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Exam 8: Individual Income Tax Computation and Tax Credits

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Question 81

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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?

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$690
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Question 82

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Which of the following statements regarding late filing penalties and/or late payment penalties is true?

A) An extension of time to file the tax return protects a taxpayer from late payment penalties as long as the tax is paid by the extended due date of the return.
B) The penalty rate for late filing penalties is less than the penalty rate for late payment penalties.
C) If a taxpayer has not paid the full tax liability by the original due date of the return and the taxpayer has not filed a tax return by the due date of the return, the maximum late filing and late payment penalty will be no greater than the late filing penalty by itself.
D) None of the above

E) B) and C)
F) B) and D)

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Question 83

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The late payment penalty is based on the amount of tax owed and the number of days that the tax is not paid. The maximum amount of the penalty is unlimited.

Trudy is Jocelyn's friend. Trudy looks after Jocelyn's four-year-old son during the day so Jocelyn can go to work. During the year, Jocelyn paid Trudy $4,000 to care for her son. What is the amount of Jocelyn's child and dependent care credit if her AGI for the year was $30,000?

Johann had a gross tax liability of $22,508 in 2016, but his employer only withheld taxes of $19,500. Johann's gross tax liability was $21,000 in 2015. Calculate Johann's under/overpayment in each quarter for 2016 tax purposes.

Jerusha is married and she files a separate tax return in 2016. She claims two exemptions (2 × 4,050 = $8,100). She claimed the standard deduction for regular tax purposes ($6,300). She had no other adjustments. Her regular taxable income was $67,800. What is Jerusha's AMTI?

Business credits are generally refundable credits.

Which of the following tax credits is fully refundable?

Kaelyn's mother, Judy, looks after Kaelyn's four-year-old twins so Kaelyn can go to work (she drops off and picks up the twins from Judy's home every day) . Since Judy is a relative, Kaelyn made sure, for tax purposes, to pay her mother the going rate for child care ($6,300 for the year) . What is the amount of Kaelyn's child and dependent care credit if her AGI for the year was $36,000?

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 are Henry and Janice's net investment income tax liability this year, rounded to the nearest whole dollar amount?

Montague (age 15) is claimed as a dependent by his parents Matt and Mary. In 2016, Montague received $5,000 of qualified dividends and he received $800 from a part time job. What is his taxable income for 2016?

An 80-year-old taxpayer with earned income and no dependent children could qualify for the earned income credit.

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

All capital gains are taxed at preferential rates.

The kiddie tax does not apply to children over 24 years old at the end of the tax year.

Hestia (age 17) is claimed as a dependent by her parents, Rhea and Chronus. In 2016, Hestia received $1,000 of interest income from a corporate bond that she owns. In addition, she has earned income of $200. What is her taxable income for 2016?

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