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Exam 8: Individual Income Tax Computation and Tax Credits

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Question 31

Multiple Choice

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Which of the following statements regarding FICA taxes is True?

A) Low income employees are not required to pay FICA taxes.
B) An employee who has two different employers during the year may be entitled to a tax credit for overpaid FICA taxes.
C) The maximum amount of Medicare taxes an employee is required to pay is capped each year but the maximum amount of Social Security taxes is not.
D) The wage base limit for Social Security taxes depends on the taxpayer's filing status.

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

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Question 32

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

A) True
B) False

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Question 33

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Jerusha is married and she files a separate tax return in 2018. She claimed the standard deduction for regular tax purposes ($12,000). She had no other adjustments. Her regular taxable income was $67,800. What is Jerusha's AMTI?

Apollo is single and his AMT base is $100,250. This amount includes $500 of qualified dividends (the dividends were taxed at 15% in determining the regular tax liability). What is Apollo's tentative minimum tax?

Asteria earned a $25,500 salary as an employee in 2018. How much should her employer have withheld from her paycheck for FICA taxes? (Rounded to the nearest whole dollar amount) .

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

In 2018, Athena reported $39,600 of taxable income. Of this, $34,600 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 2018 as a single taxpayer. Use Tax Rate Schedule.)

Taxpayers are generally allowed to carry back and/or carry forward unused business credits.

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

Business credits are generally refundable credits.

Demeter is a single taxpayer. Her AGI in 2018 is $209,200. Demeter may claim a child tax credit for her daughter Persephone. What amount of child tax credit is Demeter entitled to claim after any applicable phase-out?

Which of the following tax credits is fully refundable?

All capital gains are taxed at preferential rates.

Atlas earned $17,300 from his sole proprietorship in 2018. This was his only source of income. How much in self-employment taxes will Atlas be able to deduct?

Which of the following is not True of the lifetime learning credit?

Montague (age 15) is claimed as a dependent by his parents Matt and Mary. In 2018, Montague received $5,000 of qualified dividends and he received $800 from a part time job. What is his taxable income for 2018?

Keith and Nicole are married filing joint with two daughters who qualify as dependents. Their gross income for 2018 is $25,500. Are they required to file a tax return? How do you know this without memorizing the gross income thresholds? In 2018, the standard deduction for taxpayers filing a joint return is $24,000.

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

Jack paid $5,000 in daycare expenses for his five-year-old daughter so he could work. His AGI for the year was $37,500 (all earned income). What is the amount of his child and dependent care credit?

Parents may claim a child and dependent care credit for expenses incurred in providing for their dependents while the parents work as long as the children are over age 14 and under age 20 at year end.