Exam 12: Tax Credits and Payments

The education tax credits (i.e., the American Opportunity credit and the lifetime learning credit) are available to help defray the cost of higher education regardless of the income level of the taxpayer.

Unused foreign tax credits can be carried back one year and forward fifteen years.

The child tax credit is based on the number of the taxpayer's qualifying children under age 17.

An employer's tax deduction for wages is not affected by the work opportunity tax credit.

The incremental research activities credit is 20% of the qualified research expenses that exceed the base amount.

Roger is considering making a $3,000 investment in a venture that its promoter promises will generate immediate tax benefits for him.Roger, who does not anticipate itemizing his deductions, is in the 30% marginal income tax bracket.If the investment is of a type that produces a tax credit of 40% of the amount of the expenditure, by how much will Roger's tax liability decline because of the investment?

If the cost of a building constructed and placed into service by an eligible small business in the current year includes the cost of a wheelchair ramp, the cost of the ramp qualifies for the disabled access credit.

For the current year, the base amount for the Social Security portion (old age, survivors, and disability insurance) is different from that for the Medicare portion of FICA.

Any unused general business credit must be carried back 1 year and then forward for 20 years.

An employer calculates the amount of income tax withheld from salary or wages based on the information an employee provides on the following form:

The additional Medicare taxes assessed on high-income individuals carry differing tax rates depending on the tax base.

Black Company paid wages of $360,000, of which $80,000 was qualified wages for the work opportunity tax credit under the general rules.Black Company's deduction for wages for the year is:

Employers are encouraged by the work opportunity tax credit to hire individuals who have been long-term recipients of family assistance welfare benefits.

A taxpayer who qualifies for the low-income housing credit claims the credit over a 15-year period.

Amber is in the process this year of renovating the office building (originally placed in service in 1976) used by her business.Because of current Federal Regulations that require the structure to be accessible to handicapped individuals, she incurs an additional $11,000 for various features, such as ramps and widened doorways, to make her office building more accessible.The $11,000 incurred will produce a disabled access credit of what amount?

The disabled access credit is computed at the rate of 50% of all access expenditures incurred by the taxpayer during the year.

The earned income credit, a form of a negative income tax, is a nonrefundable credit.

In May 2008, Cindy incurred qualifying rehabilitation expenditures of $500,000 on a certified historic structure and properly claimed the tax credit for rehabilitation expenditures.In March 2012, she sold the building at a loss.Calculate the rehabilitation expenditures credit recapture that she must report in 2012.

The maximum child tax credit under current law is $1,200 per qualifying child.

Pat generated self-employment income in 2012 of $76,000.The self-employment tax is: