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Exam 8: Individual Income Tax Computation and Tax Credits

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Question 81

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For alternative minimum tax purposes, taxpayers are allowed to deduct state income taxes but are not allowed to deduct charitable contributions.

A) True
B) False

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Question 82

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To qualify for the earned income credit, the taxpayer must have a qualified dependent.

A) True
B) False

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Question 83

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

Which of the following statements concerning estimated tax payments and underpayment penalties for individuals is true?

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

Sheryl's AGI is $250,000. Her current tax liability is $52,068. Last year, her tax liability was $48,722. She will not owe underpayment penalties if her total estimated tax payments are at least which of the following (rounded) amounts? (Assume she makes the required payments each quarter.)

In 2020, Maia (who files as a head of household) reported regular taxable income of $115,000. She itemized her deductions, deducting $8,000 in charitable contributions and $3,000 in state income taxes. What is Maia's alternative minimum taxable income?

Miley, a single taxpayer, plans on reporting $32,025 of taxable income this year (all of her income is from a part-time job) . She is considering applying for a second part-time job that would give her an additional $10,900 of taxable income. By how much will the income from the second job increase her tax liability? (Use the tax rate schedules.)

Quantitatively, what is the relationship between the AGI phase-out thresholds for the child tax credit?

Allen Green is a single taxpayer with an AGI (and modified AGI) of $212,000, which includes $171,000 of salary, $25,600 of interest income, $10,200 of dividends, and $5,200 of long-term capital gains. What is Allen's net investment income tax liability this year, rounded to the nearest whole dollar amount?

Which of the following statements regarding credits is correct?

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 ($6,470 for the year) . What is the amount of Kaelyn's child and dependent care credit if her AGI for the year was $37,700? (Exhibit 8-9)

Rhianna and Jay are married filing jointly in 2020. They have six children under age 17 for whom they may claim the child tax credit. Their AGI was $419,400. What amount of child tax credit may they claim on their 2020 tax return?

An 80-year-old taxpayer with earned income and no dependent children could qualify for the earned income credit.

All capital gains are taxed at preferential rates.

For taxpayers who receive both salary as an employee and self-employment income as an independent contractor in the same year, which of the following statements regarding FICA and self-employment taxes is most accurate?

Long-term capital gains are taxed at the stated AMT rate for purposes of the alternative minimum tax.

Candace is claimed as a dependent on her parent's tax return. In 2020, Candace received $5,000 of interest income from corporate bonds she obtained several years ago. This is her only source of income. She is 15 years old at year-end. What is her gross tax liability? (Use Tax Rate Schedule, Standard deduction, Estates and Trusts.)

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

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?