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Exam 8: Individual Income Tax Computation and Tax Credits

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Question 21

Multiple Choice

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The wage base for which of the following taxes is capped?

A) Federal income
B) Social Security
C) Medicare
D) Alternative minimum

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

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Question 22

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

A) True
B) False

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Question 23

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Harmony is single and was self-employed for the first half of 2020, 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?

Wolfina's twins, Romulus and Remus, finished their first year of school at an accredited university in 2020. 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 tax credit may she claim?

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

Which of the following tax credits is fully refundable?

During 2020, Jasmine (age 12) received $6,500 from a corporate bond. She also received $600 from a savings account established for her by her parents. Jasmine lives with her parents and she is claimed as a dependent in their tax return. Whatis Jasmine's gross tax liability? ( Use Tax Rate Schedule, Standard deduction , Estates and Trusts.)

Baker is single and earned $225,000 of salary as an employee in 2020. How much should his employer have withheld from his paycheck for FICA taxes? (Round your answer to the nearest whole dollar amount.)

Asteria earned a $25,500 salary as an employee in 2020. How much should her employer have withheld from her paycheck for FICA taxes? (Round your answer to the nearest whole dollar amount.)

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

Generally, income from an active trade or business is subject to the 3.8 percent net investment income tax.

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.

Self-employed taxpayers are allowed to deduct the full amount of the self-employment taxes they pay.

Hera earned a $175,000 salary in 2020. Her husband, Zeus, earned $100,000 salary in 2020. Hera and Zeus file a joint tax return. How much in FICA taxes will they owe in 2020?

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)

Business credits are generally refundable credits.

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

How could an individual obtain a business tax credit?

Baker is single and earned $225,500 of salary as an employee in 2020. How much should his employer have withheld from his paycheck for FICA taxes? (Round your answer to the nearest whole dollar amount.)

Hester (age 17) is claimed as a dependent by his parents, Charlton and Abigail. In 2020, Hester received $10,060 of qualified dividends, and he received $13,060 from a part-time job. What is his taxable income for 2020? (Standard deduction)