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Exam 7: Individual Income Tax Computation and Tax Credits

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Question 1

True/False

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For alternative minimum tax purposes,taxpayers are allowed to deduct state income taxes but are not allowed to deduct charitable contributions.

A) True
B) False

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Question 2

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Which of the following statements concerning tax credits is true?

A) The tax benefit a taxpayer receives from a credit depends on the taxpayer's marginal tax rate.
B) Refundable tax credits are limited to a taxpayer's gross tax liability.
C) Tax credits are generally more beneficial than tax deductions.
D) None of these is a true statement.Credits reduce taxes payable dollar for dollar while deductions reduce taxes payable at the marginal tax rate.

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

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C

Question 3

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

Johann had a gross tax liability of $22,508 in 2012 and $21,000 in 2011,but his employer only withheld $19,500.Calculate his under/overpayment in each quarter for 2013 tax purposes.

If a married couple has one primary breadwinner,filing a joint return will likely result in a marriage penalty.

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

Which of the following best describes the manner in which self-employed taxpayers may deduct self-employment taxes?

Business credits are generally refundable credits.

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

Montague (age 15) is claimed as a dependent by his parents Matt and Mary.In 2013,Montague received $5,000 of qualified dividends and he received $800 from a part time job.What is his taxable income for 2013?

Harmony reports a regular tax liability of $15,000 and tentative minimum tax of $17,000.Given just this information,what is her alternative minimum tax liability for the year?

Self-employed taxpayers are allowed to deduct the full amount of the self-employment taxes they pay.

How could an individual obtain a business tax credit?

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 $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 2013?

Sheryl's AGI is $200,000.Her current tax liability is $52,068.Last year,her tax liability was $48,722.She will not owe underpayment penalties if her total estimated tax payments are at least which of the following (rounded) amounts (assume she makes the required payments each quarter) ?

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

Happy,Sleepy,Grumpy,and Doc all did not make adequate estimated payments.Which of them will not owe underpayment penalties for 2013 given the following information?

Taxpayers are not allowed to deduct personal or dependency exemptions for alternative minimum tax purposes.

In 2013,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 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 $10,350?

Which of the following statements concerning differences between employees and independent contractors is most accurate?