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

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

Accepted Answer

A)  All of the child's income
B)  All of the unearned income
C)  The net unearned income
D)  Taxable income less the standard deductionE) B) and C)
F) A) and D)

Question 3

Which of the following statements regarding the child tax credit is false?

Accepted Answer

A)  The child for whom the credit is claimed must be under the age of 15 at the end of the year
B)  The credit is subject to phase-out based on the taxpayer's AGI
C)  The full credit for a child who qualifies is $2,000
D)  The child for whom the full credit is claimed must meet the definition of a qualifying childE) A) and B)
F) A) and C)

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A)  A taxpayer with multiple eligible dependents can claim a credit for each dependent's qualifying expenses
B)  The credit is available for students during their first four years of postsecondary education only
C)  It is phased out based on the taxpayer's AGI
D)  A taxpayer may not claim a credit unless the taxpayer pays a dependent's qualifying educational expensesE) B) and C)
F) All of the above

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Employee status is always better than independent contractor status for a taxpayer because the employee is responsible for paying the employee portion of the FICA taxes.

Accepted Answer

A) True 
 B)False

Question 8

Regular taxable income is the starting point for determining the alternative minimum tax.

Accepted Answer

A) True 
 B)False

Question 9

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 the choices are correct.E) A) and D)
F) None of the above

Question 10

The American opportunity credit is available only for those students who are in their first or second year of postsecondary education.

Accepted Answer

A) True 
 B)False

Question 11

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)  $17,000E) B) and C)
F) None of the above

Question 12

Why would a taxpayer file a tax return if not required to do so?

Accepted Answer

A)  to remain in favor with the IRS
B)  to claim a refund of taxes paid
C)  all taxpayers are required to file returns
D)  in order to claim the standard deductionE) A) and B)
F) A) and C)

Question 13

Angelena files as a head of household. In 2019, she reported $53,450 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, long-term capital gains tax brackets.)

Accepted Answer

A)  $6,137
B)  $5,042
C)  $4,937
D)  $6,437E) A) and B)
F) A) and C)

Question 14

John and Sally pay Janet (Sally's older sister)to watch John and Sally's child Dexter during the day. Janet cares for Dexter in her home. John and Sally may claim a child and dependent care credit based on the amount they pay Janet to care for Dexter.

Accepted Answer

A) True 
 B)False

Question 15

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 16

The alternative minimum tax base is typically ________ the regular income tax base.

Accepted Answer

A)  smaller than
B)  about the same as
C)  larger than
D)  exactly the same asE) A) and B)
F) None of the above

Question 17

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 state income taxes paid
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 2010E) All of the above
F) None of the above

Question 18

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)  $380E) A) and D)
F) A) and C)

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

A marriage penalty occurs when a couple pays more taxes by filing a joint tax return than they would have paid had they filed married filing separately.

Accepted Answer

A) True 
 B)False

Exam 8: Individual Income Tax Computation and Tax Credits

Correct Answer
verified

The alternative minimum tax base is typically ________ the regular income tax base.

Correct Answer
verified

Regular taxable income is the starting point for determining the alternative minimum tax.

Correct Answer
verified

Employee status is always better than independent contractor status for a taxpayer because the employee is responsible for paying the employee portion of the FICA taxes.

Correct Answer
verified

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

Correct Answer
verified

Which of the following statements regarding the child tax credit is false?

Correct Answer
verified

The American opportunity credit is available only for those students who are in their first or second year of postsecondary education.

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

A marriage penalty occurs when a couple pays more taxes by filing a joint tax return than they would have paid had they filed married filing separately.

Correct Answer
verified

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?

Correct Answer
verified

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?

Correct Answer
verified

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

Correct Answer
verified

Angelena files as a head of household. In 2019, she reported $53,450 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, long-term capital gains tax brackets.)

Correct Answer
verified

John and Sally pay Janet (Sally's older sister)to watch John and Sally's child Dexter during the day. Janet cares for Dexter in her home. John and Sally may claim a child and dependent care credit based on the amount they pay Janet to care for Dexter.

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Why would a taxpayer file a tax return if not required to do so?

Correct Answer
verified

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.

Correct Answer
verified

Exam 8: Individual Income Tax Computation and Tax Credits

Correct AnswerverifiedShow Answer

The alternative minimum tax base is typically ________ the regular income tax base.

Correct AnswerverifiedShow Answer

Regular taxable income is the starting point for determining the alternative minimum tax.

Correct AnswerverifiedShow Answer

Employee status is always better than independent contractor status for a taxpayer because the employee is responsible for paying the employee portion of the FICA taxes.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following statements regarding the child tax credit is false?

Correct AnswerverifiedShow Answer

The American opportunity credit is available only for those students who are in their first or second year of postsecondary education.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A marriage penalty occurs when a couple pays more taxes by filing a joint tax return than they would have paid had they filed married filing separately.

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Angelena files as a head of household. In 2019, she reported $53,450 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, long-term capital gains tax brackets.)

Correct AnswerverifiedShow Answer

John and Sally pay Janet (Sally's older sister)to watch John and Sally's child Dexter during the day. Janet cares for Dexter in her home. John and Sally may claim a child and dependent care credit based on the amount they pay Janet to care for Dexter.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Why would a taxpayer file a tax return if not required to do so?

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

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