Question 1

For married couples, the Medicare tax is based on the couple's combined wages.

Accepted Answer

A) True 
 B)False  True

Question 2

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

Accepted Answer

A)  An extension of time to file the tax return protects a taxpayer from late payment penalties as long as the tax is paid by the extended due date of the return. 
B)  The penalty rate for late filing penalties is less than the penalty rate for late payment penalties. 
C)  If a taxpayer has not paid the full tax liability by the original due date of the return and the taxpayer has not filed a tax return by the due date of the return, the maximum late filing and late payment penalty will be no greater than the late filing penalty by itself. 
D)  None of these 
A)  An extension of time to file the tax return protects a taxpayer from late payment penalties as long as the tax is paid by the extended due date of the return. 
B)  The penalty rate for late filing penalties is less than the penalty rate for late payment penalties. 
C)  If a taxpayer has not paid the full tax liability by the original due date of the return and the taxpayer has not filed a tax return by the due date of the return, the maximum late filing and late payment penalty will be no greater than the late filing penalty by itself. 
D)  None of these C

Question 3

In 2014, 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?

Accepted Answer

Refund of $1,799.

Question 4

All else equal, taxpayers are more likely to be classified as employees rather than independent contractors if they are allowed to determine their own working hours and work without frequent oversight.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A)  Stephanie and Mitch likely pay no tax marriage penalty nor receive a tax marriage benefit. 
B)  Stephanie and Mitch likely pay a tax marriage penalty. 
C)  Stephanie and Mitch likely receive a tax marriage benefit. 
D)  Stephanie and Mitch likely will pay a tax marriage penalty and receive a tax marriage benefit. 
A)  Stephanie and Mitch likely pay no tax marriage penalty nor receive a tax marriage benefit. 
B)  Stephanie and Mitch likely pay a tax marriage penalty. 
C)  Stephanie and Mitch likely receive a tax marriage benefit. 
D)  Stephanie and Mitch likely will pay a tax marriage penalty and receive a tax marriage benefit.

Question 6

Sam is 30 years old. In 2014, he reported an AGI of $12,000, all from his job as a server at the local café. He is single and has no dependents. What amount of earned income credit may he claim in 2014?

Accepted Answer

The answer of Sam is 30 years old. In 2014,...

Question 7

The computation of the alternative minimum tax base begins with regular taxable income. Which of the following is not part of the formula for computing the alternative minimum tax base?

Accepted Answer

A)  Subtract personal exemptions 
B)  Add the standard deduction amount if used for regular tax 
C)  Subtract the AMT exemption amount (if any) 
D)  Add back tax exempt interest from a private activity bond not issued in 2009 or 2010. 
A)  Subtract personal exemptions 
B)  Add the standard deduction amount if used for regular tax 
C)  Subtract the AMT exemption amount (if any) 
D)  Add back tax exempt interest from a private activity bond not issued in 2009 or 2010.

Question 8

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.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is not a taxpayer filing status for purposes of determining the appropriate tax rate schedule?

Accepted Answer

A)  Head of Household 
B)  Qualifying Widow or Widower 
C)  Married Filing Separately 
D)  Single 
E)  All of these are taxpayer filing statuses 
A)  Head of Household 
B)  Qualifying Widow or Widower 
C)  Married Filing Separately 
D)  Single 
E)  All of these are taxpayer filing statuses

Question 10

Both the width (or range) of the tax brackets (the amount of income taxed at a particular rate) in the tax rate schedules and the range of the tax rates in the tax rate schedules (the difference between the lowest tax rate and the highest tax rate) vary by filing status.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following statements regarding the earned income credit is true?

Accepted Answer

A)  It is a nonrefundable credit 
B)  It is possible that a taxpayer with more earned income may receive more credit than a taxpayer with less earned income 
C)  A 70-year-old taxpayer with no dependents can qualify for the credit in certain circumstances 
D)  A taxpayer whose only source of income is interest from corporate bonds is eligible for the credit 
A)  It is a nonrefundable credit 
B)  It is possible that a taxpayer with more earned income may receive more credit than a taxpayer with less earned income 
C)  A 70-year-old taxpayer with no dependents can qualify for the credit in certain circumstances 
D)  A taxpayer whose only source of income is interest from corporate bonds is eligible for the credit

Question 12

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

Accepted Answer

A)  smaller than 
B)  about the same as 
C)  larger than 
D)  exactly the same as 
A)  smaller than 
B)  about the same as 
C)  larger than 
D)  exactly the same as

Question 13

Jerusha is married and she files a separate tax return in 2014. She claims two exemptions (2 × 3,950 = $7,900). She claimed the standard deduction for regular tax purposes ($6,200). She had no other adjustments. Her regular taxable income was $67,800. What is Jerusha's AMTI?

Accepted Answer

The answer of Jerusha is married and she files a...

Question 14

An individual could pay 100% of her tax liability by the due date of her tax return and still be subject to underpayment tax penalties.

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

Which of the following items is not added back to regular taxable income in computing alternative minimum taxable income?

