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Exam 8: Individual Income Tax Computation and Tax Credits

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Question 81

Multiple Choice

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Which of the following represents the correct order in which credits are applied to gross tax liability (from first to last) ?

A) Nonrefundable personal, business, refundable
B) Business, nonrefundable personal, refundable
C) Refundable, nonrefundable personal, business
D) Refundable, business, nonrefundable personal

E) A) and C)
F) C) and D)

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Question 82

Multiple Choice

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Tamra and Jacob are married and they file a joint tax return. Tamra received nearly five times the salary that Jacob received. Which of the following statements is true?

A) Tamra and Jacob likely pay no tax marriage penalty nor receive a tax marriage benefit.
B) Tamra and Jacob likely pay a tax marriage penalty.
C) Tamra and Jacob likely receive a tax marriage benefit.
D) Tamra and Jacob likely will pay a tax marriage penalty and receive a tax marriage benefit.

E) B) and C)
F) A) and B)

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Question 83

True/False

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Tax credits reduce a taxpayer's taxable income dollar for dollar.

In 2019, Shawn's AGI is $170,000. He earned the income evenly throughout the year. He owed $29,890 in federal income tax and self-employment taxes of $2,590. Last year, he had a gross tax liability of $50,000. What is the minimum quarterly estimated tax payment Shawn must pay each quarter to avoid underpayment penalties for 2019?

Carolyn has an AGI of $38,000 (all from earned income) and two qualifying children and is filing as a head of household. What amount of earned income credit is she entitled to? (Exhibit 8-10)

Selene made $54,300 in 2019 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?

During 2019, Montoya (age 15) received $2,200 from a corporate bond. He also received $600 from a savings account established for him by his parents. Montoya lives with his parents and he is their dependent. What is Montoya's taxable income?

What happens if the taxpayer owes an underpayment penalty, but does not compute it on Form 2210?

Which of the following does not affect the amount of the earned income credit?

Harmony is single and was self-employed for the first half of 2019, 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?

For taxpayers who receive both salary as an employee and self-employment income as an independent contractor in the same year, which of the following statements regarding FICA and self-employment taxes is most accurate?

Long-term capital gains are taxed at the stated AMT rate for purposes of the alternative minimum tax.

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?

Individuals may file for and receive a six-month extension of time to file their tax return and pay their taxes without penalty.