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Exam 8: Individual Income Tax Computation and Tax Credits

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Question 91

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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.

A) True
B) False

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Question 92

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

A) True
B) False

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Question 93

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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.

Which of the following statements regarding the earned income credit is true?

Assume Georgianne underpaid her estimated tax liability by $150 in the first quarter of 2021, $500 in the second quarter, $400 in the third quarter, and $200 in the fourth quarter. Calculate her underpayment penalty for 2021, assuming the federal short-term interest rate is 5 percent.

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

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)

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

Which of the following statements regarding FICA taxes is true?

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.

In certain circumstances a child with very little income may have at least a portion of their income taxed at the trust and estate tax rates.

Asteria earned a $26,200 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.)

Which of the following statements concerning a comparison between employees and independent contractors is most accurate?

The alternative minimum tax base is typically _____ the regular income tax base.

Harmony is single and was self-employed for the first half of 2020, earning $18,000 of Schedule C (business)net income. During the second half of the year, she began working as an employee and earned $38,000 in salary. What amount of self-employment taxes is Harmony required to pay?

Allen Green is a single taxpayer with an AGI (and modified AGI) of $210,000, which includes $170,000 of salary, $25,000 of interest income, $10,000 of dividends, and $5,000 of long-term capital gains. What is Allen's net investment income tax liability this year, rounded to the nearest whole dollar amount?

Jamie is single. In 2020, she reported $100,000 of taxable income, including a long-term capital gain of $5,000. What is her gross tax liability? (Round your answer to the nearest whole dollar amount.) (Use the tax rate schedules, long-term capital gains tax brackets.)

Hera earned a $175,000 salary in 2020. Her husband, Zeus, earned $100,000 salary in 2020. Hera and Zeus file a joint tax return. How much in FICA taxes will they owe in 2020?

Which of the following is not a barrier to income shifting among family members?