Exam 14: The Individual Tax Formula

Jennifer, an unmarried individual, lives in a home with her 13-year-old dependent son, Oscar. This year, Jennifer had the following tax information. Qualified Business income from sole proprietorship $ 95,000 Dividend income 2,800 Deduction for self-employment tax 6,712 Itemized deductions 19,200 Compute Jennifer's adjusted gross income (AGI) and taxable income.

Mr and Mrs Stern reported $1,148,340 alternative minimum taxable income before any exemption on their 2018 Form 1040. Calculate their AMT exemption.

An individual who files his own tax return but is claimed as a dependent on another individual's return is not allowed any standard deduction.

In computing taxable income, an individual will deduct the lesser of itemized deductions or the standard deduction.

The Section 199A deduction always has the impact of lowering taxable income. 

Mr and Mrs Kline file a joint return on which they claim the standard deduction. If the taxable income on their return is $35,000, they are not paying a marriage penalty.

In computing taxable income, an individual is allowed to deduct both the standard deduction and any itemized deduction for the year.

Mr Pearl's total income and self-employment tax on this year's Form 1040 is $72,610. If Mr Pearl paid at least $65,349 of this tax in the form of withholding or quarterly estimated payments, he will not incur an underpayment penalty.

Mr and Mrs Steel, who file a joint return, have $513,200 taxable income in 2018. Compute their regular tax liability.

Which of the following statements regarding the calculation of regular tax liability is false?

It is impossible for a progressive income tax system to be both marriage neutral and horizontally equitable.

An itemized deduction doesn't result in any tax savings in a year in which an individual taxpayer takes the standard deduction.

The standard deduction is not deductible in the computation of alternative minimum taxable income.

Only natural and adopted children or stepchildren can be a qualifying child for tax purposes.

Last year, Mr Tyker's AGI was $182,800, and his total tax liability was $51,650. This year, his total tax liability is $65,440. Compute the minimum amount of current year tax that Mr Tyker had to prepay (withholding and estimated payments) to avoid an underpayment penalty.

Mr and Mrs Cox reported $40,900 AGI on their joint return. The couple has three dependent children under age 17. Compute their child credit.

Mrs Starling worked for Abbot Inc. from January 1 through September 19. Her salary from Abbot for this period totaled $150,000. Mrs Starling worked for JJT Inc. from October 1 through December 31. Her salary from JJT for this period totaled $38,000. JJT is not required to withhold Social Security tax from Mrs Starling's salary because Abbot Inc. already withheld the maximum tax for the year.

Mr Thomas is age 69, has perfect vision, and files as a single taxpayer. His standard deduction for 2018 is $13,600.

Samantha died on January 18, 2018. Her husband Dave lived by himself until he remarried in 2019. What was Dave's filing status in 2018 and 2019?

Which of the following statements is false?