Exam 14: The Individual Tax Formula

Mr and Mrs Casey have two dependent children, ages 3 and 6. The Caseys spent $10,300 for child care this year. Mrs Casey is employed full-time as an attorney. Mr Casey is an unpublished novelist who has yet to earn any money from his writing. The Caseys are eligible for a dependent care credit.

Bill and Afton are married and file a joint tax return. Bill is 67 and Afton is 66, and neither is legally blind. Their standard deduction for 2018 is $26,600.

Mr and Mrs Warren's AGI last year was $90,300, and their total tax was $13,988. This year, the couple's total tax is $14,700. Unless the Warrens paid at least $13,988 in the form of withholding and quarterly estimated payments, they will incur an underpayment penalty this year.

Melissa, age 16, is claimed as a dependent on her parents' tax return. This year, Melissa earned $2,000 from babysitting and $1,280 interest income from a savings account. Compute Melissa's standard deduction.

Lennie and Margo spent $2,800 for child care for their 7-year-old son. Lennie's earned income was $41,000, Margo's earned income was $24,800, and the AGI on their joint return was $71,200. Calculate their dependent care credit.

Ms. Dolan, a divorced individual, invited her elderly uncle, Martin, to move into her home in January of this year. Martin's only income item was $2,390 of taxable interest on a savings account. Ms. Dolan provides over 90% of her uncle's financial support. What is Ms. Dolan's filing status for the year? 

Mrs Paley died on July 14, 2017. Her husband has not remarried. The Paleys' two children, ages 34 and 36, are financially independent. Mr Paley may file as a surviving spouse in 2017 and 2018.

The earned income credit offsets the burden of the federal payroll tax on low-income families and encourages individuals to seek employment rather than to depend on welfare.

Which of the following statements concerning the individual alternative minimum tax (AMT) is true?

Last year, Mr Corbett's AGI was $141,000, and his total tax liability was $33,650. This year, his total tax liability is $35,290. Compute the minimum amount of current year tax that Mr Corbett had to prepay (withholding and estimated payments) to avoid an underpayment penalty.

Kilo is an unmarried individual. She has $219,344 taxable income in 2018. Compute Ms. Kilo's regular tax liability if she files as a single taxpayer and if she files as a surviving spouse.

Kilo's regular income tax before credits on her Form 1040 is $450,890, and she has a $5,700 minimum tax credit from a previous year. Which of the following statements is true?

Mr and Mrs Borem spent $1,435 for child care for their two dependent children, who are two and four years old. Mr Borem's earned income was $55,870, Mrs Borem had no earned income, and the AGI on their joint return was $66,210. Calculate their dependent care credit.

Mr and Mrs Reid reported $1,435,700 ordinary taxable income for regular tax purposes and had $158,200 positive AMT adjustments and preferences. Compute their tentative minimum tax.

Mr Jones and his first wife were legally divorced on February 19, 2018. Mr Jones remarried the second Mrs Jones on December 20, 2018. Which of the following describes Mr Jones' filing status in 2018?

Jay Blount, 26-years old and a full-time student, lives in his parents' home. Although Jay earned $8,400 from a part-time job, his parents provide at least 75% of his financial support. For tax purposes, this year Jay is considered a dependent of his parents.

An individual's taxable income equals adjusted gross income less the Section 199A deduction.

Mr and Mrs Dell, ages 29 and 26, file a joint return and have no dependents for the year. Here is their relevant information. Standard Deduction Table. Salaries $ 163,000 Dividend income 1,900 Above-the-line deductions 6,200 Itemized deductions 26,200 Compute their adjusted gross income (AGI) and taxable income.

In order to be considered a dependent, an individual must be either a qualifying child or a qualifying relative.

Julie, an unmarried individual, lives in a home with her 13-year-old dependent son, Oscar. This year, Julie had the following tax information. Standard Deduction Table. Salary $ 95,000 Interest and dividend income 12,800 Capital gain from sale of investments 11,000 Above-the-line deductions 800 Itemized deductions 6,900 Compute Julie's adjusted gross income (AGI) and taxable income.