Tax Study Guide Exam Questions And
Actual Answers.
Explain the distinction between income and gross income. - Answer Income includes all
income from whatever source derived
based on principles of economics and/or accounting. Gross income
refers only to income from taxable sources.
What determines if an individual must file a tax return? - Answer In general, it is an
individual's gross income that determines whether he or she must file a return when their gross
income is in excess of the filing requirement amounts. Certain individuals must file even if they
have less than the specified gross income amounts: (1) taxpayers with
$400
or more of the self-employment income, (2) dependent individuals whose unearned income
exceeds
$1,100
or whose total gross income exceeds the standard deduction, and (3) taxpayers who owe the
0.9% Additional Medicare Tax or the
3.8%
Net Investment Income Tax.
Is an individual required to file a tax return if he or she owes no tax? - Answer Individuals who
owe no tax because of deductions or other reasons must still file a return if they have gross
income in excess of the filing requirement amounts.
What is the normal due date for the tax return of calendar year taxpayers? What happens to the
due date if it falls on a Saturday, Sunday, or holiday? - Answer The normal due date for
calendar year individuals and C corporations is April 15. The normal due date for calendar year
partnerships and S corporations is March 15. If the normal due date is a Saturday, Sunday, or
holiday, the normal due date is delayed to the next day that is not a Saturday, Sunday, or
holiday.
Sometimes taxpayers may not be able to file their tax returns by the normal due date. Are
extensions available? How long are the extensions? Do extensions enable taxpayers to delay
paying the tax they owe? - Answer Automatic extensions of six months are generally available.
For a C corporation, the extension is six or seven months, depending on fiscal year-end. Any tax
, claim the children as dependents. The noncustodial parent may claim them as dependents only
if required documentation provides for it.
Under what circumstances, if any, can a married person file as a head of household? - Answer
A married person, if otherwise qualified, can claim head of household status if he or she is
married to a nonresident alien or if he or she qualifies as an abandoned spouse. To be an
abandoned spouse, the person must have lived apart from his or spouse for the last six months
of the year and maintain a household for a qualifying child in which they both live
Under a progressive tax rate structure, the tax rate increases as the taxpayer's income increases.
Under a proportional tax rate or flat tax structure, the same tax rate applies to all taxpayers
regardless of their income levels. Under a regressive tax rate structure, the tax rate decreases
with an increase income level.
The concept of vertical equity holds that taxpayers with higher income levels should pay a
higher proportion of tax and that the tax should be borne by those who have the "ability to
pay". Thus, Congressman Patrick's opposition to the flat tax is theoretically correct. - Answer
Why is this the case? - Answer Most estates are not subject to the federal estate tax because
of generous credit and deduction provisions, such as the unified tax credit and the unlimited
marital deduction. The unified tax credit equivalent for
2020
is
$11,580,000.
This means that, at a minimum, for decedents dying in
2020,
no estate of
$11,580,000
or less will be subject to the federal estate tax.
Should most estates be subject to the federal estate tax? Why or why not? - Answer This is
controversial and has proponents on both sides. Some people say "no" because it is considered
a double tax. Others say "yes" because they believe in the "ability to pay" principle, based on
income or wealth.
Discuss what is meant by horizontal equity and vertical equity as it pertains to the income tax. -
Answer Horizontal
Actual Answers.
Explain the distinction between income and gross income. - Answer Income includes all
income from whatever source derived
based on principles of economics and/or accounting. Gross income
refers only to income from taxable sources.
What determines if an individual must file a tax return? - Answer In general, it is an
individual's gross income that determines whether he or she must file a return when their gross
income is in excess of the filing requirement amounts. Certain individuals must file even if they
have less than the specified gross income amounts: (1) taxpayers with
$400
or more of the self-employment income, (2) dependent individuals whose unearned income
exceeds
$1,100
or whose total gross income exceeds the standard deduction, and (3) taxpayers who owe the
0.9% Additional Medicare Tax or the
3.8%
Net Investment Income Tax.
Is an individual required to file a tax return if he or she owes no tax? - Answer Individuals who
owe no tax because of deductions or other reasons must still file a return if they have gross
income in excess of the filing requirement amounts.
What is the normal due date for the tax return of calendar year taxpayers? What happens to the
due date if it falls on a Saturday, Sunday, or holiday? - Answer The normal due date for
calendar year individuals and C corporations is April 15. The normal due date for calendar year
partnerships and S corporations is March 15. If the normal due date is a Saturday, Sunday, or
holiday, the normal due date is delayed to the next day that is not a Saturday, Sunday, or
holiday.
Sometimes taxpayers may not be able to file their tax returns by the normal due date. Are
extensions available? How long are the extensions? Do extensions enable taxpayers to delay
paying the tax they owe? - Answer Automatic extensions of six months are generally available.
For a C corporation, the extension is six or seven months, depending on fiscal year-end. Any tax
, claim the children as dependents. The noncustodial parent may claim them as dependents only
if required documentation provides for it.
Under what circumstances, if any, can a married person file as a head of household? - Answer
A married person, if otherwise qualified, can claim head of household status if he or she is
married to a nonresident alien or if he or she qualifies as an abandoned spouse. To be an
abandoned spouse, the person must have lived apart from his or spouse for the last six months
of the year and maintain a household for a qualifying child in which they both live
Under a progressive tax rate structure, the tax rate increases as the taxpayer's income increases.
Under a proportional tax rate or flat tax structure, the same tax rate applies to all taxpayers
regardless of their income levels. Under a regressive tax rate structure, the tax rate decreases
with an increase income level.
The concept of vertical equity holds that taxpayers with higher income levels should pay a
higher proportion of tax and that the tax should be borne by those who have the "ability to
pay". Thus, Congressman Patrick's opposition to the flat tax is theoretically correct. - Answer
Why is this the case? - Answer Most estates are not subject to the federal estate tax because
of generous credit and deduction provisions, such as the unified tax credit and the unlimited
marital deduction. The unified tax credit equivalent for
2020
is
$11,580,000.
This means that, at a minimum, for decedents dying in
2020,
no estate of
$11,580,000
or less will be subject to the federal estate tax.
Should most estates be subject to the federal estate tax? Why or why not? - Answer This is
controversial and has proponents on both sides. Some people say "no" because it is considered
a double tax. Others say "yes" because they believe in the "ability to pay" principle, based on
income or wealth.
Discuss what is meant by horizontal equity and vertical equity as it pertains to the income tax. -
Answer Horizontal
