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Exam 8: Individual Income Tax Computation and Tax Credits

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Question 41

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Which of the following statements concerning estimated tax payments and underpayment penalties for individuals is true?

A) Whether taxpayers are subject to underpayment penalties is determined on a quarterly basis.
B) Due dates for estimated tax payments for a given year are April 15 (July 15 for 2020) , June 15, September 15 of that year, and January 15 of the next year, unless these dates fall on a weekend or a holiday.
C) The amount of penalty depends on the amount of the underpayment among other factors.
D) All of these statements are true.

E) A) and D)
F) None of the above

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Question 42

Multiple Choice

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Angelena files as a head of household. In 2020, she reported $54,300 of taxable income, including a $10,000 qualified dividend. 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.)

A) $6,234
B) $5,139
C) $5,034
D) $6,437

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

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Question 43

Multiple Choice

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Which of the following best describes the manner in which self-employed taxpayers may deduct self-employment taxes?

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

The tax rate schedules are set up to tax lower levels of income at higher tax rates than higher levels of income.

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.

Kaelyn's mother, Judy, looks after Kaelyn's four-year-old twins so Kaelyn can go to work (she drops off and picks up the twins from Judy's home every day) . Since Judy is a relative, Kaelyn made sure, for tax purposes, to pay her mother the going rate for child care ($6,390 for the year) . What is the amount of Kaelyn's child and dependent care credit if her AGI for the year was $36,900? (Exhibit 8-9)

Hestia (age 17) is claimed as a dependent by her parents, Rhea and Chronus. In 2020, 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 2020?

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.

Assuming the kiddie tax applies, what amount of a child's income is subject to the kiddie tax?

Taxpayers are not allowed to deduct the standard deduction for alternative minimum tax purposes.

Selene made $54,300 in 2020 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?

Keith and Nicole are married filing jointly, with two daughters who qualify as dependents. Their gross income for 2020 is $25,500. Are they required to file a tax return? How do you know this without memorizing the gross income thresholds? In 2020, the standard deduction for taxpayers filing a joint return is $24,800.

All capital gains are taxed at preferential rates.

Hester (age 17) is claimed as a dependent by his parents, Charlton and Abigail. In 2020, Hester received $10,000 of qualified dividends, and he received $13,000 from a part-time job. What is his taxable income for 2020? (Standard deduction)

Cassy reports a gross tax liability of $1,000. She also claims $400 of nonrefundable personal credits, $700 of refundable personal credits, and $200 of business credits. What is Cassy's tax refund or tax liability due after applying the credits?

Montague (age 15) is claimed as a dependent by his parents, Matt and Mary. In 2020, Montague received $5,100 of qualified dividends, and he received $900 from a part-time job. What is his taxable income for 2020?

Sheryl's AGI is $250,000. Her current tax liability is $52,068. Last year, her tax liability was $48,722. She will not owe underpayment penalties if her total estimated tax payments are at least which of the following (rounded) amounts? (Assume she makes the required payments each quarter.)

Parents may claim a $2,000 child tax credit for a dependent child who is 22 years of age at the end of the year if the child is a full-time student.

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