FiCEP CUNA FINAL REVIEW EXAM 2024

FiCEP CUNA FINAL REVIEW EXAM 2024 Select the statement that correctly describes a progressive tax. - ANSWER A progressive tax requires people to pay more as they earn more. Pick the statement that best describes a regressive tax. - 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? - ANSWER Because they generate income for the government. Which taxing authorities are worthy of the member's attention? - 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 ? - 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? - 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? - ANSWER Taxes are an essential financial responsibility. When is the IRS most likely to impose the maximum penalty on taxpayers? - 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? - ANSWER Never assume the IRS is always correct. What is the financial counselor's role in aiding members with complex tax issues? - 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? - 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? - 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? - 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? - 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? - ANSWER 70% are eligible When members use tax refunds to pay down debts, which debts should be paid first? - 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? - ANSWER The use of refund anticipation loans is decreasing. What rule of thumb should be used when defining taxable income? - ANSWER If you benefit financially, you are likely to be taxed for it. Which type of qualified IRA withdrawal is exempt from income tax? - ANSWER Roth IRA withdrawals are exempt. How do different tax authorities treat items excluded from federal taxable income? - ANSWER Exclusions vary from state to state. What is the first step for effectively managing income taxes? - ANSWER Determining your filing status. What should be the goal of managing a taxpayer's income tax withholding? - 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)? - 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? - ANSWER One-fourth of the deposit. Which statement accurately describes options for reducing income taxes? - ANSWER Tax exemptions, deductions, and credits all help reduce income taxes. Which group of taxpayers usually qualifies for the Earned Income Tax Credit (EITC)? - ANSWER Low-income families with earned income qualify for the credit. These six expenses are typically accepted by the IRS as itemized deductions: - ANSWER Traditional IRA contributions, alimony payments, real estate taxes paid, state and local income taxes, mortgage interest, and casualty and theft losses. What is the first step financial counselors can take to determine whether a member is properly managing their taxes? - ANSWER Review the member's payroll stub.