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Exam 8: Individual Income Tax Computation and Tax Credits

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Question 61

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Assume Georgianne underpaid her estimated tax liability by $150 in the first quarter, $500 in the second quarter, $400 in the third quarter, and $200 in the fourth quarter. Calculate her underpayment penalty for the year, assuming the federal short-term interest rate is five percent.

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$25 ($3 + $10 + $8 +...

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Question 62

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Johann had a gross tax liability of $22,508 in 2016, but his employer only withheld taxes of $19,500. Johann's gross tax liability was $21,000 in 2015. Calculate Johann's under/overpayment in each quarter for 2016 tax purposes.

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Underwitheld by $189, $379, $5...

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Question 63

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

Which of the following could explain why large number of taxpayers are subject to (or could become subject to) AMT?

Baker earned $225,000 of salary as an employee in 2016. How much should his employer have withheld from his paycheck for FICA taxes? (rounded to the nearest whole dollar amount)

Business credits are generally refundable credits.

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

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.

Maria and Tony are married. They are preparing to file their 2016 tax return. If they were to file as single taxpayers, Maria and Tony would report $10,000 and $70,000 of taxable income, respectively. On their joint tax return, their taxable income is $80,000. How much of a marriage penalty or benefit will Maria and Tony experience in 2016?

An 80-year-old taxpayer with earned income and no dependent children could qualify for the earned income credit.

Akiko and Hitachi (married filing jointly for 2016) are both educators. They attended a conference to further their job-related skills. Tuition for the conference was $2,000 for each person. Their AGI was $117,000. How much lifetime learning credit can they claim?

Hera earned $175,000 salary in 2016. Her husband, Zeus, earned $100,000 salary in 2016. Hera and Zeus file a joint tax return. How much FICA taxes will they owe in 2016?

Quantitatively, what is the relationship between the AGI phase-out thresholds for the child tax credit?

Employees are not allowed to deduct FICA taxes they pay.

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.

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?

During all of 2016, Mr. and Mrs. Clay lived with their four children (all are under the age of 17). They provided over one-half of the support for each child. Mr. and Mrs. Clay file jointly for 2016. Neither is blind, and both are under age 65. They reported the following tax-related information for the year: A. What is the Clays' taxes payable or (refund due)? (ignore the alternative minimum tax) B. What is the Clays' tentative minimum tax and alternative minimum tax?

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

Which of the following tax credits is fully refundable?

In 2016, Maia (who files as a head of household) reported regular taxable income of $115,000. She itemized her deductions, deducting $8,000 in charitable contributions and $3,000 in state income taxes. She claimed exemptions for herself and her son, Hermes, ($4,000 each) . What is Maia's alternative minimum taxable income?