Income Tax Knowledge Test

Question 1

The definition of Adjusted Gross Income

Accepted Answer

Taxable income prior to deductions

Answer

Your income after taxes

Answer

Taxable income following deductions

Question 2

A progressive income tax scheme is what?

Accepted Answer

A tax structure that taxes higher incomes more heavily and poorer incomes less heavily

Answer

A progressive tax scheme that improves over time

Answer

A tax structure that permits investment-related deductions

Question 3

Which of the following is not a qualifying itemized deduction for tax purposes?

Accepted Answer

Utilities like gas and water are expensive.

Answer

Loss from theft

Answer

Losses from gambling

Question 4

Which of the following is not an appropriate justification for filing a tax amendment?

Accepted Answer

You erred mathematically.

Answer

You entered the incorrect filing status.

Answer

One of your dependents was overlooked.

Question 5

Which of the following could make you more likely to be audited?

Accepted Answer

An error in mathematics on your tax return

Answer

Delivering receipts and explanations before the IRS requests them

Answer

A tax return that is neatly and properly filled out

Question 6

The profit is subject to the following conditions if you sell your old Chevrolet for more than you paid:

Accepted Answer

Capital gain tax

Answer

Buyer's tax

Answer

Without taxes

Question 7

Which of the following is not a method for reducing the amount of capital gains taxes you must pay?

Accepted Answer

Using short-term investments rather than long-term ones

Answer

Using long-term investments rather than short-term ones

Answer

Subtracting investment losses from capital gains