1. There are many reasons you should keep records. In addition to tax purposes, you may need to keep records for insurance purposes or for getting a loan. Good records will help you
A.
Support items reported on tax returns.
B.
Prepare your tax returns.
C.
Identify sources of income, keep track of expenses and the basis of property.
D.
All of the above.
2. You should use your checkbook to keep a record of your income and expenses. In your checkbook, you should records amounts, sources of deposits, and types of expenses.
True False
3. You should keep copies of your tax returns as part of your tax records. If you don't have one, you can request a copy of a tax return and all attachments (including Form W-2) from the IRS by
A.
Filing an amended Form 1040X.
B.
Writing "Requesting a copy" directly on Form 1040.
C.
Using Form 4506.
D. By
calling the Internal Revenue Service (IRS).
4. The IRS requires you to keep your records in a professional manner. You must use computer software for recordkeeping that makes it easy to keep track of receipts.
True False
5. Your basic records for investments should enable you to determine your basis in an investment and whether you have a gain or loss when you sell it. Investments include stocks, bonds, and mutual funds. Your records for these should show
A. The
purchase price, sales price, and commissions.
B. Any
reinvested dividends, stock splits and dividends, load charges, and original
issue discount (OID).
C.
Both A and B above.
D.
None of the above.
6. One of your basic records is proof of payment. You should keep these records to support certain amounts shown on your tax return. Proof of payment alone can be proof that the item claimed on your tax return in allowable.
True False
7. You should keep records to support certain amounts on your tax return. Generally, you prove payment with a
A.
Cash receipt.
B.
Financial account statement or credit card statement.
C.
Canceled check or substitute check.
D.
Any of the above.
8. If you receive or pay alimony, you should keep a copy of your written separation agreement or the divorce, separate maintenance, or support decree. If you pay alimony, you will
A.
Need to show a statement signed by your former spouse.
B.
Also need to know your former spouse's social security number.
C.
Need to show a canceled check with your former spouse's name on it.
D.
All of the above.
9. You may be able to deduct certain expenses connected with the business use of your home. You should
A. Keep
records that show the part of your home that your use for business.
B. Keep
records that show the expenses related to the use of the home for business.
C.
Both A and B above.
D.
None of the above.
10. To show a casualty or theft loss, you must be able to prove that your had a casualty or theft. Your records also must be able to support the amount you claim. For a casualty loss, your records should show
A. The
type of casualty (car accident, fire, storm, etc.) and when it occurred.
B. That
the loss was a direct result of the casualty.
C.
That you were the owner of the property.
D. All of the above.
11. To deduct a casualty or theft loss, you must be able to prove that you had a casualty or theft. Your records also must be able to support the amount you claim. For a theft loss, your records should show
A. When you discovered your property was missing.
B. That your property was stolen.
C. The you were the owner of the property.
D.
All of the above.
12. You must keep a daily record to accurately report your tips on your tax return. To record your tips you can use
A. Form 1040.
B. Form 4070.
C. Form 4070A.
D.
Form 1098.
13. You must keep your records as long as they may be needed for the administration of any provision of the Internal Revenue Code. Generally, this means your must keep records that support items shown on your return
A. For a period of 3 years.
B. For a period of 6 years.
C. Until the period of limitations for that tax return runs out.
D.
Later than 3 years or 2 years after tax was paid.
14. When you records are no longer needed for tax purposes,
A.
Discard them as you will not need them any longer for any purpose.
B. Do
not discard them until you check to see if they should be kept longer for other
purposes.
C.
Your insurance company has the same period of limitations as the IRS so you will
not need them for insurance purposes either.
D.
Usually creditors coincide with the IRS period of limitations so keeping your
records for them is not necessary and would be considered cumbersome.
15. You must keep an accurate diary of your gambling winnings and losses that includes the
A. Date and type of gambling activity and amount you won or lost.
B. Name and address or location of the gambling establishment.
C. Names of other persons present with you at the gambling establishment.
D.
All of the above.
16. You must keep records to prove the contributions you make during the year. The kinds of records depends on whether the contribution is cash, noncash, or out-of-pocket expenses.
True False
17. For records for Individual Retirement Arrangement (IRAs) keep copies of forms and records until all distributions are made from your IRAs. Keep the following
A. Form 5498 or similar statement received for each year showing contributions
you made, distributions you received, and the value of your IRA (s).
B. Form 1099-R received for each year you received a distribution.
C. Form 8606 for each year you made a nondeductible contribution to your IRA or
received distributions from an IRA if you ever made nondeductible contributions.
D.
Any of the above.
18. You must give the name, address, and taxpayer identification number for all persons or organization that provide care for your child or dependent. To get the information from the provider you can use various sources or
A. Form 2441.
B. Form W-10.
C. Form W-7.
D.
Form W-2.
19. If you receive a Form W-2, keep a Copy C until you begin receiving social security benefits.
True False
20. When you sell your home, your records should show the sales price and any selling expenses, such as commissions.
True False