Wiley Tax Preparer: A Guide to Form 1040

Answers to Review Questions

Chapter 1

1. Sara, who is single, has gross income of $7,000 and self-employment income of $500? Which statement best describes her filing situation? Sara:

a. Correct. Filing a tax return is mandatory because she has self-employment income of at least $400.

b. Incorrect. Filing is not optional because her self-employment income exceeds the $400 threshold.

c. Incorrect. Even though her gross income is below the basic filing threshold, she is still required to file a tax return.

d. Incorrect. She should file a tax return because she has a filing requirement.

2. Carlos, who is required to file a tax return, wants to obtain a filing extension. Which of the following actions is required?

a. Incorrect. While it is advisable to pay as much of the taxes expected to be owed in order to minimize or avoid late payment penalties, full payment is not a prerequisite to obtaining a filing extension.

b. Incorrect. An extension can be obtained for any reason; no reason is required to be provided with the filing extension request.

c. Incorrect. While a paid preparer may submit the extension request for Carlos, a taxpayer can obtain the extension on his or her own.

d. Correct. The request for the extension must be made no later than the filing deadline.

3. Harrison, an employee earning $75,000, does not file his return on time and does not obtain a filing extension. He files his return on August 15 and pays his balance due, $4,000 at that time. The $4,000 is 25% of his ...