Sample Questions and Answers
Which of the following is generally NOT included in gross income?
A) Wages
B) Life insurance proceeds
C) Rental income
D) Dividends
Answer: B) Life insurance proceeds
What is the standard deduction for a single taxpayer in 2024?
A) $12,400
B) $13,850
C) $14,000
D) $25,000
Answer: B) $13,850
Which of the following is a requirement for a taxpayer to qualify for the earned income tax credit?
A) Must be 65 years of age or older
B) Must have investment income exceeding $3,650
C) Must file jointly with a spouse
D) Must have earned income
Answer: D) Must have earned income
The child tax credit is available to taxpayers with a child under which age?
A) 21
B) 17
C) 19
D) 18
Answer: B) 17
Which of the following deductions is available to an individual taxpayer?
A) State income tax deduction
B) Charitable contributions deduction
C) Personal living expenses deduction
D) Both A and B
Answer: D) Both A and B
What is the tax rate on long-term capital gains for taxpayers in the highest tax bracket?
A) 10%
B) 15%
C) 20%
D) 25%
Answer: C) 20%
Which of the following items is not deductible for a self-employed taxpayer?
A) Health insurance premiums
B) Business mileage
C) Personal mortgage interest
D) Retirement plan contributions
Answer: C) Personal mortgage interest
What is the maximum contribution to a Roth IRA for a single taxpayer under the age of 50 in 2024?
A) $5,500
B) $6,000
C) $7,000
D) $8,000
Answer: B) $6,000
Which of the following is taxable income for a corporation?
A) Tax-exempt interest from municipal bonds
B) Dividends received from other corporations
C) Contributions to capital
D) None of the above
Answer: B) Dividends received from other corporations
Which of the following is considered tax evasion?
A) Underreporting income on a tax return
B) Disputing a tax assessment
C) Claiming valid deductions
D) Asking for an extension to file taxes
Answer: A) Underreporting income on a tax return
For a C Corporation, what is the tax rate on the first $50,000 of taxable income?
A) 15%
B) 21%
C) 10%
D) 25%
Answer: A) 15%
Which of the following is a requirement for an employee to qualify for a tax-free fringe benefit?
A) Must work for the same employer for 5 years
B) Benefit must be provided to all employees
C) Must be paid in cash
D) None of the above
Answer: B) Benefit must be provided to all employees
What is the maximum contribution to a 401(k) plan for an employee under the age of 50 in 2024?
A) $18,000
B) $19,000
C) $22,500
D) $23,500
Answer: C) $22,500
What is the tax treatment of alimony payments under agreements made after December 31, 2018?
A) Deductible for the payer, taxable to the recipient
B) Non-deductible for the payer, non-taxable to the recipient
C) Non-deductible for the payer, taxable to the recipient
D) Deductible for the payer, non-taxable to the recipient
Answer: B) Non-deductible for the payer, non-taxable to the recipient
Which of the following is a tax-exempt organization?
A) A political action committee
B) A social club
C) A religious organization
D) A for-profit corporation
Answer: C) A religious organization
Which of the following is a capital asset?
A) Inventory held for sale
B) Personal residence
C) Accounts receivable
D) Depreciable property used in a business
Answer: B) Personal residence
What is the maximum contribution to an HSA (Health Savings Account) for a family in 2024?
A) $3,650
B) $7,300
C) $7,650
D) $8,000
Answer: B) $7,300
Which of the following is subject to the self-employment tax?
A) Salary received by an employee
B) Net earnings from a sole proprietorship
C) Rental income
D) Dividends
Answer: B) Net earnings from a sole proprietorship
Which of the following is NOT a characteristic of a qualified plan for retirement?
A) The plan must be non-discriminatory
B) Contributions are tax-deductible
C) Employees must contribute a percentage of their salary
D) Employees must reach age 59½ to withdraw funds
Answer: C) Employees must contribute a percentage of their salary
Which of the following is true about a traditional IRA?
A) Contributions are made with after-tax dollars
B) Distributions are tax-free
C) Contributions are tax-deductible
D) All distributions are taxed as capital gains
Answer: C) Contributions are tax-deductible
The tax rate on corporate dividends paid to individuals is generally:
A) 15%
B) 20%
C) 0%
D) 25%
Answer: B) 20%
What is the tax treatment of a non-qualified stock option?
A) Taxed at grant
B) Taxed at exercise
C) Taxed at sale
D) No tax treatment until sold
Answer: B) Taxed at exercise
Which of the following taxes is typically not paid by an employee?
A) Social Security tax
B) Medicare tax
C) Federal income tax
D) Corporate income tax
Answer: D) Corporate income tax
How is a partnership taxed?
A) The partnership pays taxes on its income
B) The individual partners pay taxes on the partnership’s income
C) The partnership is tax-exempt
D) The partners pay taxes on their share of the income
Answer: D) The partners pay taxes on their share of the income
Which of the following items is subject to the Alternative Minimum Tax (AMT)?
A) Long-term capital gains
B) State income taxes
C) Depreciation deductions
D) All of the above
Answer: C) Depreciation deductions
What is the primary function of the IRS in tax law enforcement?
A) To audit businesses and individuals
B) To prosecute criminal tax evasion cases
C) To issue regulations and guidance on tax laws
D) To provide tax refunds
Answer: C) To issue regulations and guidance on tax laws
A taxpayer who files as head of household qualifies for which of the following?
A) A higher standard deduction than single taxpayers
B) A lower standard deduction than single taxpayers
C) The same standard deduction as married taxpayers filing jointly
D) No standard deduction
Answer: A) A higher standard deduction than single taxpayers
Which of the following is considered a tax-free fringe benefit?
A) Personal use of a company car
B) Employer contributions to a 401(k) plan
C) Bonuses paid to employees
D) Employee meals provided on a regular basis
Answer: B) Employer contributions to a 401(k) plan
The income from the sale of a principal residence is excluded from taxable income up to a maximum of:
A) $100,000 for single filers
B) $200,000 for single filers
C) $250,000 for single filers, $500,000 for married filing jointly
D) $500,000 for single filers, $1,000,000 for married filing jointly
Answer: C) $250,000 for single filers, $500,000 for married filing jointly
What type of tax is the Federal Unemployment Tax Act (FUTA)?
A) Payroll tax
B) Income tax
C) Sales tax
D) Property tax
Answer: A) Payroll tax
Which of the following types of income is not subject to self-employment tax?
A) Rental income
B) Income from a sole proprietorship
C) Income from a partnership
D) S corporation income
Answer: A) Rental income
Which of the following is a tax-exempt entity under Section 501(c)(3)?
A) Political organizations
B) Charitable organizations
C) Trade associations
D) Labor unions
Answer: B) Charitable organizations
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