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Question 1 of 10
1. Question
What does DIF stand for?
Correct
The Discriminate Functions System (DIF) screens all of the returns and assigns them a score assessing their audit-worthiness.
Incorrect
The Discriminate Functions System (DIF) screens all of the returns and assigns them a score assessing their audit-worthiness.
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Question 2 of 10
2. Question
What is the punishable fine for criminal fraud for a corporation?
Correct
Criminal fraud is also known as tax evasion, and it is a felony punishable by fines of up to $250,000 for an individual and $500,000 for a corporation.
Incorrect
Criminal fraud is also known as tax evasion, and it is a felony punishable by fines of up to $250,000 for an individual and $500,000 for a corporation.
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Question 3 of 10
3. Question
What is the penalty if the preparer of the income tax return understates the amount of tax intentionally?
Correct
If the preparer of an income tax return understates the amount of tax, then he or she may be hit with a $250 penalty; if the understatement is intentional, the penalty is $1,000.
Incorrect
If the preparer of an income tax return understates the amount of tax, then he or she may be hit with a $250 penalty; if the understatement is intentional, the penalty is $1,000.
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Question 4 of 10
4. Question
What are the basic requirements for the sole proprietorship?
Correct
There are no special forms required to start a sole proprietorship. The owner of one will simply file a Schedule C in addition to his or her personal tax forms.
Incorrect
There are no special forms required to start a sole proprietorship. The owner of one will simply file a Schedule C in addition to his or her personal tax forms.
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Question 5 of 10
5. Question
What gives limited liability protection to all of its members but will still be treated as a partnership for income tax purposes?
Correct
A limited liability company (LLC) gives limited liability protection to all of its members but will still be treated as a partnership for income tax purposes. Unlike a limited liability partnership, the partners in a limited liability company are not responsible for the misdeeds of their subordinates.
Incorrect
A limited liability company (LLC) gives limited liability protection to all of its members but will still be treated as a partnership for income tax purposes. Unlike a limited liability partnership, the partners in a limited liability company are not responsible for the misdeeds of their subordinates.
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Question 6 of 10
6. Question
Identify the artificial entities that are created for tax purposes.
Correct
C corporations are artificial entities that are created when articles of incorporation are filed and a state issues a certificate of incorporation.
Incorrect
C corporations are artificial entities that are created when articles of incorporation are filed and a state issues a certificate of incorporation.
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Question 7 of 10
7. Question
A group of people that are joined together for a particular purpose are called:
Correct
An association is a group of people that are joined together for a particular purpose.
Incorrect
An association is a group of people that are joined together for a particular purpose.
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Question 8 of 10
8. Question
When can a taxpayer file taxes as a head of household?
I. If he was married at the end of the year.
II. If he paid more than half of the cost of the house.
III. If he is a US citizen.
IV. If he is the resident for an entire year.Correct
A taxpayer can file as a head of household if he or she was not married at the end of the year, paid more than half of the cost of the house, was a US citizen or resident for the entire year, if the home was the main home for one or more family members.
Incorrect
A taxpayer can file as a head of household if he or she was not married at the end of the year, paid more than half of the cost of the house, was a US citizen or resident for the entire year, if the home was the main home for one or more family members.
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Question 9 of 10
9. Question
Identify the features of the kiddie tax:
I. It applies to children under the age of 19.
II. It applies to working adults under the age of 24.
III. Earned income from jobs is exempted from the kiddie tax.
IV. It only affects unearned income above the annual threshold.Correct
The kiddie tax is a series of tax rules aimed to keep parents from taking advantage of their children’s lower tax rates. Basically, if your child has substantial investment income, it will be taxed at the parent’s rate — not the child’s.
Incorrect
The kiddie tax is a series of tax rules aimed to keep parents from taking advantage of their children’s lower tax rates. Basically, if your child has substantial investment income, it will be taxed at the parent’s rate — not the child’s.
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Question 10 of 10
10. Question
Identify the features of the property that is capable of depreciating;
I. Property that is used in a trade or business.
II. Property that loses its value over time.
III. Property that is incurring loss.
IV. Property that has a lifespan of usefulness that is greater than one year.Correct
Property that is capable of depreciating includes property that is used in a trade or business; that is held to produce income; that loses its value over time; and that has a lifespan of usefulness that is greater than one year.
Incorrect
Property that is capable of depreciating includes property that is used in a trade or business; that is held to produce income; that loses its value over time; and that has a lifespan of usefulness that is greater than one year.