Question 1

If an employer withholds taxes from an employee, in general, when are these taxes treated as paid to the IRS?

Accepted Answer

A)  As withheld 
B)  As the employee requests on his/her W-4 form 
C)  Evenly throughout the year 
D)  On April 15 
A)  As withheld 
B)  As the employee requests on his/her W-4 form 
C)  Evenly throughout the year 
D)  On April 15

Question 2

Montague (age 15) is claimed as a dependent by his parents Matt and Mary. In 2014, Montague received $5,000 of qualified dividends and he received $800 from a part time job. What is his taxable income for 2014?

Accepted Answer

A)  $0 
B)  $3,800 
C)  $4,650 
D)  $4,800 
A)  $0 
B)  $3,800 
C)  $4,650 
D)  $4,800

Question 3

Hester (age 17) is claimed as a dependent by his parents, Charlton and Abigail. In 2014, Hester received $10,000 of qualified dividends and he received $6,000 from a part time job. What is his taxable income for 2014?

Accepted Answer

A)  $16,000 
B)  $15,000 
C)  $9,800 
D)  $9,650 
A)  $16,000 
B)  $15,000 
C)  $9,800 
D)  $9,650

Question 4

Selene made $54,300 in 2014 working at the local burger joint, Moon Café. How much should her employer withhold from her paycheck for FICA taxes if the calculation is made correctly?

Accepted Answer

The answer of Selene made $54,300 in 2014 working at...

Question 5

The alternative minimum tax system requires taxpayers to apply an alternative tax rate on the regular income tax base to determine the amount of the alternative minimum tax.

Accepted Answer

A) True 
 B)False

Question 6

Business credits are generally refundable credits.

Accepted Answer

A) True 
 B)False

Question 7

All capital gains are taxed at preferential rates.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following statements regarding the child and dependent care credit is false?

Accepted Answer

A)  Taxpayers may claim a credit for only a portion of qualifying dependent care expenditures. 
B)  If a taxpayer's income is too high, she will be ineligible to claim any child and dependent care credit. 
C)  A single taxpayer must have earned income to claim any child and dependent care credit. 
D)  A taxpayer is not eligible to claim the dependent care credit if any dependent relative provides the care. 
A)  Taxpayers may claim a credit for only a portion of qualifying dependent care expenditures. 
B)  If a taxpayer's income is too high, she will be ineligible to claim any child and dependent care credit. 
C)  A single taxpayer must have earned income to claim any child and dependent care credit. 
D)  A taxpayer is not eligible to claim the dependent care credit if any dependent relative provides the care.

Question 9

For married couples, the Social Security wage base limitation applies separately to each spouse.

Accepted Answer

A) True 
 B)False

Question 10

A marriage penalty occurs when a couple pays more taxes by filing a joint tax return than they would have paid had they filed married filing separate returns.

Accepted Answer

A) True 
 B)False

Question 11

Baker earned $225,000 of salary as an employee in 2014. How much should his employer have withheld from his paycheck for FICA taxes (rounded to the nearest whole dollar amount)?

Accepted Answer

A)  $10,742 
B)  $10,517 
C)  $7,254 
D)  $17,213 
A)  $10,742 
B)  $10,517 
C)  $7,254 
D)  $17,213

Question 12

Rhianna and Jay are married filing jointly in 2014. They have six children for whom they may claim the child tax credit. Their AGI was $123,440. What amount of child tax credit may they claim on their 2014 tax return?

Accepted Answer

A)  $5,300 
B)  $6,000 
C)  $12,000 
D)  $4,000 
A)  $5,300 
B)  $6,000 
C)  $12,000 
D)  $4,000

Question 13

All else equal, a reduction in regular income tax rates would require more taxpayers to pay the alternative minimum tax.

Accepted Answer

A) True 
 B)False

Question 14

Parents may claim a child and dependent care credit for expenses incurred in providing for their dependents while the parents work as long as the children are over age 14 and under age 20 at year end.

Accepted Answer

A) True 
 B)False

Question 15

What is the underpayment penalty rate that taxpayers pay when they underpay their estimated taxes?

Accepted Answer

A)  Federal short-term interest rate. 
B)  Federal short-term interest rate plus three percentage points. 
C)  Federal long-term interest rate plus six percentage points. 
D)  Zero. The government does not pay interest on overpayments. 
A)  Federal short-term interest rate. 
B)  Federal short-term interest rate plus three percentage points. 
C)  Federal long-term interest rate plus six percentage points. 
D)  Zero. The government does not pay interest on overpayments.

