Question 1

Hera earned a $175,000 salary in 2020. Her husband, Zeus, earned $100,000 salary in 2020. Hera and Zeus file a joint tax return. How much in FICA taxes will they owe in 2020?

Accepted Answer

A) $14,737 
B) $18,950 
C) $19,845 
D) $4,213

Question 2

Harmony is single and was self-employed for the first half of 2020, earning $18,000 of Schedule C (business)net income. During the second half of the year, she began working as an employee and earned $38,000 in salary. What amount of self-employment taxes is Harmony required to pay?

Accepted Answer

The answer of Harmony is single and was self-employed for...

Question 3

Which of the following statements concerning a comparison between employees and independent contractors is most accurate?

Accepted Answer

A) Employees and independent contractors deduct business expenses as miscellaneous itemized deductions. 
B) While employees are typically eligible for nontaxable fringe benefits from employers, independent contractors are not. 
C) Employers are required to withhold either FICA or self-employment taxes from compensation paid to employees and compensation paid to independent contractors. 
D) Employers typically withhold federal income taxes from compensation paid to employees and to independent contractors.

Question 4

Asteria earned a $26,200 salary as an employee in 2020. How much should her employer have withheld from her paycheck for FICA taxes? (Round your answer to the nearest whole dollar amount.)

Accepted Answer

A) $380 
B) $1,624 
C) $2,004 
D) $4,009

Question 5

The child and dependent care credit entitles qualifying taxpayers to a credit equal to the full amount of qualified expenses.

Accepted Answer

A) True 
 B)False

Question 6

The AMT exemption amount is phased out for high-income taxpayers.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following statements regarding late filing penalties is true?

Accepted Answer

A) If a taxpayer fails to file a tax return, the late filing penalty will continue to grow until the taxpayer files the tax return. 
B) The amount of the late filing penalty is the same for both fraudulent failure to file and nonfraudulent failure to file. 
C) Taxpayers who owe no tax as of the due date of their tax returns are not subject to late filing penalties even if they file late. 
D) None of the choices are correct.

Question 8

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? (Exhibit 8-9)

Accepted Answer

A) $0 
B) $810 
C) $1,080 
D) $3,000

Question 9

Which of the following is not a barrier to income shifting among family members?

Accepted Answer

A) The assignment of income doctrine 
B) Net unearned income for children 18 and younger taxed at marginal tax rates for trusts 
C) Elimination of preferential tax rates (on dividends and long-term capital gains)for dependents 
D) None of the choices are correct

Question 10

In certain circumstances a child with very little income may have at least a portion of their income taxed at the trust and estate tax rates.

Accepted Answer

A) True 
 B)False

Question 11

Assume Georgianne underpaid her estimated tax liability by $150 in the first quarter of 2021, $500 in the second quarter, $400 in the third quarter, and $200 in the fourth quarter. Calculate her underpayment penalty for 2021, assuming the federal short-term interest rate is 5 percent.

Accepted Answer

The answer of Assume Georgianne underpaid her estimated tax liability...

Question 12

For alternative minimum tax purposes, taxpayers are required to add back the regular tax standard deduction amount for their filing status whether or not they itemized deductions for regular tax purposes.

Accepted Answer

A) True 
 B)False

Question 13

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.

Accepted Answer

A) True 
 B)False

Question 14

Jamie is single. In 2020, she reported $100,000 of taxable income, including a long-term capital gain of $5,000. 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.)

Accepted Answer

A) $15,000 
B) $18,080 
C) $17,630 
D) $16,975

Question 15

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?

Accepted Answer

A) $2,465 
B) $1,520 
C) $570 
D) $380

Question 16

Which of the following statements regarding the earned income credit is true?

Accepted Answer

A) It is a nonrefundable credit. 
B) It is possible that a taxpayer with more earned income may receive more credit than a taxpayer with less earned income. 
C) A 70-year-old taxpayer with no dependents can qualify for the credit in certain circumstances. 
D) A taxpayer whose only source of income is interest from corporate bonds is eligible for the credit.

Question 17

If both spouses of a married couple earn roughly equivalent high levels of wages, the couple is likely to pay a marriage penalty due to the nature of the tax rate schedules.

Accepted Answer

A) True 
 B)False

Question 18

The alternative minimum tax base is typically _____ the regular income tax base.

Accepted Answer

A) smaller than 
B) about the same as 
C) larger than 
D) exactly the same as

Question 19

Which of the following statements regarding FICA taxes is true?

Accepted Answer

A) Low-income employees are not required to pay FICA taxes. 
B) An employee who has two different employers during the year may be entitled to a tax credit for overpaid FICA taxes. 
C) The maximum amount of Medicare taxes an employee is required to pay is capped each year but the maximum amount of Social Security taxes is not. 
D) The wage base limit for Social Security taxes depends on the taxpayer's filing status.

Exam 8: Individual Income Tax Computation and Tax Credits

Hera earned a $175,000 salary in 2020. Her husband, Zeus, earned $100,000 salary in 2020. Hera and Zeus file a joint tax return. How much in FICA taxes will they owe in 2020?

Harmony is single and was self-employed for the first half of 2020, earning $18,000 of Schedule C (business)net income. During the second half of the year, she began working as an employee and earned $38,000 in salary. What amount of self-employment taxes is Harmony required to pay?

Which of the following statements concerning a comparison between employees and independent contractors is most accurate?

Asteria earned a $26,200 salary as an employee in 2020. How much should her employer have withheld from her paycheck for FICA taxes? (Round your answer to the nearest whole dollar amount.)

The child and dependent care credit entitles qualifying taxpayers to a credit equal to the full amount of qualified expenses.

The AMT exemption amount is phased out for high-income taxpayers.

Which of the following statements regarding late filing penalties is true?

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? (Exhibit 8-9)

Which of the following is not a barrier to income shifting among family members?

In certain circumstances a child with very little income may have at least a portion of their income taxed at the trust and estate tax rates.

Assume Georgianne underpaid her estimated tax liability by $150 in the first quarter of 2021, $500 in the second quarter, $400 in the third quarter, and $200 in the fourth quarter. Calculate her underpayment penalty for 2021, assuming the federal short-term interest rate is 5 percent.

For alternative minimum tax purposes, taxpayers are required to add back the regular tax standard deduction amount for their filing status whether or not they itemized deductions for regular tax purposes.

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.

Jamie is single. In 2020, she reported $100,000 of taxable income, including a long-term capital gain of $5,000. 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.)

Which of the following statements regarding the earned income credit is true?

If both spouses of a married couple earn roughly equivalent high levels of wages, the couple is likely to pay a marriage penalty due to the nature of the tax rate schedules.

The alternative minimum tax base is typically _____ the regular income tax base.

Which of the following statements regarding FICA taxes is true?