Topic 1 - Introduction to Taxation
There was a time when there was no income tax. The taxing process graduated slowly to what it is now. At one point there was a question of the constitutionality of taxation. How else can a nation survive and prosper? This topic is your introduction to taxation. In it you will find very basic tax principles that are the forerunner to what taxation is nowadays.
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Student Instructions:
Read the reading material and answer the questions on this page.
Submit the answers to the Assignment online.
Complete a short quiz on the reading material: Short Quiz online. You have 40 minutes to complete this quiz. You must study the reading material. You won't have time to look up questions in the reading material. If you don't pass, you can retry - Every time you try the questions will be different.
Most forms are in Adobe Acrobat PDF format. You will need Adobe Reader to view and print these forms. If you do not already have Adobe Reader installed on your computer, you may download the software for free.
You will need IRS 1040EZ Instructions, and History of U.S. Taxes to complete this topic.
1. A qualifying taxpayer who bought a home in 2009 can claim a credit of up to _____ on either their 2008 or 2009 return.
A. $8,000. B. $2,500. C. $1,000. D. $500.
2. If you have earned income from work, you may be able to take the Making Work Pay Credit. This credit
A. Can be more than $400 if you are single. B. Can be more than $800 if you are married. C. Is 6.2% of your earned income, but cannot be more than $400 if you are single. D. Is 6.2% of your earned income that is less than $100,000.
3. Your filing status is single is on December 31, 2009
A. You never were married. B. You were legally separated, according to your state law, under a decree of divorce or separate maintenance. C. You were widowed before January 1, 2009, and did not remarry in 2009. D. Any of the above
4. Once you file a joint return, you cannot choose to file separate returns for that year after the due date of the return.
True False
5. If your spouse is an nonresident alien, he or she
A. Cannot file a U.S. tax return. B. Must have either a SSN or an ITIN. C. Must become a resident alien before she or he can file a return. D. Be living with you in the United States and file with you jointly.
6. An ITIN entitles you to social security benefits and allows your to work legally under U.S. law.
7. Your employer must provide or send Form W-2 to you no later than February 1, 2010. If you do not get a Form W-2, you
A. File your tax return without it. B. Call the IRS and ask them for a copy for a $57 fee. C. Still have to report your earnings of your tax return. D. Ask your employer for one and if he refuses, file a complaint with the IRS.
8. When you receive interest income as a nominee, it means that
A. You are responsible to report this income in your tax return. B. The IRS has name you the owner of such income. C. The income is in your name, but it actually belongs to someone else. D. You can choose whomever you want as the owner of this income.
9. For 2009, report on your tax return unemployment compensation that you receive that is
A. Less than $2,400. B. More than $2,400. C. Up to $2,400. D. Due to contributions to a government unemployment compensation program.
10. You and your spouse (both over age 65) are filing a joint return for 2009, and you both receive social security benefits during the year. In January 2010, you received a Form SSA-1099 showing net benefits of $9,700 in box 5 for 2009 tax year. Your spouse received a Form SSA-1099 showing net benefits of $1,400 in box 5. You also received unemployment compensation of 1,800 and taxable interest income of $450. You did not have any tax-exempt interest income. How much of your social security benefits are taxable for tax year 2009?
A. $0. B. $11,100. C. $9,700. D. $1,400.
11. If you take the EIC even though you are not eligible and it is determined that your error is due to reckless or intentional disregard of the EIC rules, you will
A. Be allowed to claim the credit as long as you are eligible this year. B. Not be allowed to take the credit for 10 year even if you are otherwise eligible this year. C. Not be allowed to take the credit for 2 years even if you are otherwise eligible to do so. D. Be eligible to claim the credit as long as you file Form 8862.
12. You must file Form 8862 if your EIC for a year after 1996 was reduced or disallowed for any reason other than a math or clerical error. Do not file Form 8862
A. For 2 years after the most recent tax year for which there was a final determination that your EIC claim was due to reckless or intentional disregard of the EIC rules. B. If the only reason your EIC was reduced or disallowed in the earlier year was because it was determined that a child listed on Schedule EIC was not your qualifying child. C. For 10 year after the most recent tax year for which there was a final determination that your EIC clam was due to fraud. D. Any of the above.
13. In 2009, you were 24, single, and living at home with your parents. You worked and were not a student. You earned $7,500. Your parents cannot claim you as a dependent. When you file your return, you
A. Can claim the Earned Income Credit because although you are not 25 yet, no one can claim you as a dependent. B. Can claim the Earned Income Credit because you earned less than $12,880 and it does not matter that you are not at least age 25. C. Live with your parents so you don't qualify for the Earned Income Credit because your parents will already have claimed a credit. D. Cannot claim the Earned Income Credit because you are not at least age 25.
From the link on History of U.S. Taxes. Answer the following as accurate as possible.
14. In 1862, Congress enacted the nation's first income tax law
A. In order for the government to give bonuses to its employees. B. In order for the government to have more spending money for leisure activities. C. In order to support the campaigns of political parties. D. In order to support the Civil War effort.
15. The Act of 1862 established the office of Commissioner of Internal Revenue. The Commissioner was given the power to
A. Assess taxes. B. To enforce the tax laws through seizure of property and income and through prosecution. C. Levy and collect taxes. D. All of the above.
16. The powers and authority of the office of Commissioner of Internal Revenue remain very much the same today.
17. In 1913, the 16th Amendment to the Constitution made the income tax a permanent fixture in the U.S. tax system. The amendment gave Congress legal authority to tax income and resulted in a revenue law that taxed incomes of both individuals and corporations.
18. On October 22, 1986, President Reagan signed into law the Tax Reform Act of 1986. The act called for an increase in individual taxation over a five-year period.
19. The Revenue Reconciliation Act of 1990 was signed into law on November 5, 1990. The emphasis of the 1990 act was increased taxes on the wealthy.
20. On August 10, 1993, President Clinton signed the Revenue Reconciliation Act of 1993 into law. The act's main purpose was to
A. Decrease taxation on corporations. B. Increase taxation of small business. C. Reduce taxes of individuals. D. Reduce the federal deficit.
21. In 1997, President Clinton signed a tax revenue act which
A. Cut taxes by $152 billion. B. Included a cut in capital-gains tax for individuals. C. Included a $500 per child tax credit and tax incentives for education. D. All of the above.
22. On October 22, 1986, President Reagan signed into law the Tax Reform Act of 1986. The top rate on individual income was
A. Increased from 28% to 50%. B. Increased from 3% to 15%. C. Lowered from 50% to 28%. D. To reduce the federal deficit.
23. In 1868, Congress focused its taxation efforts on tobacco and distilled spirits and
A. Eliminated the income tax in 1872. B. Increased taxation of small business. C. Increased the tax rate to 3%. D. Property sold at auction, corporate bonds, and slaves.
24. In 1895, the U.S. Supreme Court decided that the income tax was unconstitutional because if was not apportioned among the states in conformity with the Constitution.
25. From 1791 to 1802, the United States government was supported by internal taxes on distilled spirits, carriages, refined sugar, tobacco and snuff, property sold at auction, corporate bonds, and slaves.
26. The nation's first sales taxes were on gold, silverware, jewelry and watches due to
A. The War of 1817. B. The high cost of the War of 1812. C. Tariffs on imported goods. D. Sufficient funds to run the government.
27. In 1862, in order to support the Civil War effort, Congress enacted the nation's first income tax law and it was a forerunner of our modern income tax.
28. During the Civil War, a person earning from $600 to $10,000 per year paid tax at the rate of
A. 50%. B. 15%. C. 3%. D. 28%.
29. In 2004, the U.S. was forced to eliminate a corporate tax provision that had been ruled illegal by
A. The Internal Revenue Service. B. The World Trade Organization. C. The Constitution. D. The Supreme Court.
30. Two tax bills signed in 2005 and 2006 extended through 2010 the favorable rates on capital gains and dividends that had been enacted in 2003, raised the exemption levels for the Alternative Minimum Tax, and enacted new tax incentives designed to
A. Persuade individuals to save more for retirement. B. Pursue their college education. C. Invest in stocks and bonds. D. Extend to individuals a comucopia of tax breaks.
Use IRS 1040ez inst. for the following.
31. Any refund you receive as a result of taking the EIC will not be used to determine if you are eligible for temporary assistance for needy families, medicaid and SSI, or supplemental Nutrition Assistance Program and low income housing. The the refund you receive because of EIC can count as an asset if
A. You receive more than the limits set by the organization. B. Payments from a welfare state fund are permanent. C. Not spent within a certain period of time. D. Any of the above.
32. You must use Form 1040A or 1040 if,
A. You receive interest as a nominee. B. You receive a 2009 Form 1099-INT for U.S. savings bond interest that includes amounts you reported before 2009. C. You owned or had authority over one or more foreign financial accounts with a combined value over $10,000 at any time during 2009. D. Any of the above.
33. Wages received as a household employee for which you did not receive a Form W-2 because your employer paid you less than $1,700 in 2009 does not need to be included in line 1 as taxable income.
34. If your received a state refund of your taxes in 2009, and for the year the tax was paid to the state, you did not file Form 1040EZ or 1040A, then
A. None of your refund is taxable. B. You may have to report part of the refund as income on Form 1040 for 2009. C. You may have to report all of the refund as income on Form 1040 for 2009. D. You may have to report part or all of the refund as income on Form 1040 for 2009.
35. If you are a child or other dependent, you must file a tax return if
A. Your unearned income was under $950. B. Your earned income was less than $5,700. C. Your gross income was more than the larger or $950 or your earned income plus $300. D. None of the above.
36. Use this filing status if you were married at the end of 2009, even if you did not live with your spouse at the end of 2009.
A. Single. B. Married Filing Jointly. C. Qualifying Widow (er). D. None of the above.
37. Use this filing status if your spouse died in 2009 and you did not remarry in 2009 or you were married at end of 2009 and your spouse died in 2010 before filing a 2009 return.
A. Single. B. Qualifying Widow(er). C. Married Filing Jointly. D. Head of Household.
38. A student is a child who during any part of 5 calendar months in 2009 was enrolled as a full-time student at a school that offers an on the job training course, correspondence school or a school offering courses through the Internet.
39. It is better to use Direct Deposit because your get your refund faster by direct deposit that you do by check and
A. Payment is more secure and there is no check to get lost. B. It is more convenient and you do not have to make a trip to the bank to deposit your check. C. It saves tax dollars because it costs the government less to refund by direct deposit. D. All of the above.
40. You may have to pay a penalty if the amount owed is at least $1,000 and it is more than 10% of the tax shown on your return. However, you will not owe the penalty if your 2008 tax return was for a tax year of 12 full months and
A. You had no tax shown on your 2008 return and you were a U.S. citizen or resident for all of 2008. B. Line 7 on your 2009 return is at least as much as the tax shown on your 2008 return. C. Either A or B above. D. None of the above.
