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Exam 7: Individual Income Tax Computation and Tax Credits

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Question 1

True/False

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Individuals may file for and receive a six-month extension of time to file their tax return and pay their taxes without penalty.

A) True
B) False

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Question 2

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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.

A) True
B) False

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Question 3

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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.

Which of the following statements regarding the child and dependent care credit is false?

Katlyn reported $300 of net income from her sole proprietorship. She is not required to pay self-employment tax.

Alton reported net income from his sole proprietorship of $90,000. To determine his self employment tax, he would multiply $90,000 by the self-employment tax rate.

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

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?

Asteria earned a $25,500 salary as an employee in 2014. How much should her employer have withheld from her paycheck for FICA taxes (rounded to the nearest whole dollar amount) ?

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

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?

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

Long-term capital gains, dividends, and taxable interest income are all taxed at preferential rates.

Persephone has a regular tax liability of $12,475 and a tentative minimum tax of $11,500. Given just this information, what is her alternative minimum tax liability for the year?

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

Which of the following statements regarding the AMT exemption amounts is not true?

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

Harmony was self-employed for the first half of 2014, earning $18,000 of Schedule C (business) net income. During the second half of the year, she began working as an employee and earned $38,000 in salary. What amount of self-employment taxes is Harmony required to pay?

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 suggests that a working taxpayer is an independent contractor rather than an employee?