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Exam 8: Individual Income Tax Computation and Tax Credits

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Question 21

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Stephanie and Mitch are married and they file a joint tax return. Mitch received a slightly higher salary than Stephanie did during the year.They both make very high salaries. Which of the following statements is true?

A) Stephanie and Mitch likely pay no tax marriage penalty nor receive a tax marriage benefit.
B) Stephanie and Mitch likely pay a tax marriage penalty.
C) Stephanie and Mitch likely receive a tax marriage benefit.
D) Stephanie and Mitch likely will pay a tax marriage penalty and receive a tax marriage benefit.

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

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Question 22

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Sheryl's AGI is $251,100. Her current tax liability is $52,178. Last year, her tax liability was $48,832. 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.)

A) $46,960
B) $48,832
C) $51,656
D) $53,715

E) A) and C)
F) B) and C)

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Question 23

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If there is not enough gross tax liability to use the foreign tax credit, _____.

The wage base for which of the following taxes is capped?

The alternative minimum tax system requires taxpayers to apply an alternative tax rate on the regular income tax base to determine the amount of the alternative minimum tax.

Maria and Tony are married. They are preparing to file their 2020 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 2020? (Use tax rate schedules.)

Keith and Nicole are married filing jointly, with two daughters who qualify as dependents. Their gross income for 2020 is $25,500. Are they required to file a tax return? How do you know this without memorizing the gross income thresholds? In 2020, the standard deduction for taxpayers filing a joint return is $24,800.

Henry and Janice are married and file jointly. They have an AGI (and modified AGI)of $290,000, which includes $90,000 of salary, $170,000 of active business income, $10,000 of interest income, $15,000 of dividends, and $5,000 of long-term capital gains. What is Henry and Janice's net investment income tax liability this year? (Round your final answer to the nearest whole dollar amount.)

Angelena files as a head of household. In 2020, she reported $56,300 of taxable income, including a $16,000 qualified dividend. What is her gross tax liability? (Round your answer to the nearest whole dollar amount.) (Use the tax rate schedules, long-term capital gains tax brackets)

Costa is a single taxpayer. His regular tax liability was $38,000. For 2020, he reported $190,000 of alternative minimum taxable income. What is his alternative minimum tax?

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

What is the underpayment penalty rate that taxpayers pay when they underpay their estimated taxes?

Persephone has a regular tax liability of $14,175 and a tentative minimum tax of $11,670. Given just this information, what is her alternative minimum tax liability for the year?

Individuals may file for and receive a six-month extension of time to file their tax return and pay their taxes without penalty.

Which of the following is not one of the general tax credit categories?

Paul and Melissa plan on filing jointly in 2020. For the year, the couple reported taxable income of $130,000. What is their gross tax liability? (Use tax rate schedules.)

Baker is single and earned $227,000 of salary as an employee in 2020. How much should his employer have withheld from his paycheck for FICA taxes? (Round your answer to the nearest whole dollar amount.)

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?

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

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.