Taxes Bell Ringer 6

When deciding whether to itemize deductions or take the standard deduction, what should primarily guide a taxpayer’s decision?

• The total amount of their individual deductions compared to the standard deduction

• The number of deductions they have, regardless of the total amount

• Always take the standard deduction, as it is generally more beneficial

• Always itemize deductions, as it typically results in greater tax savings

What is the primary difference between a tax credit and a tax deduction?

• A tax credit reduces your taxable income, while a tax deduction directly reduces the amount of taxes you owe

• A tax credit and a tax deduction both reduce your taxable income equally

• A tax credit directly reduces the amount of taxes you owe, while a tax deduction reduces your taxable income

• A tax credit is usually a fixed amount, while a tax deduction depends on the amount of the related expense

Which of the following scenarios is an example of tax evasion?

• Claiming a deduction for unreimbursed medical expenses above 7.5% of your taxable income

• Donating to a charity and claiming the total amount as a deduction

• Underreporting your income to reduce the total amount of taxes owed

• Maximizing your contributions to a retirement account to reduce taxable income

Which of the following best describes the difference between tax avoidance and tax evasion?

• Tax avoidance involves the use of illegal methods to reduce your tax obligation, while tax evasion involves the use of legal methods to do the same thing

• Tax avoidance is when you report income from multiple sources, while tax evasion only involves a single income

• Tax avoidance is the legal use of tax laws to reduce the tax someone owes, while tax evasion is the illegal act of not paying taxes due

• Tax avoidance is when you request an extension to file your tax return, while tax evasion is when you fail to file your tax return altogether

What is the main difference between tax deductions and tax credits?

• Tax deductions are available for all taxpayers, while tax credits are only for specific groups

• Tax deductions lower taxable income, while tax credits reduce the amount of tax owed directly

• Tax deductions are for personal expenses, whereas tax credits can only be used for business expenses

• Tax deductions and tax credits are the same; both reduce the amount of tax owed dollar for dollar