Question 1

Kors Corporation has 30 employees and $5 million of gross receipts. Kors spends $15,000 for qualified structural improvements for access for the disabled. The disabled access credit is

Accepted Answer

A)  $5,000. 
B)  $5,125. 
C)  $0. 
D)  $7,500.

Question 2

In 2016 Rita is divorced with one child. She has AGI of $20,000 resulting in a federal income tax liability of $260 and an earned income credit of $3,137. She has had $550 of federal income taxes withheld from her pay. Rita will receive a federal income refund of

Accepted Answer

A)  $550. 
B)  $325. 
C)  $3,137. 
D)  $3,427.

Question 3

An individual with AGI equal to or less than $150,000 in the prior year may generally avoid penalties for underpayment of estimated tax in each of the following cases with the exception of

Accepted Answer

A)  estimated tax is less than $1,500. 
B)  90% of the tax due for the current year is paid. 
C)  90% of the tax due for the current year is paid when computed on an annualized basis. 
D)  100% of the actual tax liability for the prior year is paid.

Question 4

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?

Accepted Answer

The answer of Lara started a self-employed consulting business in...

Question 5

In computing the alternative minimum taxable income, no deduction is allowed for

Accepted Answer

A)  alimony. 
B)  moving expenses. 
C)  personal exemptions. 
D)  individual retirement account contributions.

Question 6

If an individual is classified as an employee, the employer is required to withhold the employee's share of the FICA tax and to provide a matching amount.

Accepted Answer

A) True 
 B)False

Question 7

Taxpayers with income below phaseout amounts are allowed a child credit of $1,000 for each qualifying child under age 19 or under age 24 if a full-time student.

Accepted Answer

A) True 
 B)False

Question 8

Self-employed individuals are subject to the self-employment tax if their net earnings are more than the personal exemption amount.

Accepted Answer

A) True 
 B)False

Question 9

The alternative minimum tax applies to individuals only if it exceeds the taxpayer's regular income tax liability.

Accepted Answer

A) True 
 B)False

Question 10

Beth and Jay project the following taxes for the current year:
 $\begin{array}{lr}
\text { Regular tax } & \$ 50,000 \
\text { AMT } & 10,000 \
\text { Self employment tax } & 12,000
\end{array}$ How much in estimated tax payments (including withholding from wages and quarterly estimated payments) should the taxpayers pay this year in order to avoid underpayment penalties under the following assumptions regarding the preceding tax year?
a. Preceding tax year-AGI of $140,000 and total taxes of $36,000.
b. Preceding tax year-AGI of $155,000 and total taxes of $48,000.

Accepted Answer

The answer of Beth and Jay project the following taxes...

Question 11

Burton and Kay are married, file a joint return with an AGI of $115,000, and have one dependent child, Tyler, who is a full-time student in a Master of Accountancy program. The following expenses relate to his costs of attendance in 2016:
 $$\begin{array} { l l } 
\text { Tuition and academic fees } & \$ 20,000 \
\text { Textbooks } & \$ 1,500 \
\text { Room and board } & \$ 11,000
\end{array}$$ The tuition noted above is the gross amount charged before reduction for his $5,000 tuition scholarship. What is the maximum education credit allowed to Burton and Kay?

Accepted Answer

The answer of Burton and Kay are married, file a...

Question 12

A taxpayer will be ineligible for the earned income credit if he or she has disqualified investment income of more than $3,400 in 2016. Disqualified income includes all the following except

Accepted Answer

A)  net capital gains. 
B)  tax-exempt interest. 
C)  net rental income. 
D)  self-employment income.

Question 13

Which of the following statements is incorrect regarding qualifying criteria for the health insurance premium tax credit?

Accepted Answer

A)  The insurance policy must be purchased directly from an insurance company. 
B)  Household income must be below designated levels. 
C)  The taxpayer cannot have access to affordable essential coverage through an employer. 
D)  The individual may not be eligible as a dependent of another taxpayer.

Question 14

For purposes of the AMT, only the foreign tax credit and refundable personal credits are allowed to reduce the tentative minimum tax.

Accepted Answer

A) True 
 B)False

Question 15

Nonrefundable personal tax credits can only offset an individual's regular tax, not AMT.

Accepted Answer

A) True 
 B)False

Question 16

The maximum amount of the American Opportunity Tax Credit for each qualified student is

Accepted Answer

A)  $1,500. 
B)  $2,000. 
C)  $2,500. 
D)  $3,000.

Question 17

All of the following statements regarding self-employment income/tax are true except:

Accepted Answer

A)  The self-employment tax is imposed on net earnings from self-employment when self-employment income is over $400. 
B)  Self-employment tax is computed separately for married individuals filing joint returns. 
C)  Independent contractors are subject to self-employment tax on the amount of net earnings from the self-employment activity. 
D)  Employees who have a business in addition to their regular employment are not subject to the self-employment tax since FICA is withheld on their wages.

Question 18

A wage cap does not exist for which of the following self-employment taxes?

Accepted Answer

A)  Social Security tax 
B)  FICA 
C)  FUTA 
D)  Medicare hospital insurance

Question 19

A larger work opportunity credit is available for employers who hire any veteran of the U.S. military.

Accepted Answer

A) True 
 B)False

Question 20

Casualty and theft losses in excess of 10% of AGI are deductible for AMT purposes.

Accepted Answer

A) True 
 B)False

Exam 29: Special Tax Computation Methods, Tax Credits, and Payment of Tax

Kors Corporation has 30 employees and $5 million of gross receipts. Kors spends $15,000 for qualified structural improvements for access for the disabled. The disabled access credit is

In 2016 Rita is divorced with one child. She has AGI of $20,000 resulting in a federal income tax liability of $260 and an earned income credit of $3,137. She has had $550 of federal income taxes withheld from her pay. Rita will receive a federal income refund of

An individual with AGI equal to or less than $150,000 in the prior year may generally avoid penalties for underpayment of estimated tax in each of the following cases with the exception of

In computing the alternative minimum taxable income, no deduction is allowed for

If an individual is classified as an employee, the employer is required to withhold the employee's share of the FICA tax and to provide a matching amount.

Taxpayers with income below phaseout amounts are allowed a child credit of $1,000 for each qualifying child under age 19 or under age 24 if a full-time student.

Self-employed individuals are subject to the self-employment tax if their net earnings are more than the personal exemption amount.

The alternative minimum tax applies to individuals only if it exceeds the taxpayer's regular income tax liability.

A taxpayer will be ineligible for the earned income credit if he or she has disqualified investment income of more than $3,400 in 2016. Disqualified income includes all the following except

Which of the following statements is incorrect regarding qualifying criteria for the health insurance premium tax credit?

For purposes of the AMT, only the foreign tax credit and refundable personal credits are allowed to reduce the tentative minimum tax.

Nonrefundable personal tax credits can only offset an individual's regular tax, not AMT.

The maximum amount of the American Opportunity Tax Credit for each qualified student is

All of the following statements regarding self-employment income/tax are true except:

A wage cap does not exist for which of the following self-employment taxes?

A larger work opportunity credit is available for employers who hire any veteran of the U.S. military.

Casualty and theft losses in excess of 10% of AGI are deductible for AMT purposes.