Question 1

Individuals may file for and receive a six-month extension of time to file their tax return and pay their taxes without penalty.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following suggests that a working taxpayer is an independent contractor rather than an employee?

Accepted Answer

A)  Works for more than one firm 
B)  May realize a loss from business activities 
C)  Sets own working hours 
D)  Works somewhere other than on employer premises 
E)  All of these suggest independent contractor status 
A)  Works for more than one firm 
B)  May realize a loss from business activities 
C)  Sets own working hours 
D)  Works somewhere other than on employer premises 
E)  All of these suggest independent contractor status

Question 3

In 2014, Maia (who files as a head of household) reported regular taxable income of $115,000. She itemized her deductions, deducting $8,000 in charitable contributions and $3,000 in state income taxes. She claimed exemptions for herself and her son, Hermes, ($3,900 each). What is Maia's alternative minimum taxable income?

Accepted Answer

A)  $118,000 
B)  $126,000 
C)  $133,900 
D)  $125,900 
A)  $118,000 
B)  $126,000 
C)  $133,900 
D)  $125,900

Question 4

Jackson earned a salary of $254,000 in 2014. What amount of FICA taxes should Jackson's employer withhold from his paycheck?

Accepted Answer

The answer of Jackson earned a salary of $254,000 in...

Question 5

Sheryl's AGI is $250,000. Her current tax liability is $52,068. Last year, her tax liability was $48,722. She will not owe underpayment penalties if her total estimated tax payments are at least which of the following (rounded) amounts (assume she makes the required payments each quarter)?

Accepted Answer

A)  $46,861 
B)  $48,722 
C)  $51,547 
D)  $53,594 
A)  $46,861 
B)  $48,722 
C)  $51,547 
D)  $53,594

Question 6

Which of the following is not one of the general tax credit categories?

Accepted Answer

A)  Nonrefundable personal 
B)  Refundable personal 
C)  Business 
D)  Refundable business 
A)  Nonrefundable personal 
B)  Refundable personal 
C)  Business 
D)  Refundable business

Question 7

Which of the following statements concerning differences between employees and independent contractors is most accurate?

Accepted Answer

A)  Employees and independent contractors deduct business expenses as miscellaneous itemized deductions. 
B)  While employees are typically eligible for nontaxable fringe benefits from employers, independent contractors are not. 
C)  Employers are required to withhold either FICA or self employment taxes from compensation paid to employees and compensation paid to independent contractors. 
D)  Employers typically withhold federal income taxes from compensation paid to employees and to independent contractors. 
A)  Employees and independent contractors deduct business expenses as miscellaneous itemized deductions. 
B)  While employees are typically eligible for nontaxable fringe benefits from employers, independent contractors are not. 
C)  Employers are required to withhold either FICA or self employment taxes from compensation paid to employees and compensation paid to independent contractors. 
D)  Employers typically withhold federal income taxes from compensation paid to employees and to independent contractors.

Question 8

The lifetime learning credit can be used toward the cost of any course of instruction to acquire or improve a taxpayer's job skills, no matter the age of the taxpayer.

Accepted Answer

A) True 
 B)False

Question 9

In 2014, Shawn's AGI is $170,000. He earned the income evenly throughout the year. He owed $24,900 in federal income tax plus alternative minimum tax of $263, and self-employment taxes of $2,590. Last year, he had a gross tax liability of $50,000. What is the minimum quarterly estimated tax payment Shawn must pay each quarter to avoid underpayment penalties for 2014?

Accepted Answer

The answer of In 2014, Shawn's AGI is $170,000. He...

Question 10

Cassy reports a gross tax liability of $1,000. She also claims $400 of nonrefundable personal credits, $700 of refundable personal credits, and $200 of business credits. What is Cassy's tax refund or tax liability due after applying the credits?

Accepted Answer

A)  $1,000 taxes payable 
B)  $0 refund or taxes payable 
C)  $700 refund 
D)  $300 refund 
A)  $1,000 taxes payable 
B)  $0 refund or taxes payable 
C)  $700 refund 
D)  $300 refund

Question 11

Tamra and Jacob are married and they file a joint tax return. Tamra received nearly five times the salary that Jacob received. Which of the following statements is true?

Accepted Answer

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

Question 12

Self-employed taxpayers are allowed to deduct the full amount of the self-employment taxes they pay.

Accepted Answer

A) True 
 B)False

Question 13

During 2014, Jasmine (age 12) received $2,400 from a corporate bond. She also received $600 from a savings account established for her by her parents. Jasmine lives with her parents and she is their dependent. Assuming her parents' marginal tax rate is 28%, what is Jasmine's gross tax liability?

Accepted Answer

A)  $0 
B)  $100 
C)  $280 
D)  $380 
A)  $0 
B)  $100 
C)  $280 
D)  $380

Question 14

Julien and Sarah are married, file a joint return, and have two children, Kaya and Christopher. Kaya just finished her third year at college and Christopher just finished his first year of graduate school (fifth year of college). Tuition and books for the past year were $1,800 for Kaya and $5,000 for Christopher. How much can Julien and Sarah claim in educational credits if their joint AGI was $120,000 for 2014?

Accepted Answer

The answer of Julien and Sarah are married, file a...

