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Exam 8: Individual Income Tax Computation and Tax Credits

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Question 31

Multiple Choice

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Hestia (age 17) is claimed as a dependent by her parents, Rhea and Chronus. In 2016, Hestia received $1,000 of interest income from a corporate bond that she owns. In addition, she has earned income of $200. What is her taxable income for 2016?

A) $0
B) $150
C) $650
D) $1,200

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

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Question 32

Multiple Choice

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Carolyn has an AGI of $38,000 (all from earned income) , two qualifying children, and is filing as a head of household. What amount of earned income credit is she entitled to?

A) $0
B) $1,400
C) $3,373
D) $4,172
E) $5,572

F) B) and C)
G) B) and E)

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Question 33

Multiple Choice

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Which of the following statements regarding the AMT exemption amounts is not true?

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.

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

Which of the following statements concerning tax credits is true?

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

A marriage penalty occurs when a couple pays more taxes by filing a joint tax return than they would have paid had they filed married filing separate returns.

Due to the alternative minimum tax rate structure, timing tax planning strategies are not effective under the alternative minimum tax system.

Keith and Nicole are married filing joint with two daughters who qualify as dependents. Their gross income for 2016 is $21,000. Are they required to file a tax return? How do you know this without memorizing the gross income thresholds? In 2016, the standard deduction for taxpayers filing a joint return is $12,600 and the personal exemption is $4,050.

Which of the following items is not added back to regular taxable income in computing alternative minimum taxable income?

Persephone has a regular tax liability of $12,475 and a tentative minimum tax of $11,500. Given just this information, what is her alternative minimum tax liability for the year?

Atlas earned $17,300 from his sole proprietorship in 2016. This was his only source of income. How much in self-employment taxes will Atlas be able to deduct?

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.

Which of the following is not true of the extension to file an individual tax return?

The child and dependent care credit entitles qualifying taxpayers to a credit equal to the full amount of qualified expenses.

Which of the following is not a taxpayer filing status for purposes of determining the appropriate tax rate schedule?

Jackson earned a salary of $254,000 in 2016. What amount of FICA taxes should Jackson's employer withhold from his paycheck?

Demeter is a single taxpayer. Her AGI in 2016 is $81,200. Demeter may claim a child tax credit for her daughter Persephone. What amount of child tax credit is Demeter entitled to claim after any applicable phase-out?

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