Intuit Academy Tax Level 1 | 335 Complete Questions And
Correct Answers With Verified Solution | New Update
Question 1
Which federal agency is responsible for collecting taxes and
administering the Internal Revenue Code?
A) Department of the Treasury
B) Internal Revenue Service (IRS)
C) Department of Justice
D) Federal Bureau of Investigation (FBI)
E) Social Security Administration
Correct Answer: B) Internal Revenue Service (IRS)
Rationale: The Internal Revenue Service (IRS) is the tax collection
agency of the federal government.
Question 2
What is the primary purpose of filing a tax return?
A) To apply for government benefits.
B) To report income, deductions, and credits to the IRS to determine
tax liability.
C) To register for Social Security.
D) To request an extension for payment.
E) To apply for a new job.
Correct Answer: B) To report income, deductions, and credits to the
IRS to determine tax liability.
Rationale: The primary purpose of filing a tax return is to report
income, deductions, and credits to the IRS to determine your tax
liability.
Question 3
Which of the following is considered taxable income?
A) Child support payments received.
B) Gifts received.
C) Wages, salaries, and tips.
,D) Life insurance proceeds received due to death.
E) Inheritances.
Correct Answer: C) Wages, salaries, and tips.
Rationale: Wages, salaries, and tips received for work performed
are generally considered taxable income.
Question 4
What document do employers typically send to employees showing
their annual wages and the amount of taxes withheld?
A) Form 1099-MISC
B) Form W-2
C) Form 1099-INT
D) Form 1098
E) Form 1040
Correct Answer: B) Form W-2
Rationale: Form W-2, Wage and Tax Statement, is sent by employers
to employees and the IRS, reporting annual wages and taxes
withheld.
Question 5
What is a "deduction" in tax terminology?
A) An amount subtracted from the total tax owed.
B) An amount of money the government pays back to taxpayers.
C) An amount that reduces your taxable income.
D) A penalty for late filing.
E) An increase in tax liability.
Correct Answer: C) An amount that reduces your taxable income.
Rationale: A deduction is an expense that can be subtracted from
your gross income to arrive at your adjusted gross income (AGI) or
taxable income, thereby reducing your tax liability.
Question 6
Which of the following is an example of an "above-the-line"
,deduction (reduces gross income to arrive at Adjusted Gross
Income)?
A) Standard Deduction.
B) Itemized Deduction for mortgage interest.
C) Student loan interest deduction.
D) Deduction for state and local taxes.
E) Charitable contributions (if itemizing).
Correct Answer: C) Student loan interest deduction.
Rationale: Student loan interest is an "above-the-line" deduction,
meaning it reduces your gross income to calculate your Adjusted
Gross Income (AGI).
Question 7
What is "Adjusted Gross Income (AGI)"?
A) Your total income before any deductions.
B) Your income after all taxes have been paid.
C) Your gross income minus certain deductions (above-the-line
deductions).
D) Your taxable income after all credits.
E) The amount of tax you owe.
Correct Answer: C) Your gross income minus certain deductions
(above-the-line deductions).
Rationale: Adjusted Gross Income (AGI) is your gross income after
certain allowable deductions (often called "above-the-line"
deductions) have been subtracted.
Question 8
Which of the following is NOT an allowable filing status for federal
income tax?
A) Single
B) Married Filing Jointly
C) Divorced
, D) Head of Household
E) Qualifying Widow(er) with Dependent Child
Correct Answer: C) Divorced
Rationale: "Divorced" is not a recognized filing status. A divorced
individual would typically file as Single or, if they meet certain
criteria, Head of Household.
Question 9
What is a "tax credit"?
A) An amount that reduces your taxable income.
B) An amount that directly reduces the amount of tax you owe.
C) A penalty for underpayment of taxes.
D) An extension for filing your tax return.
E) A refund you always receive.
Correct Answer: B) An amount that directly reduces the amount of
tax you owe.
Rationale: A tax credit is a dollar-for-dollar reduction in the amount
of tax you owe, making it more valuable than a deduction.
Question 10
Which of the following describes a "refundable" tax credit?
A) It can only reduce your tax liability to zero.
B) If the credit amount is more than the tax you owe, you can
receive the difference as a refund.
C) It is only available to high-income earners.
D) It must be repaid to the government.
E) It only applies to state taxes.
Correct Answer: B) If the credit amount is more than the tax you
owe, you can receive the difference as a refund.
Rationale: A refundable tax credit can reduce your tax liability
below zero, resulting in a refund even if you owe no tax.
