Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is typical of taxpayers who are most likely affected by the AMT?

Accepted Answer

A)   Pay high mortgage interest.
B)   Pay high state income tax.
C)   Pay high property taxes.
D)   Have very high capital gains.E) C) and D)
F) A) and D)

Question 3

Selene made $54,300 in 2018 working at the local burger joint, Moon Café. How much should her employer withhold from her paycheck for FICA taxes if the calculation is made correctly?

Accepted Answer

$4,154
($5...

Question 4

Which of the following is not a barrier to income shifting among family members?

Accepted Answer

A)   The assignment of income doctrine.
B)   Net unearned income for children 18 and younger taxed at parents' marginal tax rates.
C)   Elimination of preferential tax rates (on dividends and long-term capital gains)  for dependents.
D)   "The assignment of income doctrine" and "Net unearned income for children 18 and younger taxed at parents' marginal tax rates".E) A) and C)
F) All of the above

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A)   All of it.
B)   All of the unearned income.
C)   The net unearned income.
D)   Taxable income less the standard deduction.E) C) and D)
F) B) and D)

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

During 2018, Montoya (age 15)  received $2,200 from a corporate bond. He also received $600 from a savings account established for him by his parents. Montoya lives with his parents and he is their dependent. What is Montoya's taxable income?

Accepted Answer

A)   $0
B)   $2,200
C)   $2,800
D)   $1,750E) A) and D)
F) B) and D)

Question 10

In certain circumstances a child with very little income may have at least a portion of their income taxed at the trust and estate tax rates.

Accepted Answer

A) True 
 B)False

Question 11

Parents may claim a child and dependent care credit for expenses incurred in providing for their dependents while the parents work as long as the children are over age 14 and under age 20 at year end.

Accepted Answer

A) True 
 B)False

Question 12

If there is not enough gross tax liability to use the foreign tax credit, ________.

Accepted Answer

A)   it expires unused
B)   it is carried back 2 years or forward 20 years
C)   it is carried back 3 years or forward 5 years
D)   it is carried back 1 year or forward 10 yearsE) A) and D)
F) None of the above

Question 13

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

Accepted Answer

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

Question 14

Tamra and Jacob are married and they file a joint tax return. Tamra received nearly five times the salary that Jacob received. Which of the following statements is true?

Accepted Answer

A)   Tamra and Jacob likely pay no tax marriage penalty nor receive a tax marriage benefit.
B)   Tamra and Jacob likely pay a tax marriage penalty.
C)   Tamra and Jacob likely receive a tax marriage benefit.
D)   Tamra and Jacob likely will pay a tax marriage penalty and receive a tax marriage benefit.E) B) and C)
F) A) and C)

Question 15

Employees must pay both Social Security tax and Medicare tax on the full amount of their wages no matter the amount of their wages.

Accepted Answer

A) True 
 B)False

Question 16

Sam is 30 years old. In 2018, he reported an AGI of $12,000, all from his job as a server at the local café. He is single and has no dependents. What amount of earned income credit may he claim in 2018? Use Exhibit 8-10

Accepted Answer

$250
Answe...

Question 17

Hester (age 17)  is claimed as a dependent by his parents, Charlton and Abigail. In 2018, Hester received $10,000 of qualified dividends and he received $11,800 from a part time job. What is his taxable income for 2018?

Accepted Answer

A)   $21,800
B)   $20,750
C)   $9,800
D)   $9,650E) A) and B)
F) All of the above

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

Which of the following statement(s)  concerning estimated tax payments and underpayment penalties for individuals is (are)  true?

Accepted Answer

A)   Whether taxpayers are subject to underpayment penalties is determined on a quarterly basis.
B)   Due dates for estimated tax payments for a given year are April 15, June 15, September 15 of that year and January 15 of the next year unless these dates fall on a weekend or a holiday.
C)   The amount of penalty depends on the amount of the underpayment among other factors.
D)   All of these statements are true.E) A) and C)
F) B) and C)

Question 20

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.

Accepted Answer

A) True 
 B)False

Exam 8: Individual Income Tax Computation and Tax Credits

Selene made $54,300 in 2018 working at the local burger joint, Moon Café. How much should her employer withhold from her paycheck for FICA taxes if the calculation is made correctly?

Correct Answerverified$4,154($5...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is not a barrier to income shifting among family members?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Employees must pay both Social Security tax and Medicare tax on the full amount of their wages no matter the amount of their wages.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following statement(s) concerning estimated tax payments and underpayment penalties for individuals is (are) true?

Correct AnswerverifiedShow Answer

Parents may claim a child and dependent care credit for expenses incurred in providing for their dependents while the parents work as long as the children are over age 14 and under age 20 at year end.

Correct AnswerverifiedShow Answer

During 2018, Montoya (age 15) received $2,200 from a corporate bond. He also received $600 from a savings account established for him by his parents. Montoya lives with his parents and he is their dependent. What is Montoya's taxable income?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If there is not enough gross tax liability to use the foreign tax credit, ________.

Correct AnswerverifiedShow Answer

Sam is 30 years old. In 2018, he reported an AGI of $12,000, all from his job as a server at the local café. He is single and has no dependents. What amount of earned income credit may he claim in 2018? Use Exhibit 8-10

Correct Answerverified$250Answe...View AnswerShow Answer

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.

Correct AnswerverifiedShow Answer

Which of the following is typical of taxpayers who are most likely affected by the AMT?

Correct AnswerverifiedShow Answer

Hester (age 17) is claimed as a dependent by his parents, Charlton and Abigail. In 2018, Hester received $10,000 of qualified dividends and he received $11,800 from a part time job. What is his taxable income for 2018?

Correct AnswerverifiedShow Answer

Tamra and Jacob are married and they file a joint tax return. Tamra received nearly five times the salary that Jacob received. Which of the following statements is true?

Correct AnswerverifiedShow Answer

In certain circumstances a child with very little income may have at least a portion of their income taxed at the trust and estate tax rates.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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$4,154
($5...
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$250
Answe...
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