Can you Pass this Tax Law Quiz?
The federal tax code is very complicated. Even people who have been filing their taxes themselves for years likely are not experts. If the IRS ever accuses them of breaking the law, there is a good chance the taxpayer will not even understand what they are accused of doing, let alone be able to mount an effective defense, without the help of a tax attorney.
Proof of this seems to be the results of a quiz supplied by personal finance website NerdWallet. The site had 1,000 adults take a 10-question, multiple-choice test about various tax issues as they relate to retirement, saving for college and health care. Testers averaged a score of just 51 percent.
The entire test is available here, but we will provide a couple examples:
Is the money you put in a Roth IRA pretax or post-tax? A) pretax, B) post-tax, or C) none of the above.
A 529 plan is A) a way to make tax-deductible contributions for college savings, B) a college investment plan that earns tax-free income as it grows, or C) a plan that allows qualified users to defer their tax payments.
If you lend money to a friend and she does not pay it back, can you write off the loan? A) yes, B) possibly under capital loss rules, or C) no.
The answers to each of these questions is B. If you got all three correct, congratulations! If you did not, don’t feel bad. Testers got these questions right just 42 percent of the time.
We share this test not to embarrass our readers, but to point out that there is a lot about tax preparation that the general public knows. The advice of a tax attorney can be invaluable, especially if you are engaged in a tax controversy with the IRS.
