Question

Which of the following is excluded from gross income?

Wage income.


Rental income.


Life insurance benefits received upon the death of an insured person.


Net income from running a small business.

Answer 1

Life insurance benefits received upon the death of an insured person are excluded from gross income. The other options—wage income, rental income, and net income from running a small business—are generally included in gross income.

Answer 2

Every taxpayer must:

Mail in their return via the U.S. Postal Service.


E-file their return.


Sign their return.


Keep two copies of their return.

Answer 3

Every taxpayer must **sign their return**. This is a requirement for both mailed and electronically filed returns. While taxpayers can choose to mail in their return or e-file it, signing is mandatory. Keeping copies of the return is also advisable but not a strict legal requirement.

Answer 4

A taxpayer whose taxable income is $60,000 and all from wages would most likely use which of the following to determine their tax?

Tax Computation Worksheet.


Tax Tables.


Qualified Dividends and Capital Gain Tax Worksheet.


Schedule J, Income Averaging for Farmers and Fishermen.

Answer 5

A taxpayer whose taxable income is $60,000 and all from wages would most likely use the **Tax Tables** to determine their tax. The Tax Tables are designed for individual taxpayers, especially those who have straightforward income sources like wages. The other options are not typically applicable to someone with only wage income.

Answer 6

Scott Sanders earned $50,000 as a tow truck driver and $400 in interest from a savings account. He had no other sources of income. How much is Scott's gross income?

$400


$50,000


$50,400


Need more information.

Answer 7

Scott's gross income is **$50,400**. This includes his earnings as a tow truck driver ($50,000) and the interest earned from his savings account ($400). Thus, the total gross income is calculated as follows:

\[
\text{Gross Income} = \text{Wage Income} + \text{Interest Income}
\]

\[
\text{Gross Income} = \$50,000 + \$400 = \$50,400
\]

Answer 8

If Melissa's Form W-2, box 12 has a code D for $1,000, we would be able to determine this is the total of her:

Contributions to her Health Savings Account (HSA).


Cost of employer-sponsored health coverage.


Elective deferral from her 401(k).


Nontaxable sick pay.

Answer 9

If Melissa's Form W-2, box 12 has a code D for $1,000, this indicates the total of her **elective deferral from her 401(k)**. Code D specifically refers to elective contributions made to a 401(k) plan.