Exam 14: The Individual Tax Formula

Mr. Pearl's total income and self-employment tax on this year's Form 1040 is $72,610. If Mr. Pearl paid at least $65,349 of this tax in the form of withholding or quarterly estimated payments, he will not incur an underpayment penalty.

Mr. and Mrs. Reece couldn't complete their 2013 Form 1040 before April 15, 2014. 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. Eller's AGI last year was $287,300, and their total tax was $70,268. The couple's safe-harbor estimate of current year tax is $77,295.

Mr. and Mrs. Harvey's tax liability before credits was $1,675. Their income tax withholding was $1,050, and they are entitled to a $1,189 earned income credit. Which of the following statements is true?

Which of the following statements describing individual tax deductions is false?

Mr. and Mrs. Steel, who file a joint return, have $513,200 taxable income in 2013. Compute their regular tax liability.

Mr. and Mrs. Reid reported $435,700 ordinary taxable income for regular tax purposes and had $58,200 positive AMT adjustments and preferences. Compute their tentative minimum tax.

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?

Which of the following statements regarding the calculation of regular tax liability is false?

An individual's taxable income equals adjusted gross income less the exemption amount.

Leon died on August 23, 2011, and his wife Mary has not remarried. Since her husband's death, Mary has maintained a home for her two dependent children, who were ages 7 and 4 when their father died. Which of the following describes Mary's filing status for 2012, 2013, and 2014?

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

Mr. and Mrs. Daniels, ages 45, and 42, had the following income items in 2013: Mr. and Mrs. Daniels have no dependents and claim the standard deduction. Compute their income tax liability on a joint return.

Ms. Dolan, an unmarried individual, invited her elderly uncle, Martin, to move into her home in January of this year. Martin's only income item was $2,390 of taxable interest on a savings account. Ms. Dolan provides over 90% of her uncle's financial support. What is Ms. Dolan's filing status and number of exemptions for the year?

An individual is indifferent between filing as a single taxpayer or a head of household if he has $8,950 or less of taxable income.

Melissa, age 16, is claimed as a dependent on her parents' tax return. This year, Melissa earned $2,000 from babysitting and $1,280 interest income from a savings account. Compute Melissa's standard deduction.

Last year, Mr. Tyker's AGI was $182,800, and his total tax liability was $51,650. This year, his total tax liability is $65,440. Compute the minimum amount of current year tax that Mr. Tyker had to prepay (withholding and estimated payments) to avoid an underpayment penalty.

Miss Blixen's regular income tax is $77,390, and her tentative minimum tax is $74,100. Consequently, Miss Blixen's alternative minimum tax (AMT) is zero.

Mr. and Mrs. Upton's marginal tax rate on their joint return is 33%. This year, their itemized deductions totaled $13,400, and their standard deduction (MFJ) was $12,200. Compute their incremental tax savings from their itemized deductions.

Which of the following statements regarding filing status is false?