Exam 8: Individual Income Tax Computation and Tax Credits

Long-term capital gains are taxed at the stated AMT rate for purposes of the alternative minimum tax.

Harmony is single and was self-employed for the first half of 2017, earning $18,000 of Schedule C (business) net income. During the second half of the year, she began working as an employee and earned $38,000 in salary. What amount of self-employment taxes is Harmony required to pay?

Which of the following statements concerning tax credits is true?

Alton reported net income from his sole proprietorship of $90,000. To determine his self employment tax, he would multiply $90,000 by the self-employment tax rate.

Which of the following represents the correct order in which credits are applied to gross tax liability (from first to last)?

Baker earned $225,000 of salary as an employee in 2017. How much should hisemployer have withheld from his paycheck for FICA taxes (rounded to the nearest whole dollar amount)?

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

Why would a taxpayer file a tax return if not required to do so?

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?

Generally, income from an active trade or business is subject to the 3.8% net investmentincome tax.

In 2017, John (52 years old) files as a head of household with one 18-year old dependent (qualifying) child. John is eligible to claim a $700 American opportunity credit for the year. John did not have any taxes withheld by his employer during the year and he did not make any estimated tax payments. After taking credits into account, what is the amount of John's taxes payable or refund assuming that his AGI is $26,000 (all from salary) and his taxable income is $9,000?

Angelena files as a head of household. In 2017, she reported $51,400 of taxable income, including a $10,000 qualified dividend. What is her gross tax liability, rounded to the nearest whole dollar amount? (use the tax rate schedules)

In 2017, Shawn's AGI is $170,000. He earned the income evenly throughout the year. He owed$24,900 in federal income tax plus alternative minimum tax of $263, 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 2017?

The kiddie tax does not apply to children over 24 years old at the end of the tax year.

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.

The earned income credit is sometimes referred to as a negative income tax.

The child and dependent care credit entitles qualifying taxpayers to a credit equal to the full amount of qualified expenses.

Max is a 14-year-old dependent of his parents. During 2017, 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 2017 taxable income?

Jerusha is married and she files a separate tax return in 2017. She claims two exemptions (2 × 4,050= $8,100). She claimed the standard deduction for regular tax purposes ($6,350). She had no other adjustments. Her regular taxable income was $67,800. What is Jerusha's AMTI?

The alternative minimum tax base is typically ________ the regular income tax base.