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Exam 8: Individual Income Tax Computation and Tax Credits

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Question 51

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Long-term capital gains, dividends, and taxable interest income are all taxed at preferential rates.

A) True
B) False

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Question 52

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Harrison received a qualified dividend. Without knowing any additional facts, which of the following statements is True regarding the rate at which the dividend will be taxed to Harrison?

A) The dividend will be taxed at a 15% tax rate.
B) The dividend will be taxed at a 20% tax rate.
C) The entire dividend will be taxed at either 15% or the entire dividend will be taxed at 20% depending on Harrison's marginal ordinary income tax rate.
D) None of the choices are correct.

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

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Question 53

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

Employees are not allowed to deduct FICA taxes they pay.

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

During 2018, Jasmine (age 12) received $6,500 from a corporate bond. She also received $600 from a savings account established for her by her parents. Jasmine lives with her parents and she is their dependent. What is Jasmine's gross tax liability?

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.

Which of the following suggests that a working taxpayer is an independent contractor rather than an employee?

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.

The amount of expenditures eligible for the child and dependent care credit is the least of three amounts. Which of the following is not one of those amounts?

If an employer withholds taxes from an employee, in general, when are these taxes treated as paid to the IRS?

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

Miley, a single taxpayer, plans on reporting $29,700 of taxable income this year (all of her income is from a part-time job) . She is considering applying for a second part-time job that would give her an additional $10,000 of taxable income. By how much will the income from the second job increase her tax liability? (Use the tax rate schedules)

Employees must pay both Social Security tax and Medicare tax on the full amount of their wages no matter the amount of their wages.

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.

Tamra and Jacob are married and they file a joint tax return. Tamra received nearly five times the salary that Jacob received. Which of the following statements is True?

For taxpayers who receive both salary as an employee and self-employment income as an independent contractor in the same year, which of the following statements regarding FICA and self-employment taxes is most accurate?

The alternative minimum tax is the AMT base multiplied by the AMT rate.

For alternative minimum tax purposes, taxpayers are allowed to deduct state income taxes but are not allowed to deduct charitable contributions.

Pyrrha, a 12-year-old dependent of Epimetheus and Pandora, received $8,200 of interest income in 2018. What is Pyrrha's gross tax liability for the year?