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Exam 8: Individual Income Tax Computation and Tax Credits

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Question 1

Multiple Choice

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Which of the following statements concerning tax credits is true?

A) The tax benefit a taxpayer receives from a credit depends on the taxpayer's marginal tax rate.
B) Refundable tax credits are limited to a taxpayer's gross tax liability.
C) Tax credits are generally more beneficial than tax deductions.
D) None of these are true statements.

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

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Question 2

True/False

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

A) True
B) False

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Question 3

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The kiddie tax does not apply to children over 24 years old at the end of the tax year.

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

Jocelyn, a single taxpayer, had $742,000 of taxable income in 2020. All of the income is ordinary. What is her tax liability for the year? (Use tax rate schedules.)

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

During all of 2020, 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 2020. Neither is blind, and both are under age 65. They reported the following tax-related information for the year. (Use the tax rate schedules, 2020 Alternative minimum tax (AMT)exemption) What are the Clays' taxes payable or refund due? (Ignore the alternative minimum tax.)What are the Clays' tentative minimum tax and alternative minimum tax?

Demeter is a single taxpayer. Her AGI in 2020 is $209,200. Demeter may claim a child tax credit for her daughter Persephone. What amount of child tax credit is Demeter entitled to claim after any applicable phase-out?

Pyrrha, a 12-year-old, claimed in a tax return as a dependent of Epimetheus and Pandora, received $8,200 of interest income in 2020. What is Pyrrha's gross tax liability for the year? (Use Tax Rate Schedule, Standard deduction,Estates and Trusts.)

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?

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?

Harmony reports a regular tax liability of $15,000 and tentative minimum tax of $17,000. Given just this information, what is her alternative minimum tax liability for the year?

Jerusha is married and she files a separate tax return in 2020. She claimed the standard deduction for regular tax purposes ($12,400). She had no other adjustments. Her regular taxable income was $67,800. What is Jerusha's AMTI?

A marriage penalty occurs when a couple pays more taxes by filing a joint tax return than they would have paid had they filed married filing separately.

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?

Business credits are generally refundable credits.

Which of the following suggests that a working taxpayer is an independent contractor rather than an employee?

Long-term capital gains, dividends, and taxable interest income are all taxed at preferential rates.

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

Johann had a gross tax liability of $22,508 in 2020, but his employer only withheld taxes of $19,500. Johann's gross tax liability was $21,000 in 2019. Calculate Johann's under/overpayment in each quarter for 2019 tax purposes.