the 25% tax bracket save in federal income taxes
by depositing pre-tax income into tax-deferred retirement accounts, such as
traditional IRAs? Correct Answer: One-fourth of the deposit.
Which statement accurately describes options for reducing income taxes?
Correct Answer: Tax exemptions, deductions, and credits all help reduce
income taxes.
Which group of taxpayers usually qualifies for the Earned Income Tax Credit
(EITC)? Correct Answer: Low-income families with earned income qualify for the
credit.
These six expenses are typically accepted by the IRS as itemized deductions:
Correct Answer: Traditional IRA contributions, alimony payments, real estate
with 100% Correct Answers
Select the statement that correctly describes a progressive tax. Correct Answer:
A progressive tax requires people to pay more as they earn more.
Pick the statement that best describes a regressive tax. Correct Answer: A
regressive tax charges the same tax rate regardless of the taxpayer's income.
Why are government fees and surcharges sometimes described as a form of
tax? Correct Answer: Because they generate income for the government.
Which taxing authorities are worthy of the member's attention? Correct Answer:
The member must attend to all tax authorities at all levels of government to
maintain their financial well-being.
How do taxes impact your personal spending? Correct Answer: Taxes can make
personal spending go up or down.
Which is larger: the penalty for failing to pay federal income taxes on time, or
the penalty for failing to file a tax return when taxes are owed? Correct Answer:
The penalty for failing to file a tax return is significantly higher.
What is the right attitude to take toward taxes to protect your financial well-
being? Correct Answer: Taxes are an essential financial responsibility.
When is the IRS most likely to impose the maximum penalty on taxpayers?
Correct Answer: When they are forced to track down the taxpayer.
What is a good rule to follow when dealing with a tax auditor or another issue
involving the IRS? Correct Answer: Never assume the IRS is always correct.
,What is the financial counselor's role in aiding members with complex tax issues?
Correct Answer: The counselor provides basic information and refers members
to tax programs or tax experts.
What happens when taxpayers who file a late return for any or all of the 4 most
recent tax years are owed a refund? Correct Answer: No penalty is charged
and the taxpayer gets the full refund amount.
What tax services are provided by the Volunteer Income Tax Assistance (VITA)
program? Correct Answer: Free tax return assistance to low- or moderate-
income taxpayers.
What benefit is offered when VITA services are combined with credit union
programs that encourage taxpayers to open accounts for direct deposit of tax
refunds? Correct Answer: Direct deposit reduces the time required to get a
refund, which counters the appeal of refund anticipation loans.
What is the name of the organization that offers free tax assistance to taxpayers
age 60 or older, those with disabilities or special needs, or who qualify for
earned income or homestead tax credits? Correct Answer: Tax Counseling for
the Elderly (TCE)
What percent of tax payers are eligible to use the "Free File Online" service
offered as a partnership between the IRS and tax software companies? Correct
Answer: 70% are eligible
When members use tax refunds to pay down debts, which debts should be paid
first? Correct Answer: Always pay the debts with high interest rates or that could
prompt garnishments.
How have education, information, and direct deposit programs impacted
taxpayers' use of refund anticipation loans? Correct Answer: The use of refund
anticipation loans is decreasing.
, What rule of thumb should be used when defining taxable income? Correct
Answer: If you benefit financially, you are likely to be taxed for it.
Which type of qualified IRA withdrawal is exempt from income tax? Correct
Answer: Roth IRA withdrawals are exempt.
How do different tax authorities treat items excluded from federal taxable
income? Correct Answer: Exclusions vary from state to state.
What is the first step for effectively managing income taxes? Correct Answer:
Determining your filing status.
What should be the goal of managing a taxpayer's income tax withholding?
Correct Answer: To maintain cash flow while avoiding a tax bill at filing time.
What happens to year-end balances "left over" in Section 125 plans or health
savings accounts (HSAs)? Correct Answer: Section 125 balances are forfeited,
while HSA balances are rolled over
How much can a member in the 25% tax bracket save in federal income taxes
by depositing pre-tax income into tax-deferred retirement accounts, such as
traditional IRAs? Correct Answer: One-fourth of the deposit.
Which statement accurately describes options for reducing income taxes?
Correct Answer: Tax exemptions, deductions, and credits all help reduce
income taxes.
Which group of taxpayers usually qualifies for the Earned Income Tax Credit
(EITC)? Correct Answer: Low-income families with earned income qualify for the
credit.
These six expenses are typically accepted by the IRS as itemized deductions:
Correct Answer: Traditional IRA contributions, alimony payments, real estate
