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University of Phoenix College Material Appendix P Appendix P – Assignment Instructions: • Use your text as a reference to complete this assignment. • Please do not delete any assignment text. • Complete Section A using the directions below • Complete Section B – highlight in yellow the correct answer for each multiple choice question. • Complete Section C – Fill in short answers for each question. • Save completed assignment as a word document and submit to the assignments section of the courseroom. Section A: Essay In at least 50 words, describe the meaning of taxable income and taxes owed. (10 points) Taxable income is your gross income before you take out any deductions or exemptions. Taxable income is your wages and salary and any other things such as lottery winnings or bonuses. To find out how much tax you owe you need to have all of your information as far as your income and deductions and exemptions and your filing statues to file your taxes and this gives you your taxes owed. Section B: Multiple choice (10 questions at 2 points each) 1. A progressive tax is a. A tax that places a disproportionate burden on taxpayers with lower incomes b. A tax that imposes higher tax rates on taxpayers with higher incomes c. A flat tax d. A tax that increases as taxpayers get older 2. A regressive tax is a. A tax that places a disproportionate burden on taxpayers with lower incomes b. A tax that imposes higher tax rates on taxpayers with higher incomes c. A flat tax d. A tax that increases as taxpayers get older 3. FICA tax is an example of a. A regressive tax b. A progressive tax c. A flat tax d. Both a and c 4. The marginal tax effect is a. A reduction in taxes paid as a result of a financial decision b. A reduction in taxes owed as a result of a financial decision c. An increase in taxes paid as a result of a financial decision d. An increase in taxes owed as a result of a financial decision 5. The following are examples of income that are not included in gross taxable income: a. Hobby income b. Wages, salaries, tips, bonuses c. Gambling winnings and prizes d. Jury awards 6. The following are examples of income that are included in gross taxable income: a. Military cost-of-living allowances b. Dividends c. Inheritance d. Welfare 7. An example of a tax status is: a. Married filing separately b. Qualified widower c. Head of household d. Single e. All of the above 8. Choose the item that is not a deduction you can claim on your taxes: a. State and local income taxes b. Gifts to charity c. Medical expenses that equal below 7.5 percent of your AGI d. All of the above 9. An exemption is a member of a household who receives at least half of his or her support from the head of the household. a. True b. False 10. The alternative minimum tax: a. Includes triggers that includes large itemized deductions b. Ensures that higher income people cannot take advantage of too many special tax rules to avoid paying their fair share of taxes c. Has affected many middle-income taxpayers d. All of the above Section C: Short Answer (10 questions at 2 points each) 11. Give four ways to save money on taxes. 1. Medical and dental expenses______________ 2. Gifts to charity______________ 3. Interest you paid______________ 4. Taxes you paid______________ 12. List four triggers that trigger alternative minimum tax liability: 1. A large number of exemptions claimed_____________________ 2. Exercise of incentive stock options_____________________ 3. Long term capital gain_____________________ 4. Large itemized deductions_____________________ 13. Gross income__________________ is income from all sources. 14. Gross taxable income__________________ is income from all sources less allowed exclusions. 15. Adjusted gross income__________________ is calculated by subtracting certain expenses from total income. 16. Give four examples of common filing errors. a. Math errors___________________ b. Incorrect social security numbers___________________ c. Incorrect tax entered___________________ d. Computation errors___________________ 17. Tax evasion_______________ is the deliberate failure to pay taxes that are legally owed. 18. Marginal tax effect____________ is when a person makes financial decisions that reduce taxes owed. 19. Deferring taxable income is when you pay taxes at a later date.______________________________. 20. List four examples of tax forms: a. 1040_________________ b. 1040ez_________________ c. _1040a________________ d. 4868_________________