Taxation for Individuals Flashcards
7 cards from real IRS practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Taxation for Individuals flashcards as text
A taxpayer receives employer-provided health insurance worth $8,000. How is this treated for federal income tax purposes?
Answer: Excluded from gross income under Section 106
Employer-paid health insurance premiums are excluded from an employee's gross income under IRC Section 106.
What is the 'additional standard deduction' available to taxpayers age 65 or older?
Answer: An extra deduction added to the regular standard deduction based on age and filing status
Taxpayers who are age 65 or older (and/or blind) receive an additional standard deduction amount that is added to the basic standard deduction.
A taxpayer who is single and age 28 withdraws $15,000 from their traditional IRA for non-qualifying reasons. What tax consequences apply?
Answer: Income tax plus a 10% early withdrawal penalty on the $15,000
Early distributions from a traditional IRA before age 59½ are subject to ordinary income tax plus a 10% additional tax unless an exception applies.
Which of the following Social Security benefits scenarios results in NO federal taxation of benefits?
Answer: Combined income of $22,000 for a married filing jointly couple
For MFJ filers, Social Security benefits are not taxable if combined income (AGI + nontaxable interest + half of SS benefits) is below $32,000.
A taxpayer pays $12,000 in mortgage interest and $4,000 in real property taxes. They are single with no other itemized deductions. Should they itemize?
Answer: Yes — $16,000 of itemized deductions exceeds the 2023 single standard deduction of $13,850
Total itemized deductions of $16,000 ($12,000 mortgage interest + $4,000 taxes) exceed the 2023 single standard deduction of $13,850, so itemizing is beneficial.
What is the American Opportunity Tax Credit (AOTC) and who qualifies?
Answer: A credit up to $2,500 per eligible student for the first four years of post-secondary education
The AOTC provides up to $2,500 per eligible student for qualified education expenses during the first four years of higher education, with 40% refundable.
A taxpayer receives a Form 1099-C for $18,000 of cancelled credit card debt. Under which circumstance would this amount be excluded from income?
Answer: The taxpayer was insolvent immediately before the cancellation
Cancelled debt can be excluded from gross income to the extent the taxpayer was insolvent (liabilities exceeded assets) immediately before the cancellation.