Question 1

Kaelyn's mother, Judy, looks after Kaelyn's four-year-old twins so Kaelyn can go to work (she drops off and picks up the twins from Judy's home every day).Since Judy is a relative, Kaelyn made sure, for tax purposes, to pay her mother the going rate for child care ($6,300 for the year).What is the amount of Kaelyn's child and dependent care credit if her AGI for the year was $36,000? (Exhibit 8-9)

Accepted Answer

A) $1,440 
B) $2,100 
C) $6,000 
D) $0

Question 2

Which of the following represents the correct order in which credits are applied to gross tax liability (from first to last)?

Accepted Answer

A) Nonrefundable personal, business, refundable 
B) Business, nonrefundable personal, refundable 
C) Refundable, nonrefundable personal, business 
D) Refundable, business, nonrefundable personal

Question 3

Montague (age 15)is claimed as a dependent by his parents, Matt and Mary.In 2019, Montague received $5,000 of qualified dividends, and he received $800 from a part-time job.What is his taxable income for 2019?

Accepted Answer

A) $0 
B) $3,900 
C) $4,650 
D) $4,750

Question 4

Depending on the year, the original (unextended)due date for an individual's tax return may be before April 15.

Accepted Answer

A) True 
 B)False

Question 5

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.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A) Nothing, unless the taxpayer is audited 
B) The taxpayer is immediately sent to the Tax Court 
C) The IRS will compute and assess the penalty 
D) The penalty is increased by five percentage points

Question 7

Jerusha is married and she files a separate tax return in 2019.She claimed the standard deduction for regular tax purposes ($12,200).She had no other adjustments.Her regular taxable income was $67,800.What is Jerusha's AMTI?

Accepted Answer

The answer of Jerusha is married and she files a...

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

Sam is 30 years old.In 2019, 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 2019? Use Exhibit 8-10

Accepted Answer

The answer of Sam is 30 years old.In 2019, he...

Question 10

Carolyn has an AGI of $38,000 (all from earned income)and two qualifying children and is filing as a head of household.What amount of earned income credit is she entitled to? (Exhibit 8-10)

Accepted Answer

A) $0 
B) $1,833 
C) $3,526 
D) $3,995 
E) $5,828

Question 11

Lexa, a single taxpayer, worked as an employee during the first half of the year, earning $65,000 of salary.Lexa's employer withheld $4,030 of Social Security tax, $943 of Medicare tax, and $0 of additional Medicare tax.In the second half of the year, she was self-employed and she reported $180,000 of self-employment income on her Schedule C.What amount of self-employment taxes and additional Medicare tax is Lexa required to pay on her self-employment income (each component rounded to the nearest dollar)?

Accepted Answer

The answer of Lexa, a single taxpayer, worked as an...

Question 12

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.

Accepted Answer

A) True 
 B)False

Question 13

Self-employed taxpayers are allowed to deduct the full amount of the self-employment taxes they pay.

Accepted Answer

A) True 
 B)False

Question 14

Demeter is a single taxpayer.Her AGI in 2019 is $209,200.Demeter may claim a child tax credit for her daughter Persephone.What amount of child tax credit is Demeter entitled to claim after any applicable phase-out?

Accepted Answer

The answer of Demeter is a single taxpayer.Her AGI in...

Question 15

All else equal, taxpayers are more likely to be classified as employees rather than independent contractors if they are allowed to determine their own working hours and work without frequent oversight.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following statements best describes the deductions independent contractors may claim for valid business expenses?

Accepted Answer

A) for AGI deductions 
B) from AGI deductions 
C) from AGI deductions limited to income from the business activities 
D) for AGI deductions limited to income from the business activities

Question 17

Which of the following best describes the manner in which self-employed taxpayers may deduct self-employment taxes?

Accepted Answer

A) Deduct employer portion from AGI. 
B) Deduct entire amount from AGI. 
C) Deduct employer portion for AGI. 
D) Deduct entire amount for AGI. 
E) No deduction.

Question 18

Which of the following is not true of the American opportunity credit?

Accepted Answer

A) A taxpayer with multiple eligible dependents can claim a credit for each dependent's qualifying expenses 
B) The credit is available for students during their first four years of postsecondary education only 
C) It is phased out based on the taxpayer's AGI 
D) A taxpayer may not claim a credit unless the taxpayer pays a dependent's qualifying educational expenses

Question 19

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?

Accepted Answer

A) Stephanie and Mitch likely pay no tax marriage penalty nor receive a tax marriage benefit. 
B) Stephanie and Mitch likely pay a tax marriage penalty. 
C) Stephanie and Mitch likely receive a tax marriage benefit. 
D) Stephanie and Mitch likely will pay a tax marriage penalty and receive a tax marriage benefit.

Question 20

The Olympians have three children.The kiddie tax applies to unearned income received by which of the following children?

Accepted Answer

A) Poseidon is a 20-year-old full-time student who does not support himself 
B) Demeter is a 23-year-old full-time student who supports herself with a job at a grocery store 
C) Zeus is 20 years old and not a student 
D) Demeter is a 23-year-old full-time student who supports herself with a job at a grocery store and Zeus is 20 years old and not a student 
E) None of the choices are correct

Exam 8: Individual Income Tax Computation and Tax Credits

Which of the following represents the correct order in which credits are applied to gross tax liability (from first to last) ?

Montague (age 15) is claimed as a dependent by his parents, Matt and Mary.In 2019, Montague received $5,000 of qualified dividends, and he received $800 from a part-time job.What is his taxable income for 2019?

Depending on the year, the original (unextended)due date for an individual's tax return may be before April 15.

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.

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

Jerusha is married and she files a separate tax return in 2019.She claimed the standard deduction for regular tax purposes ($12,200).She had no other adjustments.Her regular taxable income was $67,800.What is Jerusha's AMTI?

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

Sam is 30 years old.In 2019, 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 2019? Use Exhibit 8-10

Carolyn has an AGI of $38,000 (all from earned income) and two qualifying children and is filing as a head of household.What amount of earned income credit is she entitled to? (Exhibit 8-10)

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.

Self-employed taxpayers are allowed to deduct the full amount of the self-employment taxes they pay.

Demeter is a single taxpayer.Her AGI in 2019 is $209,200.Demeter may claim a child tax credit for her daughter Persephone.What amount of child tax credit is Demeter entitled to claim after any applicable phase-out?

All else equal, taxpayers are more likely to be classified as employees rather than independent contractors if they are allowed to determine their own working hours and work without frequent oversight.

Which of the following statements best describes the deductions independent contractors may claim for valid business expenses?

Which of the following best describes the manner in which self-employed taxpayers may deduct self-employment taxes?

Which of the following is not true of the American opportunity credit?

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?

The Olympians have three children.The kiddie tax applies to unearned income received by which of the following children?