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Exam 8: Individual Income Tax Computation and Tax Credits

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Question 21

True/False

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If a married couple has one primary breadwinner,filing a joint return will likely result in a marriage penalty.

A) True
B) False

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Question 22

Multiple Choice

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

A) Taxpayers may claim a credit for only a portion of qualifying dependent care expenditures.
B) If a taxpayer's income is too high, she will be ineligible to claim any child and dependent care credit.
C) A single taxpayer must have earned income to claim any child and dependent care credit.
D) A taxpayer is not eligible to claim the dependent care credit if any dependent relative provides the care.

E) A) and D)
F) All of the above

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Question 23

Multiple Choice

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Jamie is single.In 2017,she reported $100,000 of taxable income,including a long-term capital gain of $5,000.What is her gross tax liability,rounded to the nearest whole dollar amount? (use the tax rate schedules in the text)

In 2017,Shawn's AGI is $170,000.He earned the income evenly throughout the year.He owed $24,900 in federal income tax plus alternative minimum tax of $263,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 2017?

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

Which of the following statements best describes the deductions independent contractors may claim for valid business expenses?

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

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?

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.

Employees are allowed to deduct a portion of the FICA taxes they pay.

Baker earned $225,000 of salary as an employee in 2017.How much should his employer have withheld from his paycheck for FICA taxes (rounded to the nearest whole dollar amount) ?

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

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.

Miley,a single taxpayer,plans on reporting $28,950 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 $10,000 of taxable income.By how much will the income from the second job increase her tax liability? (use the tax rate schedules in the text)

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)

Both the width (or range)of the tax brackets (the amount of income taxed at a particular rate)in the tax rate schedules and the range of the tax rates in the tax rate schedules (the difference between the lowest tax rate and the highest tax rate)vary by filing status.

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

If both spouses of a married couple earn roughly equivalent wages,the couple is likely to pay a marriage penalty due to the nature of the tax rate schedules.

Harrison received a qualified dividend.Without knowing any additional facts,which of the following statements is true regarding the rate at which the dividend will be taxed to Harrison?

Which of the following is not true of the American opportunity credit?