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Exam 8: Individual Income Tax Computation and Tax Credits

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Question 21

Multiple Choice

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

A) Nonrefundable personal, business, refundable
B) Business, nonrefundable personal, refundable
C) Refundable, nonrefundable personal, business
D) Refundable, business, nonrefundable personal

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

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Question 22

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Employees are not allowed to deduct FICA taxes they pay.

A) True
B) False

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Question 23

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During 2016, Montoya (age 15) received $2,200 from a corporate bond. He also received $600 from a savings account established for him by his parents. Montoya lives with his parents and he is their dependent. What is Montoya's taxable income?

Jocelyn, a single taxpayer, had $742,000 of taxable income in 2016. All of the income is ordinary. What is her tax liability for the year?

Paul and Melissa plan on filing jointly in 2016. For the year, the couple reported taxable income of $130,000. What is their gross tax liability?

Jackson earned a salary of $254,000 in 2016. What amount of FICA taxes should Jackson's employer withhold from his paycheck?

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

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

Candace is claimed as a dependent on her parent's tax return. Her parents' ordinary income marginal tax rate is 33%. In 2016, 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?

Employee status is always better than independent contractor status for a taxpayer because the employee is responsible for paying the employee portion of the FICA taxes.

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.

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?

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

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.

Hester (age 17) is claimed as a dependent by his parents, Charlton and Abigail. In 2016, Hester received $10,000 of qualified dividends and he received $6,000 from a part time job. What is his taxable income for 2016?

Allen Green is a single taxpayer with an AGI (and modified AGI) of $210,000, which includes $170,000 of salary, $25,000 of interest income, $10,000 of dividends, and $5,000 of long-term capital gains. What is Allen's net investment income tax liability this year, rounded to the nearest whole dollar amount?

Miley, a single taxpayer, plans on reporting $28,650 of taxable income this year (all of her income is from a part-time job) . She is considering applying for a second part-time job that would give her an additional $10,000 of taxable income. By how much will the income from the second job increase her tax liability? (use the tax rate schedules)

John and Sally pay Janet (Sally's older sister) to watch John and Sally's child Dexter during the day. Janet cares for Dexter in her home. John and Sally may claim a child and dependent care credit based on the amount they pay Janet to care for Dexter.

Selene made $54,300 in 2016 working at the local burger joint, Moon Café. How much should her employer withhold from her paycheck for FICA taxes if the calculation is made correctly?

Maria and Tony are married. They are preparing to file their 2016 tax return. If they were to file as single taxpayers, Maria and Tony would report $40,000 and $60,000 of taxable income, respectively. On their joint tax return, their taxable income is $100,000. How much of a marriage penalty or benefit will Maria and Tony experience in 2016?