C237 - TAXATION 1 UPDATED ACTUAL QUESTIONS
AND CORRECT ANSWERS
Question:
1. Marginal Tax Rate
Answer:
amount of tax payable on the next dollar earned
Question:
2. Average Tax Rate
Answer:
total taxes paid divided by total taxable income
Question:
3. Effective Tax Rate
Answer:
total tax/total income
Question:
4. Progressive Tax
Answer:
A tax graduated so that people with higher incomes pay larger fraction of their
income than people with lower incomes. (Income Tax)
Question:
5. Proportional Tax
Answer:
Tax rate remains the same regardless of the size of the base (sales tax)
Question:
6. Regressive Tax
Answer:
Taxes paid up to a certain amount, and then not any more (social security)
, Question:
7. Social Security and Medicare Tax Rates
Answer:
Social Security: employee pays 6.2%, employer pays 6.2%. Self employed person
pays 12.4%.
Medicare: employee pays 1.45%, employer pays 1.45%. Self employed person pays
2.9%.
Total for self employed people is 15.3%.
Question:
8. 5 Steps to Evaluate Tax Systems
Answer:
Sufficiency
Equity
Certainty
Convenience
Economy
Question:
9. Standard Deduction
Answer:
Threshold that must be reached before you owe income taxes.
Deducted from income before taxes are calculated.
Depends on filing status.
Question:
10. Due dates for individuals, C corporations and S
corporations
Answer:
Individual: 15th day of the 4th months after the last day of the previous year. (April
15th)
C corporation: 15th day of the 4th month after the last day of the previous year,
but corp chooses when the year ends.
S corporation: 15th day of the 3rd month after the last day of the previous year.
Also choose their own year end date.
Question:
11. Statute of Limitations
Answer:
Usually 3 years.
6 years if income was underreported by 25% or more.
No statute of limitations for fraud or failure to file.
Goes from the original due date or the actual file date, whichever is later.
AND CORRECT ANSWERS
Question:
1. Marginal Tax Rate
Answer:
amount of tax payable on the next dollar earned
Question:
2. Average Tax Rate
Answer:
total taxes paid divided by total taxable income
Question:
3. Effective Tax Rate
Answer:
total tax/total income
Question:
4. Progressive Tax
Answer:
A tax graduated so that people with higher incomes pay larger fraction of their
income than people with lower incomes. (Income Tax)
Question:
5. Proportional Tax
Answer:
Tax rate remains the same regardless of the size of the base (sales tax)
Question:
6. Regressive Tax
Answer:
Taxes paid up to a certain amount, and then not any more (social security)
, Question:
7. Social Security and Medicare Tax Rates
Answer:
Social Security: employee pays 6.2%, employer pays 6.2%. Self employed person
pays 12.4%.
Medicare: employee pays 1.45%, employer pays 1.45%. Self employed person pays
2.9%.
Total for self employed people is 15.3%.
Question:
8. 5 Steps to Evaluate Tax Systems
Answer:
Sufficiency
Equity
Certainty
Convenience
Economy
Question:
9. Standard Deduction
Answer:
Threshold that must be reached before you owe income taxes.
Deducted from income before taxes are calculated.
Depends on filing status.
Question:
10. Due dates for individuals, C corporations and S
corporations
Answer:
Individual: 15th day of the 4th months after the last day of the previous year. (April
15th)
C corporation: 15th day of the 4th month after the last day of the previous year,
but corp chooses when the year ends.
S corporation: 15th day of the 3rd month after the last day of the previous year.
Also choose their own year end date.
Question:
11. Statute of Limitations
Answer:
Usually 3 years.
6 years if income was underreported by 25% or more.
No statute of limitations for fraud or failure to file.
Goes from the original due date or the actual file date, whichever is later.
