Name: Activity Worksheet #4 (Chapter 4) TRUE/FALSE Personal income taxes are paid only on your taxable income. 1. The key to reducing one's tax liability is to reduce taxable income rather than gross 2. income. MULTIPLE CHOICE 3. Which of the following would be considered smart financial planning? a. Turn all your income tax planning over to someone else b. Withhold too much income in order to receive a refund next year. c. Ignore the impact of income taxes in your personal financial planning d. Contribute to your employer-sponsored 401(k) retirement plan at least up to the amount of the employer's matching contribution taxes are based on one's ability to pay a. Progressive b. Regressive c. Marginal d. All of these 5. Dave Scott's total income is $42,000, but his taxable income is only $34,050. Therefore, his tax percent liability (what he owes in taxes) is 4,694. Dave's average tax rate is approximately С. 15 а. 11 b. 14 d. 25 6. Jeff is trying to decide whether to sell his baseball card collection. He has been offered $2,800 by a dealer who has agreed to pay Jeff this price now or in January of next year. This year Jeff is in the 28 percent marginal tax bracket, but next year Jeff expects to be in the 15 percent marginal tax bracket. Therefore, the estimated income tax liability on this $2,800 income would be year and this next year a. $784; $420 b. $520; $520 d. $700; $375 c. $425; $700 7. Judy Hays wants to give $3,000 to the building fund at her local church. Assuming Judy can itemize her deductions, how much will this contribution save her on her federal income taxes if she is in the 28 percent marginal tax bracket? b. $896 c. $840 d. $0 a. $3,200 8. Sally is a single young professional with a gross income of $51,000. Sally has no adjustments to gross income, but she does have itemized deductions totaling $4,275. If personal exemptions for the year are $3,700 each and the standard deduction is $5,800, what is Sally's taxable inocome? a. $37,225 b. $43,225 c. $41,500 d. $47,300 9. Which of the following types of subtractions cannot be taken by a taxpayer if he or she itemizes deductions? a. Adjustments to income b. Exemptions c. Tax credits d. Standard deduction 10. Which of the following persons is (are) practicing tax avoidance? a. Waiter who does not report all his tips b. Plumber who does not report a barter transaction C. Employee who deducts qualifying job-related expenses d. All of these.