Exam 14: Special Tax Computation Methods, tax Credits, and Payment of Tax

When a husband and wife file a joint return and both have self-employment income,the self-employment tax must be computed separately.

One-half of the self-employment tax imposed is allowed as a for AGI deduction.

Which one of the following is a refundable credit?

A taxpayer acquired new equipment to be used in her business this year.For AMT purposes,depreciation must be recalculated using the straight-line method over the same recovery period used for regular tax purposes.

Marguerite and Josephus have two children,ages 13 and 10.Their modified AGI is $120,500.What is their child tax credit?

For purposes of the child and dependent care credit,qualifying employment-related expenses cannot include payments to a relative.

All tax-exempt bond interest income is classified as an AMT preference.

Lara started a self-employed consulting business in the last part of the year and earned $60,000 of self- employment income.She had been employed as manager in a consulting firm prior to starting her own business and had earned $175,000. (a)What is Lara's Additional Medicare Tax for 2016,if any? (b)What is Lara's deduction for AGI for the Additional Medicare Tax?

The earned income credit is refundable only if a tax has been withheld.

The health insurance premium assistance credit is designed to help lower and middle income taxpayers who purchase their own health insurance insurance directly from an insurance company or through a state or federal exchange.

Claire accepts a new job.She will have access to health insurance coverage through her employer.The employer's policy meets the criteria for affordable minimum essential coverage.Claire prefers to purchase her own insurance policy through the state or federal exchange so she can retain access to her doctor.Assuming Claire's income is within the parameters specified,she will be eligible for the health insurance premium assistance credit.

The adoption credit based on qualified adoption expenses is generally allowed in the year the adoption is finalized.

Dwayne has general business credits totaling $30,000 before limitation.His regular tax liability is $83,000 and his tentative minimum tax is $79,000.What amount of general business credit can Dwayne take this year?

In computing AMTI,tax preference items are

Hong earns $127,300 in her job as a physician's assistant.She also has her own business selling cosmetics.This business generated $10,000 of earnings.What is Hong's self-employment tax for 2016?

Annie has taxable income of $100,000,a regular tax liability of $21,037,a positive AMT adjustment due to limitations on itemized deductions of $20,000,and tax preferences of $25,000 in 2016.Annie is single and takes a $4,050 personal exemption for herself only.What is Annie's AMT for 2016?

Refundable tax credits

An individual taxpayer who is self-employed and an active investor has qualified for foreign tax credits,nonrefundable personal tax credits and general business credits.Because he knows there are differing limitations on the application of these credits,with resulting interrelated aspects,he wants to know the appropriate order for their application.The appropriate order of the application of these three classes of tax credits is as follow:

Nonrefundable credits may offset tax liability but may not result in additional payments to the taxpayer.

If an individual is an employee and also has self-employment income,the maximum tax base for computing self-employment tax is reduced by the wages that are subject to the FICA tax.