Exam 14: The Individual Tax Formula

Mr. and Mrs. Warren's AGI last year was $90,300, and their total tax was $13,988. This year, the couple's total tax is $14,700. Unless the Warrens paid at least $13,988 in the form of withholding and quarterly estimated payments, they will incur an underpayment penalty this year.

The majority of individual taxpayers take the standard deduction rather than itemizing.

Which of the following situations result in a marriage penalty for federal income tax purposes?

Mr. and Mrs. Reece couldn't complete their 2012 Form 1040 before April 15, 2013. They estimate that they will have a $700 balance of tax due with the return. Which of the following statement is true?

Mr. and Mrs. Liddy, ages 39 and 41, file a joint return and have no dependents for the year. Here is their relevant information. Compute their adjusted gross income (AGI) and taxable income.

Ms. Lewis' maintains a household which is the principal place of residence for Kathy. Ms. Lewis' provides more than 50% of Kathy's financial support. In which of the following cases can Ms. Lewis' claim Kathy as a qualifying child?

Harry and Sally were married on December 23, 2011. Their income for the entire year is reported on a joint return.

Ms. Kilo is an unmarried individual. She has $219,344 taxable income in 2012. Compute Ms. Kilo's regular tax liability if she files as a single taxpayer and if she files as a surviving spouse.

Bill and Afton are married and file a joint tax return. Bill is 67 and Afton is 66, and neither is legally blind. Their standard deduction for 2012 is $14,200.

Which of the following statements regarding exemptions is false?

Mr. and Mrs. Toliver's AGI on their jointly filed return is $339,000. Regardless of the number of their children, the Tolivers are not eligible for a child credit.

Alice Grim, a single taxpayer, has $219,000 taxable income, which includes a $20,000 capital gain taxed at 15%. Her alternative minimum taxable income in excess of her exemption amount is $237,400. Compute Alice's regular tax, AMT, and total tax.

Mr. and Mrs. Luang reported $417,900 ordinary taxable income for regular tax purposes and had $39,100 positive AMT adjustments and preferences. Compute their tentative minimum tax.

Mrs. Starling worked for Abbot Inc. from January 1 through September 19. Her salary from Abbot for this period totaled $122,000. 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.

Julie, an unmarried individual, lives in a home with her 13-year-old dependent son, Oscar. This year, Julie had the following tax information. Compute Julie's adjusted gross income (AGI) and taxable income.

A husband and wife are allowed only one exemption on a jointly filed return.

An individual must pay the greater of her regular income tax or her alternative minimum tax (AMT) for the year.

Mr. Thomas is age 69, has perfect vision, and files as a single taxpayer. His standard deduction for 2012 is $7,400.

Mr. and Mrs. Cox reported $115,900 AGI on their joint return. The couple has three dependent children under age 17. Compute their child credit.

The earned income credit offsets the burden of the federal payroll tax on low-income families and encourages individuals to seek employment rather than to depend on welfare.