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Exam 8: Individual Income Tax Computation and Tax Credits

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Question 71

Multiple Choice

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Which of the following statements regarding the earned income credit is true?

A) It is a nonrefundable credit.
B) It is possible that a taxpayer with more earned income may receive more credit than a taxpayer with less earned income.
C) A 70-year-old taxpayer with no dependents can qualify for the credit in certain circumstances.
D) A taxpayer whose only source of income is interest from corporate bonds is eligible for the credit.

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

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Question 72

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Employees are not allowed to deduct FICA taxes they pay.

A) True
B) False

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Question 73

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Which of the following statements accurately describes the alternative minimum tax rate(s) ?

Jocelyn,a single taxpayer,had $742,000 of taxable income in 2017.All of the income is ordinary.What is her tax liability for the year? (Use tax rate schedule in the text.)

Atlas earned $17,300 from his sole proprietorship in 2017.This was his only source of income.How much in self-employment taxes will Atlas be able to deduct?

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.

Paul and Melissa plan on filing jointly in 2017.For the year,the couple reported taxable income of $130,000.What is their gross tax liability? (Use tax rate schedule in the text.)

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

Angelena files as a head of household.In 2017,she reported $51,400 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 in the text)

Parents may claim a child tax credit for a dependent child who is 22 years of age at the end of the year if the child is a full-time student.

Which of the following statements concerning a comparison between employees and independent contractors is most accurate?

Wolfina's twins,Romulus and Remus,finished their first year of school at an accredited university in 2017.She paid $10,000 in qualified educational expenses for Romulus and $2,000 of qualifying expenses for Remus.Wolfina is a head of household with an AGI of $85,000.What amount of American opportunity credit may she claim?

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

Assume Georgianne underpaid her estimated tax liability by $150 in the first quarter,$500 in the second quarter,$400 in the third quarter,and $200 in the fourth quarter.Calculate her underpayment penalty for the year,assuming the federal short-term interest rate is five percent.

Which of the following is not a taxpayer filing status for purposes of determining the appropriate tax rate schedule?

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

All else equal,a reduction in regular income tax rates would require more taxpayers to pay the alternative minimum tax.

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 .9 percent 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.9 percent additional Medicare tax is Lexa required to pay on her self-employment income?

Which of the following items is not added back to regular taxable income in computing alternative minimum taxable income?

Asteria earned a $25,500 salary as an employee in 2017.How much should her employer have withheld from her paycheck for FICA taxes (rounded to the nearest whole dollar amount) ?