Exam 8: Individual Income Tax Computation and Tax Credits

Which of the following statements regarding the child and dependent care credit is false?

The alternative minimum tax is the AMT base multiplied by the AMT rate.

Which of the following items is not added back to regular taxable income in computing alternative minimum taxable income?

The American opportunity credit and lifetime learning credit are available to all taxpayers regardless of their income level.

In 2018, Athena reported $39,600 of taxable income. Of this, $34,600 came from her work at the local library and the remaining $5,000 was from capital gains to be taxed at preferential rates. Compute her tax liability for 2018 as a single taxpayer. Use Tax Rate Schedule.)

Sheryl's AGI is $250,000. Her current tax liability is $52,068. Last year, her tax liability was $48,722. She will not owe underpayment penalties if her total estimated tax payments are at least which of the following (rounded) amounts (assume she makes the required payments each quarter)?

Julien and Sarah are married, file a joint return, and have two children, Kaya and Christopher. Kaya just finished her third year at college and Christopher just finished his first year of graduate school (fifth year of college). Tuition and books for the past year were $1,800 for Kaya and $5,000 for Christopher. How much can Julien and Sarah claim in educational credits if their joint AGI was $126,000 for 2018?

The late payment penalty is based on the amount of tax owed and the number of days that the tax is not paid. The maximum amount of the penalty is unlimited.

Stephanie and Mitch are married and they file a joint tax return. Mitch received a slightly higher salary than Stephanie did during the year. They both make very high salaries. Which of the following statements is true?

Tax credits reduce a taxpayer's taxable income dollar for dollar.

John and Sally pay Janet (Sally's older sister) to watch John and Sally's child Dexter during the day. Janet cares for Dexter in her home. John and Sally may claim a child and dependent care credit based on the amount they pay Janet to care for Dexter.

Hestia (age 17) is claimed as a dependent by her parents, Rhea and Chronus. In 2018, Hestia received $1,000 of interest income from a corporate bond that she owns. In addition, she has earned income of $200. What is her taxable income for 2018?

If an employer withholds taxes from an employee, in general, when are these taxes treated as paid to the IRS?

Assume Georgianne underpaid her estimated tax liability by $150 in the first quarter, $500 in the second quarter, $400 in the third quarter, and $200 in the fourth quarter. Calculate her underpayment penalty for the year, assuming the federal short-term interest rate is five percent.

An individual could pay 100% of her tax liability by the due date of her tax return and still be subject to underpayment tax penalties.

What happens if the taxpayer owes an underpayment penalty, but does not compute it on Form 2210?

The amount of expenditures eligible for the child and dependent care credit is the least of three amounts. Which of the following is not one of those amounts?

Wolfina's twins, Romulus and Remus, finished their first year of school at an accredited university in 2018. She paid $10,000 in qualified educational expenses for Romulus and $2,000 of qualifying expenses for Remus. Wolfina is a head of household with an AGI of $85,000. What amount of American opportunity credit may she claim?

Max is a 14-year-old dependent of his parents. During 2018, Max earned $1,800 working part time jobs and he received $1,500 of interest income from corporate bonds that were given to him last year. What is Max's 2018 taxable income?

The computation of the alternative minimum tax base begins with regular taxable income. Which of the following is not part of the formula for computing the alternative minimum tax base?