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Exam 8: Individual Income Tax Computation and Tax Credits

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Question 51

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Which of the following is not true of the lifetime learning credit?

A) It is a nonrefundable credit.
B) The credit can be claimed by taxpayers who have graduated from college and are taking professional training courses to improve their job skills.
C) A taxpayer with multiple dependents can claim a credit for each dependent's qualifying expenses.
D) The credit is subject to phase out based on the taxpayer's AGI.

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

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Question 52

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

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.

E) A) and C)
F) A) and B)

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Question 53

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Which of the following statement(s) concerning estimated tax payments and underpayment penalties for individuals is(are) true?

Keith and Nicole are married filing joint with two daughters who qualify as dependents. Their gross income for 2016 is $21,000. Are they required to file a tax return? How do you know this without memorizing the gross income thresholds? In 2016, the standard deduction for taxpayers filing a joint return is $12,600 and the personal exemption is $4,050.

What is the underpayment penalty rate that taxpayers pay when they underpay their estimated taxes?

Assuming the kiddie tax applies, what amount of a child's income is subject to the kiddie tax?

Which of the following is not true of the extension to file an individual tax return?

Parents may claim a child tax credit for a dependent child who is 22 years of age at the end of the year if the child is a full-time student.

Which of the following statements concerning tax credits is true?

How could an individual obtain a business tax credit?

In 206, 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 2016?

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

To qualify for the earned income credit, the taxpayer must have a qualified dependent.

All else equal, taxpayers are more likely to be classified as employees rather than independent contractors if they are allowed to determine their own working hours and work without frequent oversight.

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

All else equal, a reduction in regular income tax rates would require more taxpayers to pay the alternative minimum tax.

Rhianna and Jay are married filing jointly in 2016. They have six children for whom they may claim the child tax credit. Their AGI was $123,440. What amount of child tax credit may they claim on their 2016 tax return?

Pyrrha, a 12-year-old dependent of Epimetheus and Pandora, received $2,200 of interest income in 2016. Her parents' marginal tax rate is 35%. What is Pyrrha's gross tax liability for the year?

The computation of the alternative minimum tax base begins with regular taxable income. Which of the following is not part of the formula for computing the alternative minimum tax base?

The earned income credit is sometimes referred to as a negative income tax.