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Exam 8: Individual Income Tax Computation and Tax Credits

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Question 41

Multiple Choice

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Why would a taxpayer file a tax return if not required to do so?

A) To remain in favor with the IRS.
B) To claim a refund of taxes paid.
C) All taxpayers are required to file returns.
D) In order to claim the standard deduction.

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

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Question 42

True/False

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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.

A) True
B) False

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Question 43

Multiple Choice

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

Happy, Sleepy, Grumpy, and Doc all did not make adequate estimated payments. Which of them will not owe underpayment penalties for 2018 given the following information?  

Which of the following represents the correct order in which credits are applied to gross tax liability (from first to last) ?

Sam is 30 years old. In 2018, he reported an AGI of $12,000, all from his job as a server at the local café. He is single and has no dependents. What amount of earned income credit may he claim in 2018? Use Exhibit 8-10

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?

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.

Cassy reports a gross tax liability of $1,000. She also claims $400 of nonrefundable personal credits, $700 of refundable personal credits, and $200 of business credits. What is Cassy's tax refund or tax liability due after applying the credits?

Parents may claim a $2,000 child tax credit for a dependent child who is 22 years of age at the end of the year if the child is a full-time student.

Which of the following statements regarding credits is correct?

Which of the following statements concerning tax credits is True?

Assume Georgianne underpaid her estimated tax liability by $150 in the first quarter, $500 in the second quarter, $400 in the third quarter, and $200 in the fourth quarter. Calculate her underpayment penalty for the year, assuming the federal short-term interest rate is five percent.

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

Hester (age 17) is claimed as a dependent by his parents, Charlton and Abigail. In 2018, Hester received $10,000 of qualified dividends and he received $11,800 from a part time job. What is his taxable income for 2018?

Candace is claimed as a dependent on her parent's tax return. In 2018, Candace received $5,000 of interest income from corporate bonds she obtained several years ago. This is her only source of income. She is 15 years old at year-end. What is her gross tax liability?

Alton reported net income from his sole proprietorship of $90,000. To determine his self-employment tax, he would multiply $90,000 by the self-employment tax rate.

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

Which of the following is not a barrier to income shifting among family members?

Carolyn has an AGI of $38,000 (all from earned income) , two qualifying children, and is filing as a head of household. What amount of earned income credit is she entitled to? (Exhibit 8-10)