Question 1

Apollo is single and his AMT base is $100,250. This amount includes $500 of qualified dividends (the dividends were taxed at 15% in determining the regular tax liability). What is Apollo's tentative minimum tax?

Accepted Answer

The answer of Apollo is single and his AMT base...

Question 2

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?

Accepted Answer

A)  Subtract personal exemptions 
B)  Add the standard deduction amount if used for regular tax 
C)  Subtract the AMT exemption amount (if any) 
D)  Add back tax exempt interest from a private activity bond not issued in 2009 or 2010.

Question 3

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

Accepted Answer

A)  Whether taxpayers are subject to underpayment penalties is determined on a quarterly basis. 
B)  Due dates for estimated tax payments for a given year are April 15, June 15, September 15 of that year and January 15 of the next year unless these dates fall on a weekend or a holiday. 
C)  The amount of penalty depends on the amount of the underpayment among other factors. 
D)  All of these statements are true.

Question 4

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 not subject to the two percent of AGI floor 
C)  from AGI deductions subject to a two percent of AGI floor 
D)  for AGI deductions limited to income from the business activities

Question 5

Jackson earned a salary of $254,000 in 2014. What amount of FICA taxes should Jackson's employer withhold from his paycheck?

Accepted Answer

The answer of Jackson earned a salary of $254,000 in...

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Hestia (age 17) is claimed as a dependent by her parents, Rhea and Chronus. In 2014, 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 2014?

Accepted Answer

A)  $0 
B)  $200 
C)  $650 
D)  $1,200

Question 8

In 2014, Athena reported $37,500 of taxable income. Of this, $32,500 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 2014 as a single taxpayer.

Accepted Answer

The answer of In 2014, Athena reported $37,500 of taxable...

Question 9

For alternative minimum tax purposes, taxpayers are required to add back the regular tax standard deduction amount for their filing status whether or not they itemized deductions for regular tax purposes.

Accepted Answer

A) True 
 B)False

Question 10

Looking at the following partial calendar for April, when will individual tax returns be due? $$\begin{array} { |ccccccccccccccccccccccccccccccccccc|} 
\hline
&&&&&&&&&&&&&&&{ \text { April } } &&&&&&&&&&&&&&&&&&&
\end{array}$$
$$\begin{array} { | r | r | r | r | r | r | r | } 
\hline \text { Sunday } & \text { Monday } & \text { Tuesday } & \text { Wednesday } & \text { Thursday } & \text { Friday } & \text { Saturday } \
\hline & & & & & & 1 \
\hline 2 & 3 & 4 & 5 & 6 & 7 & 8 \
\hline 9 & 10 & 11 & 12 & 13 & 14 & 15 \
\hline 16 & \begin{array} { r } 
17 \
\text { National } \
\text { Accountants } \
\text { Day }\
\text { (Fedral }\
\text { Holiday) }\
\end{array} & 18 & 19 & 20 & 21 & 22 \
\hline 
\end{array}$$

Accepted Answer

A)  Friday, April 14 
B)  Saturday, April 15 
C)  Sunday, April 16 
D)  Monday, April 17 
E)  Tuesday, April 18

Question 11

Costa is a single taxpayer. His regular tax liability was $38,000. For 2014, he reported $190,000 of alternative minimum taxable income. What is his alternative minimum tax? [Use 2014 AMT Exemption amount]

Accepted Answer

The answer of Costa is a single taxpayer. His regular...

Question 12

Jack paid $5,000 in daycare expenses for his five-year-old daughter so he could work. His AGI for the year was $37,500 (all earned income). What is the amount of his child and dependent care credit?

Accepted Answer

The answer of Jack paid $5,000 in daycare expenses for...

Question 13

Clarissa's gross tax liability for 2014 is $1,300. She has a $1,500 nonrefundable personal tax credit, a $750 business tax credit, and a $400 refundable personal tax credit. Her employer withheld $1,000 from her pay for taxes. What is her net tax due or refund for this year?

Accepted Answer

The answer of Clarissa's gross tax liability for 2014 is...

Question 14

Long-term capital gains are taxed at the stated AMT rate for purposes of the alternative minimum tax.

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

Angelena files as a head of household. In 2014, she reported $50,000 of taxable income, including a $10,000 qualified dividend. What is her gross tax liability, rounded to the nearest whole dollar amount (use the tax rate schedules)?

