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Exam 8: Individual Income Tax Computation and Tax Credits

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Question 1

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During 2016, 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?

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

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

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D

Question 2

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Selene made $54,300 in 2016 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?

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$4,154
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Question 3

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Henry and Janice are married and file jointly. They have an AGI (and modified AGI) of $290,000, which includes $90,000 of salary, $170,000 of active business income, $10,000 of interest income, $15,000 of dividends, and $5,000 of long-term capital gains. What are Henry and Janice's net investment income tax liability this year, rounded to the nearest whole dollar amount?

Which of the following statements regarding FICA taxes is true?

Which of the following taxpayers (all age 40) are required to file a return? $\begin{array}{|rr|r|r|r|r|r|}\hline &&&\text {April}\\\hline \text { Sunday } & \text { Monday } & \text { Tuescday } & \text { Weanesday } & \text { Thursday } & \text { Fricay } & \text { Saturday } \\\hline & & & & & & 1 \\\hline 2 & 3 & 4 & 5 & 6 & 7 & 8 \\\hline 9 & 10 & 11 & 12 & 13 & 14 & 15 \\\hline&17 & \\&\text { National } & \\&\text { Accountants } & \\16&\text { Day } & 18&19&20&21&22 \\&\text { (Federal } & \\&\text { Holiday) } & \\\hline\end{array}$

Which of the following statements regarding late filing penalties is true?

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.

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

In certain circumstances a child with very little income may have at least a portion of their income taxed at the parents' marginal tax rate.

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

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?

Which of the following is not one of the general tax credit categories?

Rhianna and Jay are married filing jointly in 2016. They have six children for whom they may claim the child tax credit. Their AGI was $123,440. What amount of child tax credit may they claim on their 2016 tax return?

Happy, Sleepy, Grumpy, and Doc all did not make adequate estimated payments. Which of them will not owe underpayment penalties for 2016 given the following information? $\begin{array} { | l | r | r | r | } \hline & \text { Tax fablity } & \text { Tax liablity } & \text { Tax liability } \\& 2016 & 2015 & \mathbf { 2 0 1 4 } \\\hline \text { Happy } &\$2,200&\$0&\$500\\\hline \text { Sleepy } & \$ 1,500 & \$500 & \$ 700 \\\hline \text { Grumpy } & \$ 1,200 & \$ 200 & \$ 0 \\\hline \text { Doc } & \$ 800 & \$ 1,100 & \$ 1,001 \\\hline\end{array}$

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.

Which of the following statements accurately describes the alternative minimum tax rate(s) ?

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.

Jocelyn, a single taxpayer, had $742,000 of taxable income in 2016. All of the income is ordinary. What is her tax liability for the year?

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

The amount of expenditures eligible for the child and dependent care credit is the least of three amounts. Which of the following is not one of those amounts?