Mastering TOEIC Reading: Interpreting Tax Forms for Business Owners

The TOEIC Reading section often includes passages related to business topics, including tax forms and financial documents. As a business owner, understanding how to interpret tax forms is crucial for both your exam performance and real-world applications. Let’s dive into a practice test focusing on this important skill.

Part 1: Incomplete Sentences

In this section, you’ll encounter 30 incomplete sentences. Choose the word or phrase that best completes each sentence.

1. The company’s annual tax return must be _____ by March 15th to avoid penalties.
   A. filed
   B. fined
   C. filled
   D. failed

2. Business owners should keep detailed records of all _____ expenses for tax purposes.
   A. deductible
   B. reducible
   C. subtractable
   D. removable

3. The IRS may conduct an _____ if there are discrepancies in your tax forms.
   A. audit
   B. review
   C. inspection
   D. examination

4. Failure to report all sources of income on your tax forms may result in _____.
   A. fines
   B. rewards
   C. bonuses
   D. credits

5. Small business owners often struggle with the _____ of tax regulations.
   A. simplicity
   B. complexity
   C. ease
   D. clarity

6. It’s advisable to consult a _____ accountant when dealing with complex tax situations.
   A. certified public
   B. certified private
   C. classified public
   D. classified private

7. The company’s gross revenue must be clearly stated on Form _____.
   A. W-2
   B. 1099
   C. 1040
   D. 1120

8. Entrepreneurs should be aware of the tax _____ associated with different business structures.
   A. implications
   B. complications
   C. applications
   D. replications

9. Many small businesses qualify for tax _____ designed to encourage growth and innovation.
   A. incentives
   B. penalties
   C. increases
   D. reductions

10. The deadline for filing estimated tax payments is typically the 15th day of the _____ month of each quarter.
    A. first
    B. second
    C. third
    D. last

11. Business owners must _____ their employees’ wages and submit payroll taxes to the government.
    A. withhold
    B. withdraw
    C. withstand
    D. withhold

12. The _____ tax rate for corporations was reduced from 35% to 21% in 2017.
    A. flat
    B. variable
    C. progressive
    D. regressive

13. Self-employed individuals must pay both the employer and employee portions of _____ taxes.
    A. sales
    B. property
    C. income
    D. payroll

14. Tax forms often require business owners to provide a detailed _____ of their assets and liabilities.
    A. breakdown
    B. buildup
    C. breakthrough
    D. breakout

15. The IRS offers a _____ program for businesses that have fallen behind on their tax payments.
    A. forgiveness
    B. forgetfulness
    C. installment
    D. investment

Business owner reviewing tax forms

16. Charitable donations made by businesses are often _____ on tax returns.
    A. deductible
    B. reducible
    C. refundable
    D. reversible

17. The depreciation of business assets must be carefully _____ over time for tax purposes.
    A. calculated
    B. estimated
    C. evaluated
    D. approximated

18. Business owners should be aware of the tax _____ between personal and business expenses.
    A. distinction
    B. connection
    C. relation
    D. association

19. Failure to file tax returns on time may result in a _____ being imposed by the IRS.
    A. penalty
    B. reward
    C. bonus
    D. credit

20. Many small businesses choose to file their taxes _____ to ensure accuracy and compliance.
    A. electronically
    B. manually
    C. verbally
    D. visually

21. The _____ of a business for tax purposes can significantly impact its tax liability.
    A. classification
    B. categorization
    C. organization
    D. characterization

22. Business owners must keep tax records for at least _____ years after filing.
    A. three
    B. five
    C. seven
    D. ten

23. The IRS provides various _____ for taxpayers who need assistance understanding tax forms.
    A. resources
    B. restrictions
    C. reservations
    D. resolutions

24. Businesses that operate in multiple states may need to file _____ tax returns.
    A. singular
    B. double
    C. triple
    D. multiple

25. Tax forms often require business owners to provide a _____ of their inventory valuation method.
    A. description
    B. prescription
    C. subscription
    D. inscription

26. The accrual method of accounting recognizes income when it’s _____, not when it’s received.
    A. earned
    B. paid
    C. recorded
    D. deposited

27. Business owners should be aware of the tax implications of _____ assets to the company.
    A. contributing
    B. distributing
    C. allocating
    D. designating

28. The IRS may impose _____ on businesses that consistently underreport their income.
    A. sanctions
    B. bonuses
    C. incentives
    D. rewards

29. Tax forms often require a detailed _____ of business travel expenses.
    A. itemization
    B. generalization
    C. summarization
    D. minimization

30. Business owners should consider the tax _____ of different retirement plan options for their employees.
    A. advantages
    B. disadvantages
    C. neutralities
    D. indifferences

Part 2: Text Completion

In this section, you’ll read four short passages related to tax forms and business ownership. Each passage has four blanks. Choose the best word or phrase from the given options to fill each blank.

Passage 1

As a business owner, understanding how to interpret tax forms is (1) to maintaining compliance and maximizing financial efficiency. The Internal Revenue Service (IRS) provides various forms for different types of businesses, each serving a (2) purpose. For example, Form 1120 is used for C corporations, while Form 1065 is used for partnerships. It’s (3) to choose the correct form based on your business structure to avoid potential issues. Additionally, familiarizing yourself with common tax terms and (4) can help you navigate these forms more effectively.

1. A. crucial B. optional C. irrelevant D. secondary
2. A. specific B. general C. vague D. broad
3. A. unnecessary B. essential C. recommended D. forbidden
4. A. concepts B. products C. services D. employees

Passage 2

One of the most important aspects of interpreting tax forms is understanding (5) expenses. These are costs that can be subtracted from your business’s income, thereby reducing your overall tax liability. Common deductible expenses include office supplies, marketing costs, and (6) expenses. However, it’s crucial to maintain accurate records and receipts to support these deductions. The IRS may require you to (7) your claimed expenses during an audit. Failure to properly document your deductions could result in (8) and potential legal consequences.

5. A. deductible B. taxable C. fixed D. variable
6. A. personal B. travel C. entertainment D. illegal
7. A. estimate B. exaggerate C. substantiate D. fabricate
8. A. rewards B. bonuses C. penalties D. promotions

Passage 3

For many business owners, understanding payment terms in business invoices is closely related to interpreting tax forms. The timing of income recognition can significantly impact your tax (9). Under the cash basis accounting method, income is generally reported when it’s actually (10), while expenses are deducted when they’re paid. In contrast, the accrual method recognizes income when it’s earned and expenses when they’re (11). The choice between these methods can affect your reported income and, consequently, your tax liability. It’s important to (12) with a tax professional to determine which method is most appropriate for your business.

9. A. reduction B. increase C. liability D. credit
10. A. earned B. received C. invoiced D. projected
11. A. incurred B. paid C. estimated D. approved
12. A. argue B. disagree C. consult D. compete

Passage 4

Interpreting tax forms also involves understanding various tax credits available to businesses. These credits can directly reduce your tax (13) and are often designed to encourage specific behaviors or investments. For example, the Research and Development (R&D) tax credit incentivizes businesses to invest in innovation, while the Work Opportunity Tax Credit encourages hiring from certain target groups. To claim these credits, you’ll need to complete additional (14) and provide supporting documentation. It’s important to stay informed about available credits, as they can change from year to year. Many business owners find it beneficial to work with a (15) tax professional who can help identify applicable credits and ensure proper (16) on tax forms.

13. A. burden B. return C. form D. rate
14. A. payments B. forms C. employees D. products
15. A. certified B. amateur C. part-time D. temporary
16. A. omission B. exclusion C. inclusion D. confusion

Answer Key

Part 1: Incomplete Sentences

1. A
2. A
3. A
4. A
5. B
6. A
7. D
8. A
9. A
10. A
11. A
12. A
13. D
14. A
15. C
16. A
17. A
18. A
19. A
20. A
21. A
22. C
23. A
24. D
25. A
26. A
27. A
28. A
29. A
30. A

Part 2: Text Completion

1. A
2. A
3. B
4. A
5. A
6. B
7. C
8. C
9. C
10. B
11. A
12. C
13. A
14. B
15. A
16. C

By practicing with these TOEIC Reading exercises focused on Interpreting Tax Forms For Business Owners, you’ll not only improve your exam performance but also gain valuable knowledge for real-world business situations. Remember to pay close attention to context clues and specific terminology related to taxes and business operations. Good luck with your TOEIC preparation!