Exam 7: Individual Income Tax Computation and Tax Credits

The late payment penalty is based on the amount of tax owed and the number of days that the tax is not paid. The maximum amount of the penalty is unlimited.

Which of the following statement(s) concerning estimated tax payments and underpayment penalties for individuals is (are) true?

In certain circumstances a child with very little income may have their income taxed at the parents' marginal tax rate.

Katlyn reported $300 of net income from her sole proprietorship. She is not required to pay self-employment tax.

Depending on the year, the original (unextended) due date for an individual's tax return may be before April 15.

When applying credits against a taxpayer's gross tax liability, nonrefundable personal credits are applied first, then business credits, and finally refundable personal credits.

Tax rate schedules are provided for use by (relatively) higher income taxpayers while the tax tables are provided for use by (relatively) lower income taxpayers.

Employees must pay both Social Security tax and Medicare tax on all of their wages no matter the amount of their wages.

If a married couple has one primary breadwinner, filing a joint return will likely result in a marriage penalty.

Depending on the year, the original (unextended) due date for an individual's tax return may be after April 15.

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?

Harmony reports a regular tax liability of $15,000 and tentative minimum tax of $17,000. Given just this information, what is her alternative minimum tax liability for the year?

Miley, a single taxpayer, plans on reporting $27,900 of taxable income this year (all of her income is from a part-time job). She is considering applying for a second part-time job that would give her an additional $10,000 of taxable income. By how much will the income from the second job increase her tax liability (use the tax rate schedules)?

Demeter is a single taxpayer. Her AGI in 2014 is $81,200. Demeter may claim a child tax credit for her daughter Persephone. What amount of child tax credit is Demeter entitled to claim after any applicable phase-out?

Which of the following tax credits is fully refundable?

Which of the following statements about estimated tax payments and underpayment penalties is true for individual taxpayers?

Taxpayers are generally allowed to carry back and/or carry forward unused business credits.

Which of the following is not typical of taxpayers who are most likely affected by the AMT?

Taxpayers are not allowed to deduct personal or dependency exemptions for alternative minimum tax purposes.

Which of the following is not a true statement about the American opportunity credit (AOC) and lifetime learning credits?