Question 1

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 2

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 3

In certain circumstances a child with very little income may have their income taxed at the parents' marginal tax rate.

Accepted Answer

A) True 
 B)False

Question 4

Katlyn reported $300 of net income from her sole proprietorship. She is not required to pay self-employment tax.

Accepted Answer

A) True 
 B)False

Question 5

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 6

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

Accepted Answer

A) True 
 B)False

Question 7

Tax rate schedules are provided for use by (relatively) higher income taxpayers while the tax tables are provided for use by (relatively) lower income taxpayers.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

If a married couple has one primary breadwinner, filing a joint return will likely result in a marriage penalty.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

Allen Green is a single taxpayer with an AGI (and modified AGI) of $210,000, which includes $170,000 of salary, $25,000 of interest income, $10,000 of dividends, and $5,000 of long-term capital gains. What is Allen's Net Investment Income tax liability this year, rounded to the nearest whole dollar amount?

Accepted Answer

A)  $2,465 
B)  $1,520 
C)  $570 
D)  $380

Question 12

Harmony reports a regular tax liability of $15,000 and tentative minimum tax of $17,000. Given just this information, what is her alternative minimum tax liability for the year?

Accepted Answer

A)  $0 
B)  $2,000 
C)  $15,000 
D)  $17,000

Question 13

Miley, a single taxpayer, plans on reporting $27,900 of taxable income this year (all of her income is from a part-time job). She is considering applying for a second part-time job that would give her an additional $10,000 of taxable income. By how much will the income from the second job increase her tax liability (use the tax rate schedules)?

Accepted Answer

A)  $1,000 
B)  $1,500 
C)  $1,600 
D)  $2,500

Question 14

Demeter is a single taxpayer. Her AGI in 2014 is $81,200. 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...

Question 15

Which of the following tax credits is fully refundable?

Accepted Answer

A)  American opportunity credit 
B)  Dependent care credit 
C)  Earned income credit 
D)  None of these

Question 16

Which of the following statements about estimated tax payments and underpayment penalties is true for individual taxpayers?

Accepted Answer

A)  Taxpayers who have paid their full tax liability by the original tax return due date are protected from underpayment penalties. 
B)  Taxpayers who have paid their full tax liability by the extended tax return due date are protected from underpayment penalties. 
C)  Taxpayers who have uneven income streams can pay estimated tax quarterly in uneven amounts and not be susceptible to underpayment penalties. 
D)  Taxpayers who have paid their required amount of estimated tax, even though not on time, are protected from underpayment penalties.

Question 17

Taxpayers are generally allowed to carry back and/or carry forward unused business credits.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is not typical of taxpayers who are most likely affected by the AMT?

Accepted Answer

A)  Have many dependents 
B)  Pay high state income tax 
C)  Pay high property taxes 
D)  Have relatively low capital gains

Question 19

Taxpayers are not allowed to deduct personal or dependency exemptions for alternative minimum tax purposes.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is not a true statement about the American opportunity credit (AOC) and lifetime learning credits?

Accepted Answer

A)  A taxpayer may not report both an AOC and a lifetime learning credit on the same tax return 
B)  Certain educational expenses qualify for both credits but taxpayers must claim one credit or the other for the expenditures (the taxpayer cannot claim both credits for the same expenditures) 
C)  Taxpayers may choose to either (1) deduct qualifying education expenses of an individual as for AGI deductions or claim educational credits for the individual's expenses (but not both) 
D)  The AGI phase-out threshold for phasing out the AOC is higher than the AGI phase-out threshold for the lifetime learning credit.

Exam 7: Individual Income Tax Computation and Tax Credits

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.

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

In certain circumstances a child with very little income may have their income taxed at the parents' marginal tax rate.

Katlyn reported $300 of net income from her sole proprietorship. She is not required to pay self-employment tax.

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

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

Tax rate schedules are provided for use by (relatively) higher income taxpayers while the tax tables are provided for use by (relatively) lower income taxpayers.

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

If a married couple has one primary breadwinner, filing a joint return will likely result in a marriage penalty.

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

Harmony reports a regular tax liability of $15,000 and tentative minimum tax of $17,000. Given just this information, what is her alternative minimum tax liability for the year?

Demeter is a single taxpayer. Her AGI in 2014 is $81,200. 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?

Which of the following tax credits is fully refundable?

Which of the following statements about estimated tax payments and underpayment penalties is true for individual taxpayers?

Taxpayers are generally allowed to carry back and/or carry forward unused business credits.

Which of the following is not typical of taxpayers who are most likely affected by the AMT?

Taxpayers are not allowed to deduct personal or dependency exemptions for alternative minimum tax purposes.

Which of the following is not a true statement about the American opportunity credit (AOC) and lifetime learning credits?