Question 1

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

Accepted Answer

A)  Federal short-term interest rate
B)  Federal short-term interest rate plus 3 percentage points
C)  Federal long-term interest rate plus 6 percentage points
D)  Zero. The government does not pay interest on overpaymentsE) All of the above
F) B) and D)

Question 2

Which of the following statements about estimated tax payments and underpayment penalties is true for individual taxpayers?

Accepted Answer

A)  Taxpayers who have paid their full tax liability by the original tax return due date are protected from underpayment penalties.
B)  Taxpayers who have paid their full tax liability by the extended tax return due date are protected from underpayment penalties.
C)  Taxpayers who have uneven income streams can pay estimated tax quarterly in uneven amounts and not be susceptible to underpayment penalties.
D)  Taxpayers who have paid their required amount of estimated tax, even though not on time, are protected from underpayment penalties.E) B) and C)
F) B) and D)

Question 3

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?

Accepted Answer

A)  The total amount of child and dependent care expenditures for the year
B)  $3,000 for one qualifying person or $6,000 for two or more qualifying persons
C)  The dependent's earned income for the year
D)  The taxpayer's earned income for the yearE) A) and D)
F) C) and D)

Question 4

Looking at the following partial calendar for April, when will individual tax returns be due?

Accepted Answer

A)  Friday, April 14
B)  Saturday, April 15
C)  Sunday, April 16
D)  Monday, April 17
E)  Tuesday, April 18F) None of the above
G) All of the above

Question 5

Katlyn reported $300 of net income from her sole proprietorship. She is not required to pay self-employment tax.

Accepted Answer

A) True 
 B)False

Question 6

During all of 2019, Mr. and Mrs. Clay lived with their four children (all are under the age of 17). They provided over one-half of the support for each child. Mr. and Mrs. Clay file jointly for 2019. Neither is blind, and both are under age 65. They reported the following tax-related information for the year. (Use the tax rate schedules)
  1. What are the Clays' taxes payable or refund due? (Ignore the alternative minimum tax.)
2. What are the Clays' tentative minimum tax and alternative minimum tax?

Accepted Answer

A. Tax refund is $4,093.
Answe...

Question 7

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

Accepted Answer

A)  A married couple must file jointly to claim the credit.
B)  A taxpayer may claim a credit for dependent care expenses for a dependent who is 14 years old or older but only if the dependent lives in the taxpayer's home for the entire year.
C)  All else equal, a taxpayer making qualifying expenditures for three children may claim more dependent care credit than a taxpayer making (the same amount of) qualifying expenditures for two children.
D)  None of these statements are true.E) A) and B)
F) A) and C)

Question 8

Employees must pay both Social Security tax and Medicare tax on the full amount of their wages no matter the amount of their wages.

Accepted Answer

A) True 
 B)False

Question 9

For alternative minimum tax purposes, taxpayers are required to add back the regular tax standard deduction amount for their filing status whether or not they itemized deductions for regular tax purposes.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

An individual could pay 100 percent of her tax liability by the due date of her tax return and still be subject to underpayment tax penalties.

Accepted Answer

A) True 
 B)False

Question 12

Employees are not allowed to deduct FICA taxes they pay.

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A)  If a taxpayer fails to file a tax return, the late filing penalty will continue to grow until the taxpayer files the tax return.
B)  The amount of the late filing penalty is the same for both fraudulent failure to file and nonfraudulent failure to file.
C)  Taxpayers who owe no tax as of the due date of their tax returns are not subject to late filing penalties even if they file late.
D)  None of the choices are correct.E) A) and B)
F) C) and D)

Question 14

Which of the following statements regarding credits is correct?

Accepted Answer

A)  Business expenses are generally refundable credits.
B)  Business credits that are generated in one year but are not utilized in that year expire.
C)  Business credits that are generated in one year but are not utilized in that year may be carried forward to future years but not back to a prior year.
D)  Business credits that are generated in one year but are not utilized in that year may be carried back to the previous year and then forward to future years.E) B) and D)
F) C) and D)

Question 15

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

Accepted Answer

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) C) and D)
F) None of the above

Question 16

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?

Accepted Answer

A)  $0
B)  $11,500
C)  $975
D)  $12,475E) All of the above
F) A) and B)

Question 17

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.

Accepted Answer

A) True 
 B)False

Question 18

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)

Accepted Answer

A)  $0
B)  $810
C)  $1,080
D)  $3,000E) None of the above
F) All of the above

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

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

Exam 8: Individual Income Tax Computation and Tax Credits

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

Correct Answer
verified

Employees are not allowed to deduct FICA taxes they pay.

Correct Answer
verified

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

Correct Answer
verified

Employees must pay both Social Security tax and Medicare tax on the full amount of their wages no matter the amount of their wages.

Correct Answer
verified

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

Correct Answer
verified

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)

Correct Answer
verified

Correct Answer
verified
A. Tax refund is $4,093.
Answe...
View Answer

An individual could pay 100 percent of her tax liability by the due date of her tax return and still be subject to underpayment tax penalties.

Correct Answer
verified

For alternative minimum tax purposes, taxpayers are required to add back the regular tax standard deduction amount for their filing status whether or not they itemized deductions for regular tax purposes.

Correct Answer
verified

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

Correct Answer
verified

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.

Correct Answer
verified

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?

Correct Answer
verified

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?

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Which of the following statements about estimated tax payments and underpayment penalties is true for individual taxpayers?

Correct Answer
verified

Which of the following statements regarding credits is correct?

Correct Answer
verified

Looking at the following partial calendar for April, when will individual tax returns be due?

Correct Answer
verified

Katlyn reported $300 of net income from her sole proprietorship. She is not required to pay self-employment tax.

Correct Answer
verified

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

Correct Answer
verified

Exam 8: Individual Income Tax Computation and Tax Credits

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

Correct AnswerverifiedShow Answer

Employees are not allowed to deduct FICA taxes they pay.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Employees must pay both Social Security tax and Medicare tax on the full amount of their wages no matter the amount of their wages.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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)

Correct AnswerverifiedShow Answer

Correct AnswerverifiedA. Tax refund is $4,093.Answe...View AnswerShow Answer

An individual could pay 100 percent of her tax liability by the due date of her tax return and still be subject to underpayment tax penalties.

Correct AnswerverifiedShow Answer

For alternative minimum tax purposes, taxpayers are required to add back the regular tax standard deduction amount for their filing status whether or not they itemized deductions for regular tax purposes.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following statements about estimated tax payments and underpayment penalties is true for individual taxpayers?

Correct AnswerverifiedShow Answer

Which of the following statements regarding credits is correct?

Correct AnswerverifiedShow Answer

Looking at the following partial calendar for April, when will individual tax returns be due?

Correct AnswerverifiedShow Answer

Katlyn reported $300 of net income from her sole proprietorship. She is not required to pay self-employment tax.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A. Tax refund is $4,093.
Answe...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified