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Exam 8: Individual Income Tax Computation and Tax Credits

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Question 1

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Harmony reports a regular tax liability of $15,000 and tentative minimum tax of $17,000. Given just this information, what is her alternative minimum tax liability for the year?

A) $0
B) $2,000
C) $15,000
D) $17,000

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

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Question 2

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Keith and Nicole are married filing joint with two daughters who qualify as dependents. Their gross income for 2018 is $25,500. Are they required to file a tax return? How do you know this without memorizing the gross income thresholds? In 2018, the standard deduction for taxpayers filing a joint return is $24,000.

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Yes, Keith and Nicole are required to fi...

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Question 3

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

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 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.

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

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?

Lexa, a single taxpayer, worked as an employee during the first half of the year earning $65,000 of salary. Lexa's employer withheld $4,030 of Social Security tax, $943 of Medicare tax, and $0 of additional Medicare tax. In the second half of the year, she was self-employed and she reported $180,000 of self-employment income on her Schedule C. What amount of self-employment taxes and additional Medicare tax is Lexa required to pay on her self-employment income?

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

Tax rate schedules are provided for use by (relatively) higher income taxpayers while the tax tables are provided for use by (relatively) lower income taxpayers.

Regular taxable income is the starting point for determining the alternative minimum tax.

Maria and Tony are married. They are preparing to file their 2018 tax return. If they were to file as single taxpayers, Maria and Tony would report $40,000 and $60,000 of taxable income, respectively. On their joint tax return, their taxable income is $100,000. How much of a marriage penalty or benefit will Maria and Tony experience in 2018? (Use Tax Rate Schedule.)

All capital gains are taxed at preferential rates.

Angelena files as a head of household. In 2018, she reported $52,300 of taxable income, including a $10,000 qualified dividend. What is her gross tax liability, rounded to the nearest whole dollar amount? (Use the tax rate schedules)

Why would a taxpayer file a tax return if not required to do so?

Linda is a qualifying widow in 2018. In 2018, she reports $80,000 of taxable income (all ordinary) . What is her gross tax liability using the tax rate schedules? (Tax rate schedule)

Which of the following statements accurately describes the alternative minimum tax rate(s) ?

Employees are not allowed to deduct FICA taxes they pay.

The lifetime learning credit can be used toward the cost of any course of instruction to acquire or improve a taxpayer's job skills, no matter the age of the taxpayer.

Which of the following statements regarding late filing penalties is true?