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Exam 8: Individual Income Tax Computation and Tax Credits

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Question 41

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

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

E) A) and B)
F) All of the above

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Question 42

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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)?

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$13,522, consisting of $13,241...

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Question 43

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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.

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

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

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?

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

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

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?

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

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

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

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)

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 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.

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)

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

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?

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.

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