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Exam 8: Individual Income Tax Computation and Tax Credits

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Question 41

Multiple Choice

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Which of the following statements regarding the earned income credit is true?

A) It is a nonrefundable credit
B) It is possible that a taxpayer with more earned income may receive more credit than a taxpayer with less earned income
C) A 70-year-old taxpayer with no dependents can qualify for the credit in certain circumstances
D) A taxpayer whose only source of income is interest from corporate bonds is eligible for the credit

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

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Question 42

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

A) True
B) False

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Question 43

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Which of the following is not a barrier to income shifting among family members?

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

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

Costa is a single taxpayer.His regular tax liability was $38,000.For 2019,he reported $190,000 of alternative minimum taxable income.What is his alternative minimum tax?

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

Julien and Sarah are married,file a joint return,and have two children,Kaya and Christopher.Kaya just finished her third year at college and Christopher just finished his first year of graduate school (fifth year of college).Tuition and books for the past year were $1,800 for Kaya and $5,000 for Christopher.How much can Julien and Sarah claim in educational credits if their joint AGI was $126,000 for 2019?

Paul and Melissa plan on filing jointly in 2019.For the year,the couple reported taxable income of $130,000.What is their gross tax liability? (Use Tax rate schedules.)

Which of the following is typical of taxpayers who are most likely affected by the AMT?

Which of the following statements best describes the deductions independent contractors may claim for valid business expenses?

Jerusha is married and she files a separate tax return in 2019.She claimed the standard deduction for regular tax purposes ($12,200).She had no other adjustments.Her regular taxable income was $67,800.What is Jerusha's AMTI?

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?

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

In 2019,Maia (who files as a head of household) reported regular taxable income of $115,000.She itemized her deductions,deducting $8,000 in charitable contributions and $3,000 in state income taxes.What is Maia's alternative minimum taxable income?

Due to the alternative minimum tax rate structure,a taxpayer with a large amount of long-term capital gains may be susceptible to the alternative minimum tax.

If an employer withholds taxes from an employee,in general,when are these taxes treated as paid to the IRS?

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

All capital gains are taxed at preferential rates.

The child tax credit is subject to phase-out based on the taxpayer's AGI.