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Exam 8: Individual Income Tax Computation and Tax Credits

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Question 81

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Which of the following is not true of the extension to file an individual tax return?

A) It must be requested by the original due date of the return.
B) It is granted automatically by the IRS if requested.
C) It extends the due date for the return and associated tax payments beyond the original due date of the tax return.
D) The extension is for six months beyond the original due date.

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

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Question 82

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Hera wants to reduce her income tax liability by shifting some of her income to her 10-year-old daughter (a dependent), Athena. Last year, Hera gifted corporate bonds to Athena. This year, Athena received $1,550 in interest income from the bonds. What amount of tax will Athena pay on theinterest income?

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$50
Because the kidd...

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Question 83

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Due to the alternative minimum tax rate structure, timing tax planning strategies are not effective under the alternative minimum tax system.

Henry and Janice are married and file jointly. They have an AGI (and modified AGI) of $290,000, which includes $90,000 of salary, $170,000 of active business income, $10,000 of interest income,$15,000 of dividends, and $5,000 of long-term capital gains. What are Henry and Janice's net investment income tax liability this year, rounded to the nearest whole dollar amount?

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

Employees must pay both Social Security tax and Medicare tax on the full amount of their wages no matter the amount of their wages.

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

Quantitatively, what is the relationship between the AGI phase-out thresholds for the child tax credit?

Asteria earned a $25,500 salary as an employee in 2017. How much should her employer have withheld from her paycheck for FICA taxes (rounded to the nearest whole dollar amount) ?

In 2017, Athena reported $38,950 of taxable income. Of this, $33,950 came from her work at the local library and the remaining $5,000 was from capital gains to be taxed at preferential rates. Compute her tax liability for 2017 as a single taxpayer. Use Tax Rate Schedule.)

Depending on the year, the original (unextended) due date for an individual's tax return may be before April 15.

Tax rate schedules are provided for use by (relatively) higher income taxpayers while thetax tables are provided for use by (relatively) lower income taxpayers.

What happens if the taxpayer owes an underpayment penalty, but does not compute it onForm 2210?

Which of the following tax credits is fully refundable?