Accepted Answer

A)  $5,353 
B)  $5,443 
C)  $7,500 
D)  $6,913

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

Lexa 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 and $943 of Medicare tax. In the second half of the year, she was self-employed and she reported $180,000 of self-employment income on her ScheduleC. What amount of self-employment taxes is Lexa required to pay?
$11,549.
 $\begin{array}{c}
\begin{array}{|l|}
\hline
Description\
\hline
\text{(1) Social Security wage base limit less}\ \text{employec compensation subject to}\ \text{Social Security tax}\
\hline
\text{(2) Net eamings from self-employment}\
\hline
\text{(3) Social Security portion of}\ \text{selfemployment tax}\
\hline
\text{(4) Employer portion of Medicare tax on}\ \text{the self-employment income}\
\hline
\text{(5) Sum of taxpayer's compensation and net}\ 
\text{earnings from self-employment}\
\hline
\text{(6) Lesser of [Step (5) amount or  \$ 200,000]}\ 
\text{x 1.45 \%}\
\hline 
\text{(7) Greater of [(a) zero or (b) the amount}\
 \text{from Step  (5)  minus \$ 200,000] x 2.35 \%}\
\hline 
\text{(8) Steps $ (6)+(7) $ - Medieare taxes}\ \text{withheld by Lexa's employer. This is}\ 
\text{the employee pertion of Medicare tax}\ \text{on the self-employment income.}\
\hline
\text{(9) Steps (3)+(4)+(8)}\ 
\hline
\end{array}
\begin{array}{r}
\hline
Amount\
\hline \$ 52,000 \\\
\hline 166,230 \
\hline 6,448 \\
\hline 2,410 \\
\hline 231,230 \\
\hline 2,900 \\
\hline 734 \\
\hline 2,691 \\\\
\hline11,549\
\hline
\end{array}
\begin{array}{|l|}
\hline
Explanation\
\hline\$ 117,000-\$ 65,000 , \text{limited to} \$ 0\\\ 
\hline\$ 180,000 x 92.35 \% \
\hline \text{Lesser of  [  Step  (1) or (2)]} x 12.4 \%  \\
\hline S tep (2) x 1.45 \%  \\
\hline\$ 65,000+  Step  (2)  \\
\hline 200,000 x1.45 \%  \\
\hline31,230 x 2.35 \% \\
\hline 2,900+734-943 \\\\
\hline\
\hline
\end{array}
\end{array}$

Accepted Answer

The answer of Lexa worked as an employee during the...

Question 19

How could an individual obtain a business tax credit?

Accepted Answer

A)  Through self-employment activities 
B)  Through flow-through from a partnership or S corporation 
C)  By working overseas and obtaining a foreign tax credit 
D)  All of these

Question 20

Which of the following statements regarding FICA taxes is true?

Accepted Answer

A)  Low income employees are not required to pay FICA taxes. 
B)  An employee who has two different employers during the year may be entitled to a tax credit for overpaid FICA taxes. 
C)  The maximum amount of Medicare taxes an employee is required to pay is capped each year but the maximum amount of Social Security taxes is not. 
D)  The wage base limit for Social Security taxes depends on the taxpayer's filing status.

Exam 7: Individual Income Tax Computation and Tax Credits

Apollo is single and his AMT base is $100,250. This amount includes $500 of qualified dividends (the dividends were taxed at 15% in determining the regular tax liability). What is Apollo's tentative minimum tax?

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?

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

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

Jackson earned a salary of $254,000 in 2014. What amount of FICA taxes should Jackson's employer withhold from his paycheck?

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

Hestia (age 17) is claimed as a dependent by her parents, Rhea and Chronus. In 2014, 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 2014?

In 2014, Athena reported $37,500 of taxable income. Of this, $32,500 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 2014 as a single taxpayer.

For alternative minimum tax purposes, taxpayers are required to add back the regular tax standard deduction amount for their filing status whether or not they itemized deductions for regular tax purposes.

Costa is a single taxpayer. His regular tax liability was $38,000. For 2014, he reported $190,000 of alternative minimum taxable income. What is his alternative minimum tax? [Use 2014 AMT Exemption amount]

Jack paid $5,000 in daycare expenses for his five-year-old daughter so he could work. His AGI for the year was $37,500 (all earned income). What is the amount of his child and dependent care credit?

Clarissa's gross tax liability for 2014 is $1,300. She has a $1,500 nonrefundable personal tax credit, a $750 business tax credit, and a $400 refundable personal tax credit. Her employer withheld $1,000 from her pay for taxes. What is her net tax due or refund for this year?

Long-term capital gains are taxed at the stated AMT rate for purposes of the alternative minimum tax.

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

Angelena files as a head of household. In 2014, she reported $50,000 of taxable income, including a $10,000 qualified dividend. What is her gross tax liability, rounded to the nearest whole dollar amount (use the tax rate schedules) ?

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

How could an individual obtain a business tax credit?

Which of the following statements regarding FICA taxes is true?