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Exam 7: Individual Income Tax Computation and Tax Credits

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Question 21

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All else equal,taxpayers are more likely to be classified as employees rather than independent contractors if they are allowed to determine their own working hours and work without frequent oversight.

A) True
B) False

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Question 22

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All else equal,a reduction in regular income tax rates would require more taxpayers to pay the alternative minimum tax.

A) True
B) False

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Question 23

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

Parents may claim a 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.Each dependent must be under the age of 17 at year-end.

Clarissa's gross tax liability for 2013 is $1,300.She has a $1,500 nonrefundable personal tax credit,a $750 business tax credit,and a $400 refundable personal tax credit.Her employer withheld $1,000 from her pay for taxes.What is her net tax due or refund for this year?

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

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

Maria and Tony are married.They are preparing to file their 2013 tax return.If they were to file as single taxpayers,Maria and Tony would report $40,000 and $60,000 of taxable income,respectively.On their joint tax return,their taxable income is $100,000.How much of a marriage penalty or benefit will Maria and Tony experience in 2013?

During 2013,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?

During 2013,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?

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

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?

Which of the following items is not added back to regular taxable income in computing alternative minimum taxable income?

Allen Green is a single taxpayer with an AGI (and modified AGI) of $210,000,which includes $170,000 of salary,$25,000 of interest income,$10,000 of dividends,and $5,000 of long-term capital gains.What is Allen's Medicare contribution tax liability this year,rounded to the nearest whole dollar amount?

For married couples,the Medicare tax is based on the couple's combined wages.

The alternative minimum tax system requires taxpayers to apply an alternative tax rate on the regular income tax base to determine the amount of the alternative minimum tax.Taxpayers make several "plus" and "minus" adjustments to regular taxable income to compute alternative minimum taxable income (AMTI) .

Baker earned $225,000 of salary as an employee in 2013.How much should his employer have withheld from his paycheck for FICA taxes (rounded to the nearest whole dollar amount) ?

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.While each filing status has its own tax rate schedule,all tax rate schedules consist of tax brackets taxed at 10 percent,15 percent,25 percent,28 percent,33 percent,35 percent,and 39.6 percent.However,the width or range of income within each bracket varies by filing status.

The alternative minimum tax is the AMT base multiplied by the AMT rate.Above is the definition of the tentative minimum tax.

An individual could pay 100% of her tax liability by the due date of her tax return and still be subject to underpayment tax penalties.