FICEP Final Exam Questions & Answers 2024/2025
Select the statement that correctly describes a progressive tax. - ANSWERSA progressive tax requires people to pay more as they earn more.
Pick the statement that best describes a regressive tax. - ANSWERSA regressive tax charges the same tax r...
FICEP Final Exam Questions & Answers 2024/2025
Select the statement that correctly describes a progressive tax. - ANSWERSA progressive tax requires people to pay more as they earn more.
Pick the statement that best describes a regressive tax. - ANSWERSA regressive tax charges the same tax rate regardless of the taxpayer's income.
Why are government fees and surcharges sometimes described as a form of tax? - ANSWERSBecause they generate income for the government.
Which taxing authorities are worthy of the member's attention? - ANSWERSThe member must attend to all tax authorities at all levels of government to maintain their financial well-being.
How do taxes impact your personal spending? - ANSWERSTaxes can make personal spending go up or down.
Which is larger: the penalty for failing to pay federal income taxes on time, or the penalty for failing to file a tax return when taxes are owed? - ANSWERSThe penalty for failing to file a tax return is significantly
higher.
What is the right attitude to take toward taxes to protect your financial well-being? - ANSWERSTaxes are an essential financial responsibility.
When is the IRS most likely to impose the maximum penalty on taxpayers? - ANSWERSWhen they are forced to track down the taxpayer.
What is a good rule to follow when dealing with a tax auditor or another issue involving the IRS? - ANSWERSNever assume the IRS is always correct. What is the financial counselor's role in aiding members with complex tax issues? - ANSWERSThe counselor provides basic information and refers members to tax programs or tax experts.
What happens when taxpayers who file a late return for any or all of the 4 most recent tax years are owed a refund? - ANSWERSNo penalty is charged and the taxpayer gets the full refund amount.
What tax services are provided by the Volunteer Income Tax Assistance (VITA) program? - ANSWERSFree tax return assistance to low- or moderate-income taxpayers.
What benefit is offered when VITA services are combined with credit union programs that encourage taxpayers to open accounts for direct deposit of tax refunds? - ANSWERSDirect deposit reduces the time required to get a refund, which counters the appeal of refund anticipation loans.
What is the name of the organization that offers free tax assistance to taxpayers age 60 or older, those with disabilities or special needs, or who qualify for earned income or homestead tax credits? - ANSWERSTax Counseling for the Elderly (TCE)
What percent of tax payers are eligible to use the "Free File Online" service offered as a partnership between the IRS and tax software companies? - ANSWERS70% are eligible
When members use tax refunds to pay down debts, which debts should be paid first? - ANSWERSAlways pay the debts with high interest rates or that could prompt garnishments.
How have education, information, and direct deposit programs impacted taxpayers' use of refund anticipation loans? - ANSWERSThe use of refund anticipation loans is decreasing.
What rule of thumb should be used when defining taxable income? - ANSWERSIf you benefit financially, you are likely to be taxed for it.
Which type of qualified IRA withdrawal is exempt from income tax? - ANSWERSRoth IRA withdrawals are exempt. How do different tax authorities treat items excluded from federal taxable income? - ANSWERSExclusions
vary from state to state.
What is the first step for effectively managing income taxes? - ANSWERSDetermining your filing status.
What should be the goal of managing a taxpayer's income tax withholding? - ANSWERSTo maintain cash flow while avoiding a tax bill at filing time.
What happens to year-end balances "left over" in Section 125 plans or health savings accounts (HSAs)? - ANSWERSSection 125 balances are forfeited, while HSA balances are rolled over
How much can a member in the 25% tax bracket save in federal income taxes by depositing pre-tax income into tax-deferred retirement accounts, such as traditional IRAs? - ANSWERSOne-fourth of the deposit.
Which statement accurately describes options for reducing income taxes? - ANSWERSTax exemptions, deductions, and credits all help reduce income taxes.
Which group of taxpayers usually qualifies for the Earned Income Tax Credit (EITC)? - ANSWERSLow-
income families with earned income qualify for the credit.
These six expenses are typically accepted by the IRS as itemized deductions: - ANSWERSTraditional IRA contributions, alimony payments, real estate taxes paid, state and local income taxes, mortgage interest, and casualty and theft losses.
What is the first step financial counselors can take to determine whether a member is properly managing their taxes? - ANSWERSReview the member's payroll stub.
What is the meaning of the insurance practice "pooling of risks"? - ANSWERSCombining risks among insurers as well as groups of individuals.
What is an insurable interest? - ANSWERSThe policyholder's monetary interest in the insured property.
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