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Exam 7: Individual Income Tax Computation and Tax Credits

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Question 61

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In 2014, Shawn's AGI is $170,000. He earned the income evenly throughout the year. He owed $24,900 in federal income tax plus alternative minimum tax of $263, and self-employment taxes of $2,590. Last year, he had a gross tax liability of $50,000. What is the minimum quarterly estimated tax payment Shawn must pay each quarter to avoid underpayment penalties for 2014?

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Question 62

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John and Sally pay Janet (Sally's older sister) to watch John and Sally's child Dexter during the day. Janet cares for Dexter in her home. John and Sally may claim a child and dependent care credit based on the amount they pay Janet to care for Dexter.

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Question 63

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Depending on the year, the original (unextended) due date for an individual's tax return may be after April 15.

Pyrrha, a 12-year-old dependent of Epimetheus and Pandora, received $2,100 of interest income in 2014. Her parents' marginal tax rate is 35%. What is Pyrrha's gross tax liability for the year?

Due to the alternative minimum tax rate structure, timing tax planning strategies are not effective under the alternative minimum tax system.

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?

The taxable income levels in the married filing jointly tax rate schedule are _______ those in the married filing separately schedule.

Atlas earned $17,300 from his sole proprietorship in 2014. This was his only source of income. How much in self-employment taxes will Atlas be able to deduct?

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.

An individual could pay 100% of her tax liability by the due date of her tax return and still be subject to underpayment tax penalties.

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

Keith and Nicole are married filing joint with two daughters who qualify as dependents. Their gross income for 2014 is $21,000. Are they required to file a tax return? How do you know this without memorizing the gross income thresholds? In 2014, the standard deduction for taxpayers filing a joint return is $12,400 and the personal exemption is $3,950.

Business credits are generally refundable credits.

The tax rate schedules are set up to tax lower levels of income at higher tax rates than higher levels of income.

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

Taxpayers are not required to file a tax return unless their gross income passes a certain threshold. This threshold is generally the ________.

Which of the following does not affect the amount of the earned income credit?

Depending on the year, the original (unextended) due date for an individual's tax return may be before April 15.

Akiko and Hitachi (married filing jointly for 2014) are both educators. They attended a conference to further their job-related skills. Tuition for the conference was $2,000 for each person. Their AGI was $114,000. How much lifetime learning credit can they claim?

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