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Exam 8: Individual Income Tax Computation and Tax Credits

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Question 51

Multiple Choice

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Which of the following statements regarding credits is correct?

A) Business credits that are generated in one year but are not utilized in that year may be carried forward to future years but not back to a prior year.
B) Business credits that are generated in one year but are not utilized in that year expire.
C) Business expenses are generally refundable credits.
D) Business credits that are generated in one year but are not utilized in that year may be carried back to the previous year and then forward to future years.

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

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Question 52

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Jamie is single. In 2017, she reported $100,000 of taxable income, including a long-term capital gain of $5,000. What is her gross tax liability, rounded to the nearest whole dollar amount? (use the tax rate schedules)

A) $20,982
B) $15,000
C) $20,332
D) $19,582

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

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Question 53

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Jackson earned a salary of $254,000 in 2017. What amount of FICA taxes should Jackson's employer withhold from his paycheck?

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.

Carolyn has an AGI of $38,000 (all from earned income) , two qualifying children, and is fili1n0g6) as a head of household. What amount of earned income credit is she entitled to?

Johann had a gross tax liability of $22,508 in 2017, but his employer only withheld taxes of$19,500. Johann's gross tax liability was $21,000 in 2016. Calculate Johann's under/overpayment in each quarter for 2017 tax purposes.

The American opportunity credit is available only for those students who are in their first or second year of postsecondary education.

What is the underpayment penalty rate that taxpayers pay when they underpay their estimated taxes?

The computation of the alternative minimum tax base begins with regular taxableincome. Which of the following is not part of the formula for computing the alternative minimum tax base?

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$124,000 for 2017?

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

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

Which of the following statements regarding the child and dependent care credit is true?

Maria and Tony are married. They are preparing to file their 2017 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 2017? (Use Tax Rate Schedule.)

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

Clarissa's gross tax liability for 2017 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?

If there is not enough gross tax liability to use the foreign tax credit,

Which of the following statements regarding the AMT exemption amounts is not true?

Selene made $54,300 in 2017 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?

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.