Correct Answers With Verified Solution | New Update
Question 1
Which federal agency is responsible for collecting taxes and
administering the Internal Revenue Code?
A) Department of the Treasury
B) Internal Revenue Service (IRS)
C) Department of Justice
D) Federal Bureau of Investigation (FBI)
E) Social Security Administration
Correct Answer: B) Internal Revenue Service (IRS)
Rationale: The Internal Revenue Service (IRS) is the tax collection
agency of the federal government.
Question 2
What is the primary purpose of filing a tax return?
A) To apply for government benefits.
B) To report income, deductions, and credits to the IRS to determine
tax liability.
C) To register for Social Security.
D) To request an extension for payment.
E) To apply for a new job.
Correct Answer: B) To report income, deductions, and credits to the
IRS to determine tax liability.
Rationale: The primary purpose of filing a tax return is to report
income, deductions, and credits to the IRS to determine your tax
liability.
Question 3
Which of the following is considered taxable income?
A) Child support payments received.
B) Gifts received.
C) Wages, salaries, and tips.
,D) Life insurance proceeds received due to death.
E) Inheritances.
Correct Answer: C) Wages, salaries, and tips.
Rationale: Wages, salaries, and tips received for work performed
are generally considered taxable income.
Question 4
What document do employers typically send to employees showing
their annual wages and the amount of taxes withheld?
A) Form 1099-MISC
B) Form W-2
C) Form 1099-INT
D) Form 1098
E) Form 1040
Correct Answer: B) Form W-2
Rationale: Form W-2, Wage and Tax Statement, is sent by employers
to employees and the IRS, reporting annual wages and taxes
withheld.
Question 5
What is a "deduction" in tax terminology?
A) An amount subtracted from the total tax owed.
B) An amount of money the government pays back to taxpayers.
C) An amount that reduces your taxable income.
D) A penalty for late filing.
E) An increase in tax liability.
Correct Answer: C) An amount that reduces your taxable income.
Rationale: A deduction is an expense that can be subtracted from
your gross income to arrive at your adjusted gross income (AGI) or
taxable income, thereby reducing your tax liability.
Question 6
Which of the following is an example of an "above-the-line"
,deduction (reduces gross income to arrive at Adjusted Gross
Income)?
A) Standard Deduction.
B) Itemized Deduction for mortgage interest.
C) Student loan interest deduction.
D) Deduction for state and local taxes.
E) Charitable contributions (if itemizing).
Correct Answer: C) Student loan interest deduction.
Rationale: Student loan interest is an "above-the-line" deduction,
meaning it reduces your gross income to calculate your Adjusted
Gross Income (AGI).
Question 7
What is "Adjusted Gross Income (AGI)"?
A) Your total income before any deductions.
B) Your income after all taxes have been paid.
C) Your gross income minus certain deductions (above-the-line
deductions).
D) Your taxable income after all credits.
E) The amount of tax you owe.
Correct Answer: C) Your gross income minus certain deductions
(above-the-line deductions).
Rationale: Adjusted Gross Income (AGI) is your gross income after
certain allowable deductions (often called "above-the-line"
deductions) have been subtracted.
Question 8
Which of the following is NOT an allowable filing status for federal
income tax?
A) Single
B) Married Filing Jointly
C) Divorced
, D) Head of Household
E) Qualifying Widow(er) with Dependent Child
Correct Answer: C) Divorced
Rationale: "Divorced" is not a recognized filing status. A divorced
individual would typically file as Single or, if they meet certain
criteria, Head of Household.
Question 9
What is a "tax credit"?
A) An amount that reduces your taxable income.
B) An amount that directly reduces the amount of tax you owe.
C) A penalty for underpayment of taxes.
D) An extension for filing your tax return.
E) A refund you always receive.
Correct Answer: B) An amount that directly reduces the amount of
tax you owe.
Rationale: A tax credit is a dollar-for-dollar reduction in the amount
of tax you owe, making it more valuable than a deduction.
Question 10
Which of the following describes a "refundable" tax credit?
A) It can only reduce your tax liability to zero.
B) If the credit amount is more than the tax you owe, you can
receive the difference as a refund.
C) It is only available to high-income earners.
D) It must be repaid to the government.
E) It only applies to state taxes.
Correct Answer: B) If the credit amount is more than the tax you
owe, you can receive the difference as a refund.
Rationale: A refundable tax credit can reduce your tax liability
below zero, resulting in a refund even if you owe no tax.
