Question 1

Trudy is Jocelyn's friend. Trudy looks after Jocelyn's four-year-old son during the day so Jocelyn can go to work. During the year, Jocelyn paid Trudy $4,000 to care for her son. What is the amount of Jocelyn's child and dependent care credit if her AGI for the year was $30,000? (Exhibit 8-9 in the text)

Accepted Answer

A)   $3,000
B)   $0
C)   $1,080
D)   $810E) B) and C)
F) A) and D)

Question 2

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

Accepted Answer

A)   Zeus is 20 years old and not a student.
B)   Poseidon is a 20-year-old full-time student who does not support himself.
C)   Demeter, a 23-year-old full-time student who supports herself with a job at a grocery store.
D)   Two of the choices.
E)   None of the choices are correct.F) D) and E)
G) B) and D)

Question 3

How could an individual obtain a business tax credit?

Accepted Answer

A)   Through self-employment activities.
B)   By working overseas and obtaining a foreign tax credit.
C)   Through flow-through from a partnership or S corporation.
D)   All of the choices are correct.E) A) and B)
F) B) and D)

Question 4

Which of the following statements regarding late filing penalties and/or late payment penalties is true?

Accepted Answer

A)   An extension of time to file the tax return protects a taxpayer from late payment penalties as long as the tax is paid by the extended due date of the return.
B)   If a taxpayer has not paid the full tax liability by the original due date of the return and the taxpayer has not filed a tax return by the due date of the return, the maximum late filing and late payment penalty will be no greater than the late filing penalty by itself.
C)   The penalty rate for late filing penalties is less than the penalty rate for late payment penalties.
D)   None of the choices are correct.E) C) and D)
F) B) and C)

Question 5

Assume Georgianne underpaid her estimated tax liability by $150 in the first quarter, $500 in thesecond 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.

Accepted Answer

$25 ($3 + $10 + $8 +...

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Which of the following statements regarding FICA taxes is true?

Accepted Answer

A)   An employee who has two different employers during the year may be entitled to a tax credit for overpaid FICA taxes.
B)   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.
C)   The wage base limit for Social Security taxes depends on the taxpayer's filing status.
D)   Low income employees are not required to pay FICA taxes.E) B) and C)
F) A) and C)

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

All capital gains are taxed at preferential rates.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following statements about estimated tax payments and underpayment penalties is true for individual taxpayers?

Accepted Answer

A)   Taxpayers who have paid their full tax liability by the original tax return due date are protected from underpayment penalties.
B)   Taxpayers who have uneven income streams can pay estimated tax quarterly in uneven amounts and not be susceptible to underpayment penalties.
C)   Taxpayers who have paid their required amount of estimated tax, even though not on time, are protected from underpayment penalties.
D)   Taxpayers who have paid their full tax liability by the extended tax return due date are protected from underpayment penalties.E) None of the above
F) B) and C)

Question 11

Taxpayers are generally allowed to carry back and/or carry forward unused business credits.

Accepted Answer

A) True 
 B)False

Question 12

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?

Accepted Answer

$2,250
Ans...

Question 13

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

Accepted Answer

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

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

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

For married couples, the .9 percent additional Medicare tax is based on the couple's combined wages.

Accepted Answer

A) True 
 B)False

Question 17

If an employer withholds taxes from an employee, in general, when are these taxes treated as paid to the IRS?

Accepted Answer

A)   On April 15.
B)   As withheld.
C)   Evenly throughout the year.
D)   As the employee requests on his/her W-4 form.E) None of the above
F) A) and B)

Question 18

Which of the following statements regarding the child tax credit is false?

Accepted Answer

A)   The child for whom the credit is claimed must be under the age of 15 at the end of the year.
B)   The full credit for a child who qualifies is $1,000.
C)   The credit is subject to phase-out based on the taxpayer's AGI.
D)   The child for whom the credit is claimed must meet the definition of a qualifying child.E) A) and C)
F) A) and D)

Question 19

Depending on the year, the original (unextended) due date for an individual's tax return may be after April 15.

Accepted Answer

A) True 
 B)False

Question 20

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

Exam 8: Individual Income Tax Computation and Tax Credits

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 Answer
verified

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 Answer
verified

For married couples, the .9 percent additional Medicare tax is based on the couple's combined wages.

Correct Answer
verified

Assume Georgianne underpaid her estimated tax liability by $150 in the first quarter, $500 in thesecond 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.

Correct Answer
verified
$25 ($3 + $10 + $8 +...
View Answer

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

Correct Answer
verified

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

Correct Answer
verified

Which of the following statements regarding FICA taxes is true?

Correct Answer
verified

All capital gains are taxed at preferential rates.

Correct Answer
verified

Which of the following statements regarding the child tax credit is false?

Correct Answer
verified

How could an individual obtain a business tax credit?

Correct Answer
verified

Correct Answer
verified
$2,250
Ans...
View Answer

Correct Answer
verified

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

Correct Answer
verified

Taxpayers are generally allowed to carry back and/or carry forward unused business credits.

Correct Answer
verified

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

Correct Answer
verified

If an employer withholds taxes from an employee, in general, when are these taxes treated as paid to the IRS?

Correct Answer
verified

Depending on the year, the original (unextended) due date for an individual's tax return may be after April 15.

Correct Answer
verified

Which of the following statements regarding late filing penalties and/or late payment penalties is true?

Correct Answer
verified

Which of the following statements about estimated tax payments and underpayment penalties is true for individual taxpayers?

Correct Answer
verified

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

Correct Answer
verified

Exam 8: Individual Income Tax Computation and Tax Credits

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

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

For married couples, the .9 percent additional Medicare tax is based on the couple's combined wages.

Correct AnswerverifiedShow Answer

Assume Georgianne underpaid her estimated tax liability by $150 in the first quarter, $500 in thesecond 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.

Correct Answerverified$25 ($3 + $10 + $8 +...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following statements regarding FICA taxes is true?

Correct AnswerverifiedShow Answer

All capital gains are taxed at preferential rates.

Correct AnswerverifiedShow Answer

Which of the following statements regarding the child tax credit is false?

Correct AnswerverifiedShow Answer

How could an individual obtain a business tax credit?

Correct AnswerverifiedShow Answer

Correct Answerverified$2,250Ans...View AnswerShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Taxpayers are generally allowed to carry back and/or carry forward unused business credits.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If an employer withholds taxes from an employee, in general, when are these taxes treated as paid to the IRS?

Correct AnswerverifiedShow Answer

Depending on the year, the original (unextended) due date for an individual's tax return may be after April 15.

Correct AnswerverifiedShow Answer

Which of the following statements regarding late filing penalties and/or late payment penalties is true?

Correct AnswerverifiedShow Answer

Which of the following statements about estimated tax payments and underpayment penalties is true for individual taxpayers?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
verified
$25 ($3 + $10 + $8 +...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
$2,250
Ans...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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