Page 222 -

Sa ve Money with These Tax Stra tegies

2. For tax year 2007, self-employed people pay Social Security taxes on the fi rst
––––––––––– they earn.
a. $42,500
b. $60,000
c. $72,500
d. $97,500
3. The type of tax-advantaged (tax deductible) pension plan for unincorporated
small-business owners is referred to as a:
a. 401(k) plan
b. Roth IRA
c. SEP plan
d. 403(b) plan
4. For self-employed individuals in 2007, what percentage of your health
insurance expense is deductible?
a. 25%

b. 45%
c. 50%
d. 100%

5. The highest federal income tax rate applicable to individual taxpayers is:
a. 36%
b. 39.6%
c. 35%
d. 50%
6. The profits of which of the following business entities will not be taxed at the

owners’ individual income tax rates?
a. Sole proprietorships
b. Partnerships
c. Corporations (other than S corporations)
d. Limited liability companies

7. In an IRS audit, the best kind of evidence to provide in order to prove your
business is:
a. Receipts and canceled checks

b. Computerized records
c. Statements from your accountant
d. Eyewitness testimony
8. All businesses having inventories must use the accrual method of reporting
purchases and sales. (True or False)
9. ames, a cash-basis salesperson, received commissions in February of 2007
J
for sales made during the last quarter of 2006. The commissions should be
reported on his 2006 tax return. (True or False)
(continued)

199

8/23/07 3:30:20 PM
c18.indd 199 8/23/07 3:30:20 PM
c18.indd 199