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

A) As withheld
B) As the employee requests on his/her W-4 form
C) Evenly throughout the year
D) On April 15

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

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Question 52

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The lifetime learning credit can be used toward the cost of any course of instruction to acquire or improve a taxpayer's job skills, no matter the age of the taxpayer.

A) True
B) False

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Question 53

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Harmony is single and was self-employed for the first half of 2020, 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?

Maria and Tony are married. Assume their taxable income in 2020 after all deductions is $82,000, including $5,000 of qualified dividends. What is their income tax liability in 2020? (Use the tax rate schedules, long-term capital gains tax brackets.)

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

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

Montague (age 15) is claimed as a dependent by his parents, Matt and Mary. In 2020, Montague received $5,000 of qualified dividends, and he received $800 from a part-time job. What is his taxable income for 2020?

Which of the following is not an additional tax a taxpayer may have to pay?

Linda is a qualifying widow in 2020. In 2020, she reports $80,000 of taxable income (all ordinary) . What is her gross tax liability using the tax rate schedules? (Use the Tax rate schedules.)

Kaelyn's mother, Judy, looks after Kaelyn's four-year-old twins so Kaelyn can go to work (she drops off and picks up the twins from Judy's home every day) . Since Judy is a relative, Kaelyn made sure, for tax purposes, to pay her mother the going rate for child care ($6,300 for the year) . What is the amount of Kaelyn's child and dependent care credit if her AGI for the year was $36,000? (Exhibit 8-9)

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

Rhianna and Jay are married filing jointly in 2020. They have six children under age 17 for whom they may claim the child tax credit. Their AGI was $419,400. What amount of child tax credit may they claim on their 2020 tax return?

In 2020, John (52 years old)files as a head of household with one 18-year old dependent (qualifying)child. John is eligible to claim a $700 American opportunity tax credit for the year. John did not have any taxes withheld by his employer during the year and he did not make any estimated tax payments. After taking credits into account, what is the amount of John's taxes payable or refund, assuming that his AGI is $26,000 (all from salary)and his taxable income is $8,000?

The alternative minimum tax (AMT)is the AMT base multiplied by the AMT rate.

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.

Long-term capital gains are taxed at the stated AMT rate for purposes of the alternative minimum tax.

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

In 2020, 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?

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

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 the interest income?