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Exam 12: Tax Credits and Payments

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Question 31

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Which, if any, of the following correctly describes the earned income credit?

A) Would be available regardless of the amount of the taxpayer's adjusted gross income.
B) Not available to a surviving spouse.
C) A taxpayer must have a qualifying child to take advantage of the credit.
D) Is a refundable credit.
E) None of the above.

F) C) and D)
G) B) and D)

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Question 32

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All taxpayers are eligible to take the basic research credit.

A) True
B) False

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Question 33

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John owns and operates a real estate agency as a sole proprietor. On a full-time basis, he employs his 17-year old daughter as a receptionist and his 22-year old son as a bookkeeper. Both children are subject to FICA withholding.

Only married taxpayers with children are qualified to receive the earned income credit.

An expatriate who works in a country with an income tax rate higher than the U.S. rate probably will find the foreign earned income exclusion preferable to the foreign tax credit.

A small employer incurs $1,500 for consulting fees related to establishing a qualified retirement plan for its 75 employees. As a result, the employer may claim the credit for small employer pension plan startup costs for $750.

Employers are encouraged by the work opportunity tax credit to hire individuals who have been long-term recipients of family assistance welfare benefits.

Harry and Wilma are married and file a joint income tax return. On their tax return, they report $44,000 of adjusted gross income ($20,000 salary earned by Harry and $24,000 salary earned by Wilma) and claim two exemptions for their dependent children. During the year, they pay the following amounts to care for their 4-year old son and 6- year old daughter while they work. $\begin{array}{llr} \text { ABC Day Care Center } &\$3,200\\ \text { Blue Ridge Housekeeping Services } &2,000\\ \text { Mrs. Mason (Harry's mother) } &1,000\end{array}$ Harry and Wilma may claim a credit for child and dependent care expenses of:

The disabled access credit was enacted to encourage small businesses to make their businesses more accessible to disabled individuals.

A taxpayer may qualify for the credit for child and dependent care expenses if the taxpayer's dependent is under age 17.

During 2014, Barry (who is single and has no children) earned a salary of $13,000. He is age 30. His earned income credit for the year is:

The incremental research activities credit is 20% of the qualified research expenses that exceed the base amount.

In terms of the withholding procedures, which statement does not reflect current rules?

In 2013, Juan and Juanita incur $9,800 in legal and adoption fees directly related to the adoption of an infant son born in a nearby state. Over the next year, they incur another $4,500 of adoption expenses. The adoption becomes final in 2014. Which of the following choices properly reflects the amounts and years in which the adoption expenses credit is available. $\begin{array}{ll}2013&2014\\{\text { a. } \$ 9,800} &{4,500} \\\text { b. None } & \$ 13,190 \\\text { c. None } & \$ 14,300 \\\text { d. } \$ 9,800 & \$ 3,390\end{array}$ E) None of the above.

Steve has a tentative general business credit of $110,000 for the current year. His net regular tax liability before the general business credit is $125,000, and his tentative minimum tax is $100,000. Compute Steve's allowable general business credit for the year.

Certain high­income individuals are subject to three additional Medicare taxes beginning in 2013-on wages, unearned income, and tax credits claimed.

Which of the following correctly describes the tax credit for rehabilitation expenditures?

Unused foreign tax credits can be carried back three years and forward fifteen years.

The disabled access credit is computed at the rate of 50% of all access expenditures incurred by the taxpayer during the year.

Only self-employed individuals are required to make estimated tax payments.