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Exam 7: Individual Income Tax Computation and Tax Credits

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Question 51

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Which of the following statements regarding credits is correct?

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

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Question 52

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During 2014, Jasmine (age 12) received $2,400 from a corporate bond. She also received $600 from a savings account established for her by her parents. Jasmine lives with her parents and she is their dependent. Assuming her parents' marginal tax rate is 28%, what is Jasmine's gross tax liability?

A) $0
B) $100
C) $280
D) $380

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Question 53

Multiple Choice

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Which of the following tax credits is fully refundable?

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

Which of the following taxpayers (all age 40) are required to file a return? $\begin{array} { | l | l | r | c | } \hline \text { Taxpayer } & \text { Filing Status } & \begin{array} { c } \text { Number } \\\text { of exemptions }\end{array} & \begin{array} { c } \text { Gross } \\\text { Income }\end{array} \\\hline \text { Jenny and Jim } & \begin{array} { l } \text { Married Filing } \\\text { Jointly }\end{array} & 2 & \$ 21,000 \\\hline \text { Allen } & \text { Single } & 1 & \$ 9,200 \\\hline \text { Timmy } & \text { Head of Household } & 2 & \$ 10,800 \\\hline\end{array}$

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

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?

Rhianna and Jay are married filing jointly in 2014. 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 2014 tax return?

In 2014, John (52 years old) files as a head of household with one 18-year old dependent (qualifying) child. John is eligible to claim a $700 American opportunity credit for the year. John did not have any taxes withheld by his employer during the year and he did not make any estimated tax payments. After taking credits into account, what is the amount of John's taxes payable or refund assuming that his AGI is $26,000 (all from salary) and his taxable income is $9,000?

Selene made $54,300 in 2014 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?

Which of the following is not a true statement about the American opportunity credit (AOC) and lifetime learning credits?

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

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.

Hester (age 17) is claimed as a dependent by his parents, Charlton and Abigail. In 2014, Hester received $10,000 of qualified dividends and he received $6,000 from a part time job. What is his taxable income for 2014?

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

Johann had a gross tax liability of $22,508 in 2014, but his employer only withheld taxes of $19,500. Johann's gross tax liability was $21,000 in 2013. Calculate Johann's under/overpayment in each quarter for 2014 tax purposes.

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

Hera earned $175,000 salary in 2014. Her husband, Zeus, earned $100,000 salary in 2014. Hera and Zeus file a joint tax return. How much FICA taxes will they owe in 2014?

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

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