Question 1

During 2020, Montoya (age 15) received $2,200 from a corporate bond. He also received $600 from a savings account established for him by his parents. Montoya lives with his parents and he is their dependent. What is Montoya's taxable income?

Accepted Answer

A)  $0
B)  $2,200
C)  $2,800
D)  $1,700E) B) and D)
F) B) and C)

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

A)  Works for more than one firm
B)  May realize a loss from business activities
C)  Sets own working hours
D)  Works somewhere other than on employer premises
E)  All of these suggest independent contractor statusF) D) and E)
G) C) and D)

Question 4

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.E) A) and C)
F) None of the above

Question 5

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?

Accepted Answer

A)  Tamra and Jacob likely pay no tax marriage penalty nor receive a tax marriage benefit.
B)  Tamra and Jacob likely pay a tax marriage penalty.
C)  Tamra and Jacob likely receive a tax marriage benefit.
D)  Tamra and Jacob likely will pay a tax marriage penalty and receive a tax marriage benefit.E) C) and D)
F) B) and C)

Question 6

Which of the following statements regarding the child tax credit is false?

Accepted Answer

A)  The child for whom the credit is claimed must be under the age of 15 at the end of the year.
B)  The credit is subject to phase-out based on the taxpayer's AGI.
C)  The full credit for a child who qualifies is $2,000.
D)  The child for whom the full credit is claimed must meet the definition of a qualifying child.E) None of the above
F) A) and D)

Question 7

Which of the following statements concerning tax credits is true?

Accepted Answer

A)  The tax benefit a taxpayer receives from a credit depends on the taxpayer's marginal tax rate.
B)  Refundable tax credits are limited to a taxpayer's gross tax liability.
C)  Tax credits are generally more beneficial than tax deductions.
D)  None of these are true statements.E) C) and D)
F) A) and B)

Question 8

Henry and Janice are married and file jointly. They have an AGI (and modified AGI)of $290,000, which includes $90,000 of salary, $170,000 of active business income, $10,000 of interest income, $15,000 of dividends, and $5,000 of long-term capital gains. What is Henry and Janice's net investment income tax liability this year? (Round your final answer to the nearest whole dollar amount.)

Accepted Answer

$1,140
The tax is 3.8 percent ...

Question 9

Jamie is single. In 2020, she reported $105,000 of taxable income, including a long-term capital gain of $5,500. 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)  $15,750
B)  $19,405
C)  $18,785
D)  $18,035E) All of the above
F) A) and D)

Question 10

Which of the following best describes the deductions independent contractors may claim for valid business expenses?

Accepted Answer

A)  For AGI deductions
B)  From AGI deductions
C)  From AGI deductions limited to income from the business activities
D)  For AGI deductions limited to income from the business activitiesE) None of the above
F) All of the above

Question 11

Paul and Melissa plan on filing jointly in 2020. For the year, the couple reported taxable income of $130,000. What is their gross tax liability? (Use tax rate schedules.)

Accepted Answer

$20,180, computed as...

Question 12

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

Question 13

Which of the following represents the correct order in which credits are applied to gross tax liability (from first to last) ?

Accepted Answer

A)  Nonrefundable personal, business, refundable
B)  Business, nonrefundable personal, refundable
C)  Refundable, nonrefundable personal, business
D)  Refundable, business, nonrefundable personalE) A) and D)
F) None of the above

Question 14

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 15

Looking at the following partial calendar for April, when will individual tax returns be due?

Accepted Answer

A)  Friday, April 14
B)  Saturday, April 15
C)  Sunday, April 16
D)  Monday, April 17
E)  Tuesday, April 18F) B) and E)
G) C) and D)

Question 16

Costa is a single taxpayer. His regular tax liability was $38,000. For 2020, he reported $190,000 of alternative minimum taxable income. What is his alternative minimum tax?

Accepted Answer

$0.
Answer computed as follows:
Costa's ...

Question 17

Johann had a gross tax liability of $22,508 in 2021, but his employer only withheld taxes of $19,500. Johann's gross tax liability was $21,000 in 2020. Calculate Johann's under/overpayment in each quarter for 2021 tax purposes.

Accepted Answer

Underwithheld by $189, $379, $...

Question 18

A marriage penalty occurs when a couple pays more taxes by filing a joint tax return than they would have paid had they filed married filing separately.

Accepted Answer

A) True 
 B)False

Question 19

When applying credits against a taxpayer's gross tax liability, nonrefundable personal credits are applied first, then business credits, and finally refundable personal credits.

Accepted Answer

A) True 
 B)False

Question 20

Employees are not allowed to deduct FICA taxes they pay.

Accepted Answer

A) True 
 B)False

Exam 8: Individual Income Tax Computation and Tax Credits

When applying credits against a taxpayer's gross tax liability, nonrefundable personal credits are applied first, then business credits, and finally refundable personal credits.

Correct Answer
verified

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?

Correct Answer
verified

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

Correct Answer
verified

Johann had a gross tax liability of $22,508 in 2021, but his employer only withheld taxes of $19,500. Johann's gross tax liability was $21,000 in 2020. Calculate Johann's under/overpayment in each quarter for 2021 tax purposes.

Correct Answer
verified
Underwithheld by $189, $379, $...
View Answer

Which of the following statements regarding FICA taxes is true?

Correct Answer
verified

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

Correct Answer
verified

Costa is a single taxpayer. His regular tax liability was $38,000. For 2020, he reported $190,000 of alternative minimum taxable income. What is his alternative minimum tax?

Correct Answer
verified
$0.
Answer computed as follows:
Costa's ...
View Answer

Which of the following statements regarding the child tax credit is false?

Correct Answer
verified

Paul and Melissa plan on filing jointly in 2020. For the year, the couple reported taxable income of $130,000. What is their gross tax liability? (Use tax rate schedules.)

Correct Answer
verified
$20,180, computed as...
View Answer

Which of the following best describes the deductions independent contractors may claim for valid business expenses?

Correct Answer
verified

Which of the following statements concerning tax credits is true?

Correct Answer
verified

Employees are not allowed to deduct FICA taxes they pay.

Correct Answer
verified

Looking at the following partial calendar for April, when will individual tax returns be due?

Correct Answer
verified

Jamie is single. In 2020, she reported $105,000 of taxable income, including a long-term capital gain of $5,500. 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.)

Correct Answer
verified

Correct Answer
verified
$1,140
The tax is 3.8 percent ...
View Answer

Which of the following represents the correct order in which credits are applied to gross tax liability (from first to last) ?

Correct Answer
verified

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.

Correct Answer
verified

A marriage penalty occurs when a couple pays more taxes by filing a joint tax return than they would have paid had they filed married filing separately.

Correct Answer
verified

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

Correct Answer
verified

During 2020, Montoya (age 15) received $2,200 from a corporate bond. He also received $600 from a savings account established for him by his parents. Montoya lives with his parents and he is their dependent. What is Montoya's taxable income?

Correct Answer
verified

Exam 8: Individual Income Tax Computation and Tax Credits

When applying credits against a taxpayer's gross tax liability, nonrefundable personal credits are applied first, then business credits, and finally refundable personal credits.

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Johann had a gross tax liability of $22,508 in 2021, but his employer only withheld taxes of $19,500. Johann's gross tax liability was $21,000 in 2020. Calculate Johann's under/overpayment in each quarter for 2021 tax purposes.

Correct AnswerverifiedUnderwithheld by $189, $379, $...View AnswerShow Answer

Which of the following statements regarding FICA taxes is true?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Costa is a single taxpayer. His regular tax liability was $38,000. For 2020, he reported $190,000 of alternative minimum taxable income. What is his alternative minimum tax?

Correct Answerverified$0.Answer computed as follows:Costa's ...View AnswerShow Answer

Which of the following statements regarding the child tax credit is false?

Correct AnswerverifiedShow Answer

Paul and Melissa plan on filing jointly in 2020. For the year, the couple reported taxable income of $130,000. What is their gross tax liability? (Use tax rate schedules.)

Correct Answerverified$20,180, computed as...View AnswerShow Answer

Which of the following best describes the deductions independent contractors may claim for valid business expenses?

Correct AnswerverifiedShow Answer

Which of the following statements concerning tax credits is true?

Correct AnswerverifiedShow Answer

Employees are not allowed to deduct FICA taxes they pay.

Correct AnswerverifiedShow Answer

Looking at the following partial calendar for April, when will individual tax returns be due?

Correct AnswerverifiedShow Answer

Jamie is single. In 2020, she reported $105,000 of taxable income, including a long-term capital gain of $5,500. 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.)

Correct AnswerverifiedShow Answer

Correct Answerverified$1,140The tax is 3.8 percent ...View AnswerShow Answer

Which of the following represents the correct order in which credits are applied to gross tax liability (from first to last) ?

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

A marriage penalty occurs when a couple pays more taxes by filing a joint tax return than they would have paid had they filed married filing separately.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

During 2020, Montoya (age 15) received $2,200 from a corporate bond. He also received $600 from a savings account established for him by his parents. Montoya lives with his parents and he is their dependent. What is Montoya's taxable income?

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
Underwithheld by $189, $379, $...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
$0.
Answer computed as follows:
Costa's ...
View Answer

Correct Answer
verified

Correct Answer
verified
$20,180, computed as...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
$1,140
The tax is 3.8 percent ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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