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Exam 8: Individual Income Tax Computation and Tax Credits

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Question 71

Multiple Choice

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Which of the following statements regarding late filing penalties and/or late payment penalties is true?

A) An extension of time to file the tax return protects a taxpayer from late payment penalties as long as the tax is paid by the extended due date of the return.
B) The penalty rate for late filing penalties is less than the penalty rate for late payment penalties.
C) If a taxpayer has not paid the full tax liability by the original due date of the return and the taxpayer has not filed a tax return by the due date of the return, the maximum late filing and late payment penalty will be no greater than the late filing penalty by itself.
D) None of the choices are correct.

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

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Question 72

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Hester (age 17) is claimed as a dependent by his parents, Charlton and Abigail. In 2020, Hester received $10,190 of qualified dividends, and he received $13,190 from a part-time job. What is his taxable income for 2020? (Standard deduction)

A) $23,380
B) $22,280
C) $10,980
D) $9,840

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

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Question 73

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Julien and Sarah are married, file a joint return, and have two children, Kaya and Christopher. Kaya just finished her third year at college and Christopher just finished his first year of graduate school (fifth year of college). Tuition and books for the past year were $1,800 for Kaya and $5,000 for Christopher. How much can Julien and Sarah claim in educational credits if their joint AGI was $128,000 for 2020?

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?

Carolyn has an AGI of $39,900 (all from earned income) and two qualifying children and is filing as a head of household. What amount of earned income credit is she entitled to?(Exhibit 8-10)

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 5 percent.

The Olympians have three children. The kiddie tax applies to unearned income received by which of the following children?

Jack paid $5,000 in daycare expenses for his five-year-old daughter so he could work. His AGI for the year was $37,500 (all earned income). What is the amount of his child and dependent care credit?

An individual could pay 100 percent of her tax liability by the due date of her tax return and still be subject to underpayment tax penalties.

The American opportunity tax credit is available only for those students who are in their first or second year of postsecondary education.

The tax rate schedules are set up to tax lower levels of income at higher tax rates than higher levels of income.

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

Which of the following tax credits is fully refundable?

The child tax credit is subject to phase-out based on the taxpayer's AGI.

Jackson earned a salary of $254,000 in 2020. What amount of FICