Exam 8: Individual Income Tax Computation and Tax Credits

Employee status is always better than independent contractor status for a taxpayer because the employee is responsible for paying the employee portion of the FICA taxes.

Stephanie and Mitch are married and they file a joint tax return.Mitch received a slightly higher salary than Stephanie did during the year.They both make very high salaries.Which of the following statements is true?

Which of the following is not true of the American opportunity credit?

Maria and Tony are married.They are preparing to file their 2019 tax return.If they were to file as single taxpayers,Maria and Tony would report $10,000 and $70,000 of taxable income,respectively.On their joint tax return,their taxable income is $80,000.How much of a marriage penalty or benefit will Maria and Tony experience in 2019? (Use Tax rate schedules.)

The alternative minimum tax system requires taxpayers to apply an alternative tax rate on the regular income tax base to determine the amount of the alternative minimum tax.

Which of the following statements regarding late filing penalties and/or late payment penalties is true?

Max is a 14-year-old dependent of his parents.During 2019,Max earned $1,800 working part-time jobs,and he received $1,500 of interest income from corporate bonds that were given to him last year.What is Max's 2019 taxable income?

Hestia (age 17)is claimed as a dependent by her parents,Rhea and Chronus.In 2019,Hestia received $1,000 of interest income from a corporate bond that she owns.In addition,she has earned income of $200.What is her taxable income for 2019?

Employees must pay both Social Security tax and Medicare tax on the full amount of their wages no matter the amount of their wages.

Parents may claim a child and dependent care credit for expenses incurred in providing for their dependents while the parents work as long as the children are over age 14 and under age 20 at year-end.

Hera wants to reduce her income tax liability by shifting some of her income to her 10-year-old daughter (a dependent),Athena.Last year,Hera gifted corporate bonds to Athena.This year,Athena received $1,550 in interest income from the bonds.What amount of tax will Athena pay on the interest income?

Which of the following statements accurately describes the alternative minimum tax rate(s)?

Tax credits reduce a taxpayer's taxable income dollar for dollar.

Sheryl's AGI is $250,000.Her current tax liability is $52,068.Last year,her tax liability was $48,722.She will not owe underpayment penalties if her total estimated tax payments are at least which of the following (rounded)amounts? (Assume she makes the required payments each quarter.)

In 2019,Shawn's AGI is $170,000.He earned the income evenly throughout the year.He owed $29,890 in federal income tax and self-employment taxes of $2,590.Last year,he had a gross tax liability of $50,000.What is the minimum quarterly estimated tax payment Shawn must pay each quarter to avoid underpayment penalties for 2019?

Self-employed taxpayers are allowed to deduct the full amount of the self-employment taxes they pay.

Allen Green is a single taxpayer with an AGI (and modified AGI)of $210,000,which includes $170,000 of salary,$25,000 of interest income,$10,000 of dividends,and $5,000 of long-term capital gains.What is Allen's net investment income tax liability this year,rounded to the nearest whole dollar amount?

John and Sally pay Janet (Sally's older sister)to watch John and Sally's child Dexter during the day.Janet cares for Dexter in her home.John and Sally may claim a child and dependent care credit based on the amount they pay Janet to care for Dexter.

Baker is single and earned $225,000 of salary as an employee in 2019.How much should his employer have withheld from his paycheck for FICA taxes? (Round your answer to the nearest whole dollar amount.)

Depending on the year,the original (unextended)due date for an individual's tax return may be after April 15.