Question 15

During all of 2014, Mr. and Mrs. Clay lived with their four children (all are under the age of 17). They provided over one-half of the support for each child. Mr. and Mrs. Clay file jointly for 2014. Neither is blind, and both are under age 65. They reported the following tax-related information for the year $\begin{array}{c}
\begin{array}{lll}
\text{Salary income}\
\text{Prize from local radio station}\
\
\text{Medical expenses (no health insurance)}\
\text{Real estate taxes}\
\text{Alimony paid by Mr. Clay}\
\text{State income taxes withheld in 2014}\
\text{State income taxes paid with 2014 tax (return was filed}\ 
\quad\text{in April, 2015)}\
\text{Federal income tax withholding}\
\text{Qualified home mortgage interest}\
\text{Charitable contributions}\
\end{array}
\begin{array}{lll}
&&
\end{array}
\begin{array}{lll}
\$ 125,000 \
1,500\
\
4,000\
4,200\
12,000\
1,800\
\
1,500\
7,500\
11,000\
4,000\
\end{array}
\end{array}$ A. What is the Clays' taxes payable or (refund due) (ignore the alternative minimum tax)?
B. What is the Clays' tentative minimum tax and alternative minimum tax?

Accepted Answer

A. Tax refund is $1,687.
B. A

Question 16

Which of the following statements regarding the self-employment tax is most accurate?

Accepted Answer

A)  The self-employment tax base is generally the taxpayer's net income from self-employment (usually net income from Schedule 
C) . 
B)  Taxpayers who report less than $600 of net income from self-employment (usually net income from Schedule 
C)  are not required to pay self employment taxes. 
C)  The self-employment tax base is net earnings from self employment which is less than net income from self-employment. 
D)  The Social Security tax limit does not apply to self-employment taxes. 
A)  The self-employment tax base is generally the taxpayer's net income from self-employment (usually net income from Schedule 
C) . 
B)  Taxpayers who report less than $600 of net income from self-employment (usually net income from Schedule 
C)  are not required to pay self employment taxes. 
C)  The self-employment tax base is net earnings from self employment which is less than net income from self-employment. 
D)  The Social Security tax limit does not apply to self-employment taxes.

Question 17

Generally, income from an active trade or business is subject to the 3.8% Net Investment Income tax.

Accepted Answer

A) True 
 B)False

Question 18

In 2014, Athena reported $37,500 of taxable income. Of this, $32,500 came from her work at the local library and the remaining $5,000 was from capital gains to be taxed at preferential rates. Compute her tax liability for 2014 as a single taxpayer.

Accepted Answer

The answer of In 2014, Athena reported $37,500 of taxable...

Question 19

Which of the following statements regarding FICA taxes is true?

Accepted Answer

A)  Low income employees are not required to pay FICA taxes. 
B)  An employee who has two different employers during the year may be entitled to a tax credit for overpaid FICA taxes. 
C)  The maximum amount of Medicare taxes an employee is required to pay is capped each year but the maximum amount of Social Security taxes is not. 
D)  The wage base limit for Social Security taxes depends on the taxpayer's filing status. 
A)  Low income employees are not required to pay FICA taxes. 
B)  An employee who has two different employers during the year may be entitled to a tax credit for overpaid FICA taxes. 
C)  The maximum amount of Medicare taxes an employee is required to pay is capped each year but the maximum amount of Social Security taxes is not. 
D)  The wage base limit for Social Security taxes depends on the taxpayer's filing status.

Question 20

For alternative minimum tax purposes, taxpayers are required to add back the regular tax standard deduction amount for their filing status whether or not they itemized deductions for regular tax purposes.

Accepted Answer

A) True 
 B)False

Exam 7: Individual Income Tax Computation and Tax Credits

Individuals may file for and receive a six-month extension of time to file their tax return and pay their taxes without penalty.

Which of the following suggests that a working taxpayer is an independent contractor rather than an employee?

Jackson earned a salary of $254,000 in 2014. What amount of FICA taxes should Jackson's employer withhold from his paycheck?

Sheryl's AGI is $250,000. Her current tax liability is $52,068. Last year, her tax liability was $48,722. She will not owe underpayment penalties if her total estimated tax payments are at least which of the following (rounded) amounts (assume she makes the required payments each quarter)?

Which of the following is not one of the general tax credit categories?

Which of the following statements concerning differences between employees and independent contractors is most accurate?

The lifetime learning credit can be used toward the cost of any course of instruction to acquire or improve a taxpayer's job skills, no matter the age of the taxpayer.

Cassy reports a gross tax liability of $1,000. She also claims $400 of nonrefundable personal credits, $700 of refundable personal credits, and $200 of business credits. What is Cassy's tax refund or tax liability due after applying the credits?

Tamra and Jacob are married and they file a joint tax return. Tamra received nearly five times the salary that Jacob received. Which of the following statements is true?

Self-employed taxpayers are allowed to deduct the full amount of the self-employment taxes they pay.

During 2014, Jasmine (age 12) received $2,400 from a corporate bond. She also received $600 from a savings account established for her by her parents. Jasmine lives with her parents and she is their dependent. Assuming her parents' marginal tax rate is 28%, what is Jasmine's gross tax liability?

Which of the following statements regarding the self-employment tax is most accurate?

Generally, income from an active trade or business is subject to the 3.8% Net Investment Income tax.

In 2014, Athena reported $37,500 of taxable income. Of this, $32,500 came from her work at the local library and the remaining $5,000 was from capital gains to be taxed at preferential rates. Compute her tax liability for 2014 as a single taxpayer.

Which of the following statements regarding FICA taxes is true?

For alternative minimum tax purposes, taxpayers are required to add back the regular tax standard deduction amount for their filing status whether or not they itemized deductions for regular tax purposes.

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

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