Question 16

Why would a taxpayer file a tax return if not required to do so?

Accepted Answer

A)  to remain in favor with the IRS 
B)  to claim a refund of taxes paid 
C)  all taxpayers are required to file returns 
D)  in order to claim the standard deduction 
A)  to remain in favor with the IRS 
B)  to claim a refund of taxes paid 
C)  all taxpayers are required to file returns 
D)  in order to claim the standard deduction

Question 17

For alternative minimum tax purposes, taxpayers are allowed to deduct state income taxes but are not allowed to deduct charitable contributions.

Accepted Answer

A) True 
 B)False

Question 18

Jack paid $5,000 in daycare expenses for his five-year-old daughter so he could work. His AGI for the year was $37,500 (all earned income). What is the amount of his child and dependent care credit?

Accepted Answer

The answer of Jack paid $5,000 in daycare expenses for...

Question 19

Angelena files as a head of household. In 2014, she reported $50,000 of taxable income, including a $10,000 qualified dividend. What is her gross tax liability, rounded to the nearest whole dollar amount (use the tax rate schedules)?

Accepted Answer

A)  $5,353 
B)  $5,443 
C)  $7,500 
D)  $6,913 
A)  $5,353 
B)  $5,443 
C)  $7,500 
D)  $6,913

Question 20

Which of the following is not a barrier to income shifting among family members?

Accepted Answer

A)  The assignment of income doctrine 
B)  Net unearned income for children 18 and younger taxed at parents' marginal tax rates 
C)  Elimination of preferential tax rates (on dividends and long-term capital gains) for dependents 
D)  Two of these 
A)  The assignment of income doctrine 
B)  Net unearned income for children 18 and younger taxed at parents' marginal tax rates 
C)  Elimination of preferential tax rates (on dividends and long-term capital gains) for dependents 
D)  Two of these

Exam 7: Individual Income Tax Computation and Tax Credits

If an employer withholds taxes from an employee, in general, when are these taxes treated as paid to the IRS?

Montague (age 15) is claimed as a dependent by his parents Matt and Mary. In 2014, Montague received $5,000 of qualified dividends and he received $800 from a part time job. What is his taxable income for 2014?

Hester (age 17) is claimed as a dependent by his parents, Charlton and Abigail. In 2014, Hester received $10,000 of qualified dividends and he received $6,000 from a part time job. What is his taxable income for 2014?

Selene made $54,300 in 2014 working at the local burger joint, Moon Café. How much should her employer withhold from her paycheck for FICA taxes if the calculation is made correctly?

The alternative minimum tax system requires taxpayers to apply an alternative tax rate on the regular income tax base to determine the amount of the alternative minimum tax.

Business credits are generally refundable credits.

All capital gains are taxed at preferential rates.

Which of the following statements regarding the child and dependent care credit is false?

For married couples, the Social Security wage base limitation applies separately to each spouse.

A marriage penalty occurs when a couple pays more taxes by filing a joint tax return than they would have paid had they filed married filing separate returns.

Baker earned $225,000 of salary as an employee in 2014. How much should his employer have withheld from his paycheck for FICA taxes (rounded to the nearest whole dollar amount)?

Rhianna and Jay are married filing jointly in 2014. They have six children for whom they may claim the child tax credit. Their AGI was $123,440. What amount of child tax credit may they claim on their 2014 tax return?

All else equal, a reduction in regular income tax rates would require more taxpayers to pay the alternative minimum tax.

Parents may claim a child and dependent care credit for expenses incurred in providing for their dependents while the parents work as long as the children are over age 14 and under age 20 at year end.

What is the underpayment penalty rate that taxpayers pay when they underpay their estimated taxes?

Why would a taxpayer file a tax return if not required to do so?

For alternative minimum tax purposes, taxpayers are allowed to deduct state income taxes but are not allowed to deduct charitable contributions.

Jack paid $5,000 in daycare expenses for his five-year-old daughter so he could work. His AGI for the year was $37,500 (all earned income). What is the amount of his child and dependent care credit?

Angelena files as a head of household. In 2014, she reported $50,000 of taxable income, including a $10,000 qualified dividend. What is her gross tax liability, rounded to the nearest whole dollar amount (use the tax rate schedules)?

Which of the following is not a barrier to income shifting among family members?

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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