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Exam 7: Individual Income Tax Computation and Tax Credits

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Question 41

Multiple Choice

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Which of the following statements regarding FICA taxes is true?

A) Low income employees are not required to pay FICA taxes.
B) An employee who has two different employers during the year may be entitled to a tax credit for overpaid FICA taxes.
C) The maximum amount of Medicare taxes an employee is required to pay is capped each year but the maximum amount of Social Security taxes is not.
D) The wage base limit for Social Security taxes depends on the taxpayer's filing status.The cap on Social Security taxes applies to the taxpayer even if the taxpayer had more than one employer.Employers withhold on the salary they individually pay so in the aggregate if the taxpayer earns more than the Social Security wage base limit via multiple jobs,there may be more withheld than the taxpayer is required to pay.

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

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Question 42

Multiple Choice

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

A) The amount of the exemption depends on the taxpayer's filing status.
B) The exemption amount is completely phased-out for high income taxpayers.
C) Taxpayers must choose whether they will claim the exemption or itemize deductions.
D) None of these statements is false (all of these statements are true) .Taxpayers claim the exemption if their income is not too high.The exemption has nothing to do with itemized deductions.

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

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Question 43

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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.

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 separate returns.

Due to the alternative minimum tax rate structure,timing tax planning strategies are not effective under the alternative minimum tax system.

Which of the following could explain why large number of taxpayers are subject to (or could become subject to) AMT?

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

In certain circumstances a child with very little income may have their income taxed at the parents' marginal tax rate.

The lifetime learning credit can be used toward the cost of any course of instruction to acquire or improve a taxpayer's job skills,no matter the age of the taxpayer.

Hester (age 17) is claimed as a dependent by his parents,Charlton and Abigail.In 2013,Hester received $10,000 of qualified dividends and he received $6,000 from a part time job.What is his taxable income for 2013?

The taxable income levels in the married filing jointly tax rate schedule are _______ those in the married filing separately schedule.

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

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?

Harrison received a qualified dividend.Without knowing any additional facts,which of the following statements is true regarding the rate at which the dividend will be taxed to Harrison?

For alternative minimum tax purposes,taxpayers are required to add back the regular tax standard deduction amount for their filing status whether or not they itemized deductions for regular tax purposes.

Which of the following tax credits is fully refundable?

For married couples,the Social Security wage base limitation applies separately to each spouse.

Which of the following does not affect the amount of the earned income credit?

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

Jamie is single.In 2013,she reported $100,000 of taxable income,including a long-term capital gain of $5,000.What is her gross tax liability,rounded to the nearest whole dollar amount (use the tax rate schedules) ?