Exam 8: Individual Income Tax Computation and Tax Credits

When applying credits against a taxpayer's gross tax liability, nonrefundable personal credits are applied first, then business credits, and finally refundable personal credits.

If there is not enough gross tax liability to use the foreign tax credit, ________.

Which of the following statements regarding the earned income credit is true?

Tamra and Jacob are married and they file a joint tax return. Tamra received nearly five times the salary that Jacob received. Which of the following statements is true?

An 80-year-old taxpayer with earned income and no dependent children could qualify for the earned income credit.

Which of the following statement(s) concerning estimated tax payments and underpayment penalties for individuals is (are) true?

The child tax credit is subject to phase-out based on the taxpayer's AGI.

Employees must pay both Social Security tax and Medicare tax on the full amount of their wages no matter the amount of their wages.

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.

In certain circumstances a child with very little income may have at least a portion of their income taxed at the trust and estate tax rates.

Selene made $54,300 in 2018 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?

Alton reported net income from his sole proprietorship of $90,000. To determine his self-employment tax, he would multiply $90,000 by the self-employment tax rate.

Hester (age 17) is claimed as a dependent by his parents, Charlton and Abigail. In 2018, Hester received $10,000 of qualified dividends and he received $11,800 from a part time job. What is his taxable income for 2018?

Individuals may file for and receive a six-month extension of time to file their tax return and pay their taxes without penalty.

During 2018, Montoya (age 15) received $2,200 from a corporate bond. He also received $600 from a savings account established for him by his parents. Montoya lives with his parents and he is their dependent. What is Montoya's taxable income?

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

Which of the following is typical of taxpayers who are most likely affected by the AMT?

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

Assuming the kiddie tax applies, what amount of a child's income is subject to the kiddie tax?

Sam is 30 years old. In 2018, he reported an AGI of $12,000, all from his job as a server at the local café. He is single and has no dependents. What amount of earned income credit may he claim in 2018? Use Exhibit 8-10