US Tax Accounting Flashcards
6 cards from real Accounting Online Program practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 US Tax Accounting flashcards as text
Which IRS form do sole proprietors use to report business income and expenses?
Answer: Schedule C
Sole proprietors attach Schedule C (Profit or Loss from Business) to their Form 1040 to report business revenues and deductible expenses.
The IRS Section 179 deduction allows businesses to:
Answer: Immediately expense the full cost of qualifying assets in the year of purchase
Section 179 allows businesses to deduct the full purchase price of qualifying equipment and property in the year it is placed in service, subject to annual limits.
What is the difference between a tax avoidance and tax evasion?
Answer: Avoidance is legal tax minimization; evasion is illegal non-payment
Tax avoidance involves legally reducing tax liability through deductions and credits, while tax evasion involves illegally concealing income or falsifying records.
Which of the following best describes a deferred tax liability?
Answer: A future tax obligation arising from temporary differences between book and tax income
A deferred tax liability arises when taxable income is less than book income in the current period due to timing differences, meaning more taxes will be owed in the future.
The IRS statute of limitations for assessing additional taxes on a standard return is generally:
Answer: 3 years
The IRS generally has 3 years from the filing date (or due date, whichever is later) to assess additional taxes on a return with no fraud or substantial understatement.
Qualified Business Income (QBI) deduction under the Tax Cuts and Jobs Act allows eligible pass-through owners to deduct up to:
Answer: 20% of qualified business income
The QBI deduction (IRC Section 199A) allows eligible self-employed and pass-through business owners to deduct up to 20% of qualified business income from their taxable income.