Accepted Answer

A)  Home mortgage interest expense 
B)  Real property taxes 
C)  Tax exempt interest from a private activity bond issued in 2007 
D)  Miscellaneous itemized deductions in excess of the 2% floor 
A)  Home mortgage interest expense 
B)  Real property taxes 
C)  Tax exempt interest from a private activity bond issued in 2007 
D)  Miscellaneous itemized deductions in excess of the 2% floor

Question 17

Clarissa's gross tax liability for 2014 is $1,300. She has a $1,500 nonrefundable personal tax credit, a $750 business tax credit, and a $400 refundable personal tax credit. Her employer withheld $1,000 from her pay for taxes. What is her net tax due or refund for this year?

Accepted Answer

The answer of Clarissa's gross tax liability for 2014 is...

Question 18

What happens if the taxpayer owes an underpayment penalty, but does not compute it on Form 2210?

Accepted Answer

A)  Nothing, unless the taxpayer is audited 
B)  The taxpayer is immediately sent to the Tax Court 
C)  The IRS will compute and assess the penalty 
D)  The penalty is increased by five percentage points 
A)  Nothing, unless the taxpayer is audited 
B)  The taxpayer is immediately sent to the Tax Court 
C)  The IRS will compute and assess the penalty 
D)  The penalty is increased by five percentage points

Question 19

Which of the following taxpayers (all age 40) are required to file a return? $$\begin{array} { | l | l | r | c | } 
\hline \text { Taxpayer } & \text { Filing Status } & \begin{array} { c } 
\text { Number } \
\text { of exemptions }
\end{array} & \begin{array} { c } 
\text { Gross } \
\text { Income }
\end{array} \
\hline \text { Jenny and Jim } & \begin{array} { l } 
\text { Married Filing } \
\text { Jointly }
\end{array} & 2 & \$ 21,000 \
\hline \text { Allen } & \text { Single } & 1 & \$ 9,200 \
\hline \text { Timmy } & \text { Head of Household } & 2 & \$ 10,800 \
\hline
\end{array}$$

Accepted Answer

A)  Jenny and Jim 
B)  Allen 
C)  Timmy 
D)  None of these 
A)  Jenny and Jim 
B)  Allen 
C)  Timmy 
D)  None of these

Question 20

To qualify for the earned income credit, the taxpayer must have a qualified dependent.

Accepted Answer

A) True 
 B)False

Exam 7: Individual Income Tax Computation and Tax Credits

For married couples, the Medicare tax is based on the couple's combined wages.

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

All else equal, taxpayers are more likely to be classified as employees rather than independent contractors if they are allowed to determine their own working hours and work without frequent oversight.

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

Sam is 30 years old. In 2014, he reported an AGI of $12,000, all from his job as a server at the local café. He is single and has no dependents. What amount of earned income credit may he claim in 2014?

The computation of the alternative minimum tax base begins with regular taxable income. Which of the following is not part of the formula for computing the alternative minimum tax base?

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.

Which of the following is not a taxpayer filing status for purposes of determining the appropriate tax rate schedule?

Both the width (or range) of the tax brackets (the amount of income taxed at a particular rate) in the tax rate schedules and the range of the tax rates in the tax rate schedules (the difference between the lowest tax rate and the highest tax rate) vary by filing status.

Which of the following statements regarding the earned income credit is true?

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

Jerusha is married and she files a separate tax return in 2014. She claims two exemptions (2 × 3,950 = $7,900). She claimed the standard deduction for regular tax purposes ($6,200). She had no other adjustments. Her regular taxable income was $67,800. What is Jerusha's AMTI?

An individual could pay 100% of her tax liability by the due date of her tax return and still be subject to underpayment tax penalties.

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

Which of the following items is not added back to regular taxable income in computing alternative minimum taxable income?

Clarissa's gross tax liability for 2014 is $1,300. She has a $1,500 nonrefundable personal tax credit, a $750 business tax credit, and a $400 refundable personal tax credit. Her employer withheld $1,000 from her pay for taxes. What is her net tax due or refund for this year?

What happens if the taxpayer owes an underpayment penalty, but does not compute it on Form 2210?

Which of the following taxpayers (all age 40) are required to file a return? Taxpayer Filing Status Number of exemptions Gross Income Jenny and Jim Married Filing Jointly 2 \ 21,000 Allen Single 1 \ 9,200 Timmy Head of Household 2 \ 10,800

To qualify for the earned income credit, the taxpayer must have a qualified dependent.

An Introduction to Tax

Tax Compliance, the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Exemptions, and Filing Status

Gross Income and Exclusions

Individual Deductions

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Investments

Compensation

Retirement Savings and Deferred Compensation

Tax Consequences of Home Ownership

Entities Overview

Corporate Operations

Accounting for Income Taxes

Corporate Taxation: Nonliquidating Distributions

Corporate Formation, Reorganization, and Liquidation

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S Corporations

State and Local Taxes

The Us Taxation of Multinational Transactions

Transfer Taxes and Wealth Planning of the Cfa Institute

Filters