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Exam 7: Individual Income Tax Computation and Tax Credits

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Question 71

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Max is a 14-year-old dependent of his parents.During 2018,Max earned $1,800 working part time jobs and he received $1,500 of interest income from corporate bonds that were given to him last year.What is Max's 2018 taxable income?

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$1,150 This consists of gross ...

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Question 72

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Which of the following taxpayers (all age 40) are required to file a return? $\begin{array}{ll}{\text { Taxpayer }} & {\text { Filing Stat }}&\text { Income} \\\text { Jenny and Jim } & \text { Married Filing Jointly } &\$ 2670\\\text { Allen } & \text { Single }& \$ 10,30 \\\text { Timmy } & \text { Head of Household }&\$ 15,000\end{array}$

A) Jenny and Jim.
B) Allen.
C) Timmy.
D) None of the choices are correct.

E) B) and D)
F) A) and B)

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Question 73

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During 2018,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?

The late payment penalty is based on the amount of tax owed and the number of days that the tax is not paid.The maximum amount of the penalty is unlimited.

Wolfina's twins,Romulus and Remus,finished their first year of school at an accredited university in 2018.She paid $10,000 in qualified educational expenses for Romulus and $2,000 of qualifying expenses for Remus.Wolfina is a head of household with an AGI of $85,000.What amount of American opportunity credit may she claim?

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.

Alton reported net income from his sole proprietorship of $90,000.To determine his self-employment tax,he would multiply $90,000 by the self-employment tax rate.

Why would a taxpayer file a tax return if not required to do so?

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

When applying credits against a taxpayer's gross tax liability,nonrefundable personal credits are applied first,then business credits,and finally refundable personal credits.

Angelena files as a head of household.In 2018,she reported $52,300 of taxable income,including a $10,000 qualified dividend.What is her gross tax liability,rounded to the nearest whole dollar amount? (Use the tax rate schedules)

Which of the following statement(s) concerning estimated tax payments and underpayment penalties for individuals is (are) true?

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

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

Which of the following statements regarding the child tax credit is false?

Maria and Tony are married.They are preparing to file their 2018 tax return.If they were to file as single taxpayers,Maria and Tony would report $10,000 and $70,000 of taxable income,respectively.On their joint tax return,their taxable income is $80,000.How much of a marriage penalty or benefit will Maria and Tony experience in 2018? (Use Tax Rate Schedule.)

Parents may claim a child and dependent care credit for expenses incurred in providing for their dependents while the parents work as long as the children are over age 14 and under age 20 at year end.

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.

The taxable income levels in the married filing jointly tax rate schedule are ________ those in the married filing separately schedule.

Which of the following is not one of the general tax credit categories?