Exam 6: Accounting Periods and Other Taxes

All S corporations must use the accrual basis of accounting.

Household employers are not required to pay FICA taxes on part-time household employees.

Which of the following is not an acceptable method of accounting under the tax law?

Dan and Maureen file a joint income tax return for 2019. They have two dependent children, ages 7 and 9. Together they earn wages of $830,000. They also receive taxable interest income of $8,000 and interest on City of Los Angeles bonds of $78,000. During 2019, they received a state income tax refund of $3,000 relating to their 2018 state income tax return on which they itemized deductions. Their expenses for the year consist of the following: ? Home mortgage interest (on acquisition debt) \ 19,000 Interest on credit cards 2,000 Real property taxes 8,300 Cash charitable contributions 75,000 State income taxes withheld 48,000 Calculate Dan and Maureen's tentative minimum tax liability assuming an AMT exemption amount of $111,700, before any phase-outs. Show your calculations.

In 2019, Tom had net earnings of $80,000 from the plant nursery he owns. What is his liability for self-employment taxes on his earnings?

Ellen uses the head of household filing status and has a dependent daughter. Ellen has self-employment income of $310,000 as an architect and $10,000 of self-employment losses from a jewelry making business. ​ a. What is Ellen's 0.9% additional Medicare tax for 2019? b. Is Ellen allowed to include a portion of the 0.9% additional Medicare tax in computing the deduction for self-employment taxes reported as an adjustment for AGI on the front page of her income tax return?

Which of the following types of income is not subject to the "kiddie tax"?

Assume Karen is 12 years old and her only income is $5,500 of interest income from a bank account with money her parents have given her to save for college. If Karen does not elect to include her income on her parents' return, what is her income tax liability?

The Dot Corporation has changed its year-end from a calendar year-end to August 31. The income for its short period from January 1 to August 31 is $54,000. The tax for this short period is:

Polly is a cash basis taxpayer with the following transactions during the year: Cash received from sales of products \9 0,000 Cash paid for expenses (except rent and interest) \3 0,000 Rent paid on a leased building for 24 months beginning December 1 \5 4,000 Prepaid interest on abank loan, paid on December 1 , for the next 3 months \6 ,000 Four months' rent received on a leased building, on October 1 \8 ,000 Calculate Polly's income from her business for this calendar year. Salesincome underline Rental income Total income underline Expenses other than rent and interest Rent Interest Total expenses Net income underline

In determining an employee's FICA tax to be withheld, the maximum amount of wages subject to FICA must be reduced by the taxpayer's self-employment earnings.

Melody and Todd are married and have employee wages of $250,000 each in 2019. They have no other income. How much additional 0.9% Medicare tax will Melody and Todd have to pay or receive as a refund when they file their 2019 income tax return?

In general, accrual basis taxpayers recognize income when it is earned, regardless of when it is received.

For 2019, the maximum base amount for computing the Medicare portion of the self-employment tax is $250,000.

If a cash basis business owner pays 18 months of rent expense in advance during the last month of the tax year, how is this treated on the tax return? What is the reason tax law requires this treatment?

Peter and Joan are married and Joan has self-employment income of $240,000. Peter is retired. How much additional 0.9% Medicare tax will Peter and Joan owe with their 2019 income tax return?

Vernon is a cash basis taxpayer with a calendar tax year. On October 1, 2019, Vernon entered into a lease to rent a building for use in his business at $3,000 a month. On that day Vernon paid 18 months' rent on the building, a total of $54,000 ($3,000 × 18 months). How much may Vernon deduct for rent expense on his 2019 tax return?

A taxpayer would be required to pay Social Security and Medicare taxes for a domestic employee in all but one of the following situations. In which situation would this not be required?

John and Susan file a joint income tax return for 2019. They have two dependent children, students, ages 19 and 20. John earns wages of $908,000 and John and Susan have interest income of $102,000. In 2019, they settle a state tax audit and pay $50,000 for back state taxes due to an overly aggressive tax-sheltered investment. Their other expenses for the year include: Mortgage interest \ 23,000 Real estate taxes 12,000 State taxes withheld 33,500 Cash charitable contributions 56,000 CPA fees for assistance with the state audit 4,500 ? a.Calculate John and Susan's 2019 regular tax and tentative minimum tax on the schedule provided.? Regul ar tax: Adjusted gross income underline Itemized deductions: Total itemized deductions Taxable income underline Tax from 2019 tax table underline Alternative minimum tax: Adjusted gross income underline Add tax preferences and adjustments: Less allowable deductions: Total deductions Alternative minimum taxable income underline The AMT exemption ( \ 111,700 ) Alternative minimum tax base Tentative minimum tax underline (26\% of income up to \ 194,800;28\% of income in excess of \ 194,800) ? b.How much is the total tax liability shown on John and Susan's 2019 Form 1040? ? ?

Sophia is 9 years-old and has $3,200 of interest income from a savings account in 2019. Sophia's parent claim her as a dependent and make no special elections with respect to Sophia's income. Sophia's income will be taxed at her parent's tax rate.