Exam 12: Tax Credits and Payments

Bob and Sally are married, file a joint tax return, have AGI of $108,000, and have two children.Del is beginning her freshman year at State College during Fall 2012, and Owen is beginning his senior year at Southwest University during Fall 2012.Owen completed his junior year during the Spring semester of 2010 (i.e., he took a "leave of absence" during the 2011-2012 school year).Both Del and Owen are claimed as dependents on their parents' tax return.Del's qualifying tuition expenses and fees total $5,000 for the Fall semester, while Owen's qualifying tuition expenses were $6,100 for the Fall 2012 semester.Del's room and board costs were $3,200 for the Fall semester.Owen did not incur room and board costs since he lived with his aunt and uncle during the year.Full payment is made for the tuition and related expenses for both children at the beginning of each semester.In addition to the children's college expenses, Bob also spent $3,000 on professional education seminars during the year in order to maintain his license as a practicing dentist.Bob attended the seminars during July and August 2012.Compute the available education tax credits for Bob and Sally for 2012.

Nonrefundable credits are those that reduce the taxpayer's tax liability but are not paid when the amount of the credit (or credits) exceeds the taxpayer's tax liability.

Bradley has two college-age children, Clint, a freshman at State University, and Abigail, a junior at Northwest University.Both Clint and Abigail are full-time students.Clint's expenses during the 2012 fall semester are as follows: $2,400 tuition, $250 books and course materials, and $1,600 room and board.Abigail's expenses for the 2012 calendar year are as follows: $10,200 tuition, $1,200 books and course materials, and $3,600 room and board.Tuition and the applicable room and board costs are paid at the beginning of each semester.Bradley is married, files a joint tax return, claims both children as dependents, and has a combined AGI with his wife of $114,000 for 2012.Determine Bradley's available education tax credit for 2012.

A taxpayer's earned income credit is dependent on the number of his or her qualifying children.

The credit for child and dependent care expenses is an example of a refundable credit.

Dabney and Nancy are married, both gainfully employed, and have two children who are 3 and 6 years old.Dabney's salary is $35,000 while Nancy's salary is $40,000.During the year, they spend $7,000 for child care expenses that are required so both of them can work outside of the home.Calculate the credit for child and dependent care expenses.

In March 2012, Gray Corporation hired two individuals, both of whom were certified as long-term recipients of family assistance benefits.Each employee was paid $11,000 during 2012.Only one of the individuals continued to work for Gray Corporation in 2013, earning $9,000 during the year.No additional workers were hired in 2013.Gray Corporation's work opportunity tax credit amounts for 2012 and 2013 are:

The earned income credit is available only if the taxpayer has at least one qualifying child in the household.

Kevin and Sue have two children, ages 8 and 14.They spend $6,200 per year on eligible employment related expenses for the care of their children after school.Kevin earned a salary of $20,000 and Sue earned a salary of $18,000.What is the amount of the credit for child and dependent care expenses?

The tax benefit received from a tax credit is affected by the tax rate of the taxpayer.

All taxpayers are eligible to take the basic research credit.

How does the FICA tax compare to the self-employment tax? How are these two taxes similar and how do they differ?

The work opportunity tax credit is available only for wages paid to qualifying individuals during their first year of employment.

Molly has generated general business credits over the years that have not been utilized.The amounts generated and not utilized follow: In the current year, 2012, her business generates an additional $30,000 general business credit.In 2012, based on her tax liability before credits, she can utilize a general business credit of up to $40,000.After utilizing the carryforwards and the current year credits, how much of the general business credit generated in 2012 is available for future years?

Expenses that are reimbursed by a taxpayer's employer under a dependent care assistance program canalso qualify for the credit for child and dependent care expenses.

George and Jill are husband and wife, ages 67 and 65 respectively.During the year, they receive Social Security benefits of $4,000 and have adjusted gross income of $11,000.Assuming they file a joint return, their tax credit for the elderly, before considering any possible limitation due to their tax liability, is:

The purpose of the work opportunity tax credit is to encourage employers to hire individuals from specified target groups traditionally subject to high rates of unemployment.

Explain the purpose of the tax credit for rehabilitation expenditures and describe the general characteristics of its computation.

Because current U.S.corporate income tax rates are higher than many foreign corporate income tax rates, the overall limitation does not yield a lower foreign tax credit than the amount of foreign taxes actually paid.

Refundable tax credits include the: