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Exam 8: Individual Income Tax Computation and Tax Credits

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Question 81

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What is the underpayment penalty rate that taxpayers pay when they underpay their estimated taxes?

A) Federal short-term interest rate
B) Federal short-term interest rate plus 3 percentage points
C) Federal long-term interest rate plus 6 percentage points
D) Zero.The government does not pay interest on overpayments

E) None of the above
F) B) and C)

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Question 82

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Taxpayers are not required to file a tax return unless their gross income passes a certain threshold.This threshold is generally the ________.

A) applicable standard deduction amount
B) AMT exemption amount
C) twice the applicable standard deduction amount
D) applicable standard deduction amount plus the personal exemption amount

E) A) and B)
F) A) and C)

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Question 83

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During all of 2019,Mr.and Mrs.Clay lived with their four children (all are under the age of 17).They provided over one-half of the support for each child.Mr.and Mrs.Clay file jointly for 2019.Neither is blind,and both are under age 65.They reported the following tax-related information for the year.(Use the tax rate schedules) 1.What are the Clays' taxes payable or refund due? (Ignore the alternative minimum tax.) 2.What are the Clays' tentative minimum tax and alternative minimum tax?

Cassy reports a gross tax liability of $1,000.She also claims $400 of nonrefundable personal credits,$700 of refundable personal credits,and $200 of business credits.What is Cassy's tax refund or tax liability due after applying the credits?

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)

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

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.

Generally,income from an active trade or business is subject to the 3.8 percent net investment income tax.

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)

During 2019,Jasmine (age 12) received $6,500 from a corporate bond.She also received $600 from a savings account established for her by her parents.Jasmine lives with her parents and she is their dependent.What is Jasmine's gross tax liability? (Use the Estates and trusts and Tax rate schedules.)

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

Which of the following statements regarding FICA taxes is true?

Clarissa's gross tax liability for 2019 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?

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?