Question 1

If both spouses of a married couple earn roughly equivalent wages, the couple is likely to pay a marriage penalty due to the nature of the tax rate schedules.

Accepted Answer

A) True 
 B)False

Question 2

Employees are allowed to deduct a portion of the FICA taxes they pay.

Accepted Answer

A) True 
 B)False

Question 3

Baker earned $225,000 of salary as an employee in 2014. How much should his employer have withheld from his paycheck for FICA taxes (rounded to the nearest whole dollar amount)?

Accepted Answer

A)  $10,742 
B)  $10,517 
C)  $7,254 
D)  $17,213

Question 4

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 5

The AMT exemption amount is phased-out for high income taxpayers.

Accepted Answer

A) True 
 B)False

Question 6

The child and dependent care credit entitles qualifying taxpayers to a credit equal to the full amount of qualified expenses.

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

The kiddie tax does not apply to children over 24 years old at the end of the tax year.

Accepted Answer

A) True 
 B)False

Question 9

Maria and Tony are married. They are preparing to file their 2014 tax return. If they were to file as single taxpayers, Maria and Tony would report $40,000 and $60,000 of taxable income, respectively. On their joint tax return, their taxable income is $100,000. How much of a marriage penalty or benefit will Maria and Tony experience in 2014?

Accepted Answer

The answer of Maria and Tony are married. They are...

Question 10

In 2014, Maia (who files as a head of household) reported regular taxable income of $115,000. She itemized her deductions, deducting $8,000 in charitable contributions and $3,000 in state income taxes. She claimed exemptions for herself and her son, Hermes, ($3,900 each). What is Maia's alternative minimum taxable income?

Accepted Answer

A)  $118,000 
B)  $126,000 
C)  $133,900 
D)  $125,900

Question 11

Jerusha is married and she files a separate tax return in 2014. She claims two exemptions (2 × 3,950 = $7,900). She claimed the standard deduction for regular tax purposes ($6,200). 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 12

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 13

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)?

Accepted Answer

A)  $46,861 
B)  $48,722 
C)  $51,547 
D)  $53,594

Question 14

Which of the following statements regarding late filing penalties and/or late payment penalties is true?

Accepted Answer

A)  An extension of time to file the tax return protects a taxpayer from late payment penalties as long as the tax is paid by the extended due date of the return. 
B)  The penalty rate for late filing penalties is less than the penalty rate for late payment penalties. 
C)  If a taxpayer has not paid the full tax liability by the original due date of the return and the taxpayer has not filed a tax return by the due date of the return, the maximum late filing and late payment penalty will be no greater than the late filing penalty by itself. 
D)  None of these

Question 15

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 16

Henry and Janice are married and file jointly. They have an AGI (and modified AGI) of $290,000, which includes $90,000 of salary, $170,000 of active business income, $10,000 of interest income, $15,000 of dividends, and $5,000 of long-term capital gains. What is Henry and Janice's Net Investment Income tax liability this year, rounded to the nearest whole dollar amount?

Accepted Answer

The answer of Henry and Janice are married and file...

Question 17

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

Accepted Answer

A)  As withheld 
B)  As the employee requests on his/her W-4 form 
C)  Evenly throughout the year 
D)  On April 15

Question 18

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 19

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 20

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

Accepted Answer

A)  All of it 
B)  All of the unearned income 
C)  The net unearned income 
D)  Taxable income less the standard deduction

Exam 7: Individual Income Tax Computation and Tax Credits

If both spouses of a married couple earn roughly equivalent wages, the couple is likely to pay a marriage penalty due to the nature of the tax rate schedules.

Employees are allowed to deduct a portion of the FICA taxes they pay.

Baker earned $225,000 of salary as an employee in 2014. How much should his employer have withheld from his paycheck for FICA taxes (rounded to the nearest whole dollar amount) ?

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.

The AMT exemption amount is phased-out for high income taxpayers.

The child and dependent care credit entitles qualifying taxpayers to a credit equal to the full amount of qualified expenses.

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

The kiddie tax does not apply to children over 24 years old at the end of the tax year.

Jerusha is married and she files a separate tax return in 2014. She claims two exemptions (2 × 3,950 = $7,900). She claimed the standard deduction for regular tax purposes ($6,200). She had no other adjustments. Her regular taxable income was $67,800. What is Jerusha's AMTI?

Which of the following tax credits is fully refundable?

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) ?

Which of the following statements regarding late filing penalties and/or late payment penalties is true?

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]

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

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?

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

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