Quiz: How much do you understand about filing taxes?

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Quiz: How much do you understand about filing taxes?

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Taxes » Tax Filing » Tax quiz to prep you for tax-filing season

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1. Citizens who purchased their particular health care coverage under the Affordable Care Act conditions could qualify for a tax credit. It is known as:

Solution: C or D.

Millions of those who purchased insurance by means of a health market got some authorities help to cover the medical coverage. It is also called a market subsidy while it is formally called the premium tax credit. When you file to make sure that you got the appropriate sum, in the event you got the credit/subsidy ahead of time, youare going to need to complete some forms. In the event that you got more credit than you should, you will either need to pay it back at tax-filing time or it’ll be deducted from your refund.

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2. In the event you are divorced and have custody of your children, you need to file as:

Reply: B.

Do not file as single if you have got primary custody of your children in the event you are divorced. When you supply more than half the price of keeping up a house for yourself as well as your dependent children, as well as the kids lived with you during the tax year for more than 6 months, you are a head of household. The tax rates for this particular filing status usually are more encouraging than for single or married-filing- citizens. Read more about how each of the five filing statuses may make a difference in your tax bill.

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3. For those who have income that’s not subject to withholding tax, such as investment or self-employment earnings, you should pay estimated taxes. Each year, how many estimated tax payments does the IRS expect from you?

Reply: C.

The U.S. tax system is pay as you earn. That is carried through in huge part via payroll withholding. However, when you’ve got gains from which no FICA or income taxes are paid, the Internal Revenue Service favors estimated tax payments are sent four times annually by you. Bankrate has the skinny on paying estimated taxes.

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4. You itemize your deductions or have two tax deduction options: Claim the normal sum. You should:

Reply: B.

Itemizing deductions needs tax forms and extra work. But most citizens each year claim the standard deduction. This sum, which relies in your filing status, is adjusted yearly for inflation. The great news is the fact that every tax-filing season, you can select which tax write-off system, itemized or regular, functions best for your circumstance.

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5. As newlyweds you should when you get married:

Reply: D.

If both husband and wife work, withholding sums should be reassessed by each. It is usually better for the higher-earning partner to claim all the couple’s allowances on her or his W4, with the lower wage earner. Additionally, examine your individual retirement accounts. You might run into the income limitation on giving or starting to tax free Roth accounts or deducting conventional IRA contributions. Additionally, marriage is a life event which allows you to make midyear adjustments to flexible spending account payroll contributions. Have a look at other important life events that additionally have tax ramifications.

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6. It’s possible for you to take cash from a traditional IRA before you turn 59 1/2 and not confront any if fees tax or:

Reply: A.

It’s possible for you to take cash out of your traditional IRA tax free and fee-free so long as you repay the entire sum within 60 days, but you may do this just once in a 12-month interval. In the event you lose the repayment, you will owe a 10 percent fee, but in addition not only taxes. In the event the cash is utilized to get a first house, pay school costs or cover medical expenses that are excessive, you will owe the tax, but no fee. As well as the gift to charity isn’t allowed except for 70 1/2 or old. ages Find out more about IRA provisions and fee-free 401(k) and IRA withdrawals.

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7. The very best ordinary income tax class for the 2016 and 2017 tax years is:

Reply: C.

When Congress ultimately passed the American Taxpayer Relief Act in January 2013, it enlarged the common income tax rates and income brackets. There are seven tax rates, beginning at 10 percent and topping out at 39.6 percent. Some higher income earners also could confront a few extra taxes, including an added 0.9 percent Medicare payroll tax and a 3.8 percent tax on investment income.

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8. Annually, taxes appear to get more complex. That is why over fifty percent of us each year pay someone to file our returns. When choosing the tax professional, you should:

Solution: D.

A report by the Treasury Inspector General for Tax Administration found that in 2013, almost 60 percent of individual citizens paid someone to prepare their income tax returns. With each new addition to the tax code, the demand for professional help increases. So it is critical that you just make the correct selection as it pertains to tax help that is hiring. Prior to making any tax preparer selection, have a look at the numerous kinds of tax preparers.

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9. To err is human. But to err at tax time may be rather expensive. The most frequently encountered tax blunder year in and year out is:

Reply: C .

All the error alternatives make the list of 10 common tax-filing errors that the IRS per annum catches on returns. But mathematics that is poor is nearly annually, the one which leads the blunder list. This consists of transposing amounts, along with easy arithmetic errors. Double check your 1040 from which you got the info, and other forms against the tax records.

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10. Tax time is tax-scam time. Lately, one scam has made important inroads into many citizens’ lives. It’s:

Reply: B.

In April 2016, the IRS warned that offenders impersonating IRS representatives continue their constant effort of aggressive and menacing phone calls. IRS Commissioner John Koskinen said, “Do Not be misled by callers pretending to be from the IRS in an effort to steal your cash.” Be on the lookout this filing season for this particular scam in addition to other tax scams.

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