Federal Taxation - Final Exam Review
UPDATED Exam Questions and
CORRECT Answers
FICA/self employment tax - CORRECT ANSWER - 6.2% tax rate matched by employer for
total of 12.4% to government; salary greater tha $118,500 does not apply
where do tax bills begin? - CORRECT ANSWER - the House of Representatives--the House
Ways and Means Committee
marginal tax rate - CORRECT ANSWER - the tax rate applicable to the next $1 of income or
deduction for a taxpayer
total economic income - CORRECT ANSWER - includes all types of economic income that a
taxpayer has for the year; includes most types of excludible income such as tax-exempt bond
interest; permits business deductions but not personal
all dependents must: - CORRECT ANSWER - 1. have a qualifying identification number
(SSN)
2. meet a citizenship test
3. meet a separate return test
4. not claim another person as a dependent
qualifying child must meet: - CORRECT ANSWER - 1. a relationship test (blood-relation,
foster child, adoption)
2. an age test (under 19; or under 24 if full-time student
3. an abode test (same principal residence as taxpayer for more than 1/2 the year)
4. a support test (taxpayer must normally provide more than 50% of dependent's financial
support)
, qualifying relative must meet: - CORRECT ANSWER - 1. a relationship test (if not related,
then must live with taxpayer for entire year)
2. a gross income test (less than personal exemption amount of $4050)
3. a support test (taxpayer must normally provide more than 50% of dependent's financial
supports
formula for calculating taxable income - CORRECT ANSWER - Gross Income
- Deductions for AGI
= AGI
- Deductions from AGI
= Taxable Income
Statute of Limitations - CORRECT ANSWER - adjustments can be made 3 years from the
later of the due date or the date the return was filed
if the taxpayer does not report gross income items that exceed 25% of the reported gross
income... - CORRECT ANSWER - the IRS can investigate 6 years from the later of the due
date or the date the return was filed
itemized deductions - CORRECT ANSWER - medical expenses, taxes (sales, property),
mortgage interest, charitable contributions, personal casualty loss
deductions for AGI - CORRECT ANSWER - IRA, alimony, moving expenses (related to job);
most taxpayers don't have these
Which taxpayers have limits on their/receive no standard deduction? - CORRECT ANSWER -
married taxpayers filing separate where the other spouse itemizes, non-resident aliens, and
taxpayers with filing periods less than 12 months
limit on standard deduction for dependents - CORRECT ANSWER - the greater of $1050 OR
earned income + $350 (note: cannot exceed personal exemption amount of $6300)
UPDATED Exam Questions and
CORRECT Answers
FICA/self employment tax - CORRECT ANSWER - 6.2% tax rate matched by employer for
total of 12.4% to government; salary greater tha $118,500 does not apply
where do tax bills begin? - CORRECT ANSWER - the House of Representatives--the House
Ways and Means Committee
marginal tax rate - CORRECT ANSWER - the tax rate applicable to the next $1 of income or
deduction for a taxpayer
total economic income - CORRECT ANSWER - includes all types of economic income that a
taxpayer has for the year; includes most types of excludible income such as tax-exempt bond
interest; permits business deductions but not personal
all dependents must: - CORRECT ANSWER - 1. have a qualifying identification number
(SSN)
2. meet a citizenship test
3. meet a separate return test
4. not claim another person as a dependent
qualifying child must meet: - CORRECT ANSWER - 1. a relationship test (blood-relation,
foster child, adoption)
2. an age test (under 19; or under 24 if full-time student
3. an abode test (same principal residence as taxpayer for more than 1/2 the year)
4. a support test (taxpayer must normally provide more than 50% of dependent's financial
support)
, qualifying relative must meet: - CORRECT ANSWER - 1. a relationship test (if not related,
then must live with taxpayer for entire year)
2. a gross income test (less than personal exemption amount of $4050)
3. a support test (taxpayer must normally provide more than 50% of dependent's financial
supports
formula for calculating taxable income - CORRECT ANSWER - Gross Income
- Deductions for AGI
= AGI
- Deductions from AGI
= Taxable Income
Statute of Limitations - CORRECT ANSWER - adjustments can be made 3 years from the
later of the due date or the date the return was filed
if the taxpayer does not report gross income items that exceed 25% of the reported gross
income... - CORRECT ANSWER - the IRS can investigate 6 years from the later of the due
date or the date the return was filed
itemized deductions - CORRECT ANSWER - medical expenses, taxes (sales, property),
mortgage interest, charitable contributions, personal casualty loss
deductions for AGI - CORRECT ANSWER - IRA, alimony, moving expenses (related to job);
most taxpayers don't have these
Which taxpayers have limits on their/receive no standard deduction? - CORRECT ANSWER -
married taxpayers filing separate where the other spouse itemizes, non-resident aliens, and
taxpayers with filing periods less than 12 months
limit on standard deduction for dependents - CORRECT ANSWER - the greater of $1050 OR
earned income + $350 (note: cannot exceed personal exemption amount of $6300)
