Tax 1-1 Describe terms related to income taxation. Flashcards
Tax 1-1 Terms related to income tax
_____, as reported on the front of the Form 1040, is essentially gross income reduced by certain items such as net capital losses up to $3,000, losses from a sole proprietorship, and allowable rental losses.
a. personal interest
b. adjustments to income
c. exclusions
d. Keogh retirement plan
e. filing status
f. total income
g. investment interest expense
h. itemized deductions
i. adjusted gross income
total income
Tax 1-1 Terms related to income tax
______ income is all income from whatever source derived, unless specifically excluded. Some examples are income include wages, sales commissions, gains from the sale of property, and gross profits from business activities
Gross or Total
(LO 1-1)
Gross
Tax 1-1 Terms related to income tax
_____ are those deductions that reduce gross (total) income to arrive at adjusted gross income. Such deductions include deductions for IRA contributions, deductions for a portion of the self-employment tax, penalty on early withdrawal of savings, and deductions for qualifying alimony paid.
a. personal interest
b. adjustments to income
c. exclusions
d. Keogh retirement plan
e. filing status
f. total income
g. investment interest expense
h. itemized deductions
i. adjusted gross income
adjustments to income
Tax 1-1 Terms related to income tax
_____ refers to a deduction that a taxpayer can claim for himself or herself, the taxpayer’s spouse, and any dependent children. The amount is $4,050 for 2016.
a. personal interest
b. adjustments to income
c. exclusions
d. Keogh retirement plan
e. filing status
f. total income
g. investment interest expense
h. itemized deductions
i. adjusted gross income
personal exemption
Tax 1-1 Terms related to income tax
- Which one of the following is the best description of an exclusion?
a. An exclusion is an item that is not taxable, and is not included on the Form 1040.
b. An exclusion is an item that is taxable, but is deducted on the front of the Form 1040.
c. An exclusion is an item that is taxable, but is deducted on the back of the Form 1040.
(LO 1-1)
a. An exclusion is an item that is not taxable, and is not included on the Form 1040.
An exclusion is an item, such as a qualified Roth distribution, that is not subject to regular income tax, and is not part of income on the Form 1040.
Life insurance proceeds received by reason of death of the insured, a gift or most inheritances received, interest received from municipal bonds, child support received, workers’ compensation insurance proceeds and many employee fringe benefits are common examples of items that are excluded from income.
Tax 1-1 Terms related to income tax
_____ _____ miscellaneous deductions are the deductions that are deductible only to the extent they cumulatively exceed 2% of adjusted gross income. They include union dues, tax return preparation fees, un-reimbursed employee business expenses
a. personal interest
b. adjustments to income
c. exclusions
d. Keogh retirement plan
e. filing status
f. total income
g. investment interest expense
h. itemized deductions
i. adjusted gross income
j. Tier II miscellaneous deductions
k. Miscellaneous itemized deductions
(LO 1-1)
Tier II miscellaneous deductions
Tax 1-1 Terms related to income tax
_____ refer to items that create an economic benefit received by the taxpayer that are not included as income. As such, they are not taxable. They may result from the fact that (1) under the Constitution, an item is not taxable by the federal government, (2) an item does not fall within the definition of income, or (3) an item is expressly excluded by statute. Some common examples are life insurance proceeds received by reason of death of the insured, a gift or inheritance received, interest received from municipal bonds, and many employee fringe benefits.
a. personal interest
b. adjustments to income
c. exclusions
d. Keogh retirement plan
e. filing status
f. total income
g. investment interest expense
h. itemized deductions
i. adjusted gross income
exclusions
Tax 1-1 Terms related to income tax
_____ refers to the rate of tax on a taxpayer’s last dollar of income.
(LO 1-1)
Marginal income tax bracket
Tax 1-1 Terms related to income tax
_____ status is the basis for determining the tax rate structure and the ultimate tax liability of the taxpayer.
a. personal interest
b. adjustments to income
c. Itemized
d. Keogh retirement plan
e. filing status
f. total income
g. Filing
h. itemized deductions
i. adjusted gross income
(LO 1-1)
Filing
Tax 1-1 Terms related to income tax
A _____ is a retirement plan available to self-employed individuals that enables them to take a deduction on the contributions to the plan. Income earned on contributions to the plan is not taxed until withdrawn.
a. personal interest
b. adjustments to income
c. exclusions
d. Keogh retirement plan
e. filing status
f. total income
g. investment interest expense
h. itemized deductions
i. adjusted gross income
Keogh retirement plan
Tax 1-1 Terms related to income tax
_____ are allowable deductions other than the deductions that are allowable in arriving at adjusted gross income or the deductions for personal exemptions. Examples include deductions for property taxes and mortgage interest on a residence. These often are referred to as “below-the-line deductions” or “deductions from AGI.”
a. personal interest
b. adjustments to income
c. exclusions
d. Keogh retirement plan
e. filing status
f. total income
g. investment interest expense
h. itemized deductions
i. adjusted gross income
itemized deductions
Tax 1-1 Terms related to income tax
A _____ is a retirement plan available to self employed individuals that enables them to take a deduction on the contributions to the plan. Income earned on contributions to the plan is not taxed until withdrawn.
a. personal interest
b. adjustments to income
c. exclusions
d. Keogh retirement plan
e. filing status
f. total income
g. investment interest expense
h. itemized deductions
i. adjusted gross income
j. Tier II miscellaneous deductions
k. Miscellaneous itemized deductions
(LO 1-1)
Keogh retirement plan
Tax 1-1 Terms related to income tax
______ is interest paid or accrued on indebtedness incurred to purchase or carry property held for investment. This interest is deductible up to certain limits for all taxpayers.
a. personal interest
b. adjustments to income
c. exclusions
d. Keogh retirement plan
e. filing status
f. total income
g. investment interest expense
h. itemized deductions
i. adjusted gross income
investment interest expense
Tax 1-1 Terms related to income tax
_____ is adjusted gross income reduced by the greater of the standard deduction or itemized deductions and further reduced by personal exemptions.
(LO 1-1)
Taxable income
A taxpayer’s federal income tax is calculated by applying the proper tax rate schedule or tax table to the taxable income
Tax 1-1 Terms related to income tax
_____ _____ income is the figure arrived at after certain deductions are taken from gross income. Some of these deductions are deductions for expenses incurred in carrying on a trade or business (e.g., Schedule C expenses), deductions for contributions to self-employed retirement plans, deductions for alimony paid, and the deduction for a loss from a sale or exchange of property. Items deducted on the front of Form 1040 are commonly referred to as “above-the-line deductions”
a. personal interest
b. adjustments to income
c. Itemized
d. Keogh retirement plan
e. filing status
f. total income
g. Filing
h. itemized deductions
i. adjusted gross income
(LO 1-1)
Adjusted gross
