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Exam 8: Individual Income Tax Computation and Tax Credits

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Question 81

True/False

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Employee status is always better than independent contractor status for a taxpayer because the employee is responsible for paying the employee portion of the FICA taxes.

A) True
B) False

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Question 82

Multiple Choice

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

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

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

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Question 83

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The AMT exemption amount is phased out for high-income taxpayers.

What is the underpayment penalty rate that taxpayers pay when they underpay their estimated taxes?

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

Stephanie and Mitch are married and they file a joint tax return. Mitch received a slightly higher salary than Stephanie did during the year.They both make very high salaries. Which of the following statements is true?

Carolyn has an AGI of $39,500 (all from earned income) and two qualifying children and is filing as a head of household. What amount of earned income credit is she entitled to?(Exhibit 8-10)

The American opportunity tax credit is available only for those students who are in their first or second year of postsecondary education.

Persephone has a regular tax liability of $13,375 and a tentative minimum tax of $11,590. Given just this information, what is her alternative minimum tax liability for the year?

The alternative minimum tax system requires taxpayers to apply an alternative tax rate on the regular income tax base to determine the amount of the alternative minimum tax.

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

In 2020, Shawn's AGI is $170,000. He earned the income evenly throughout the year. He owed $29,890 in federal income tax and self-employment taxes of $2,590. Last year, he had a gross tax liability of $50,000. What is the minimum quarterly estimated tax payment Shawn must pay each quarter to avoid underpayment penalties for 2020?

Asteria earned a $27,500 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.)

Individual taxpayers are not required to file a tax return unless their gross income passes a certain threshold. This threshold is generally the _____.

The American opportunity tax credit and lifetime learning credit are available to all taxpayers regardless of their income level.

Which of the following is not true of the lifetime learning credit?

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

John and Sally pay Janet (Sally's older sister)to watch John and Sally's child Dexter during the day. Janet cares for Dexter in her home. John and Sally may claim a child and dependent care credit based on the amount they pay Janet to care for Dexter.

Lexa, a single taxpayer, worked as an employee during the first half of the year, earning $65,000 of salary. Lexa's employer withheld $4,030 of Social Security tax, $943 of Medicare tax, and $0 of additional Medicare tax. In the second half of the year, she was self-employed and she reported $180,000 of self-employment income on her Schedule C. What amount of self-employment taxes and additional Medicare tax is Lexa required to pay on her self-employment income? (Round intermediate calculations and final answer to the nearest dollar.)

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 18 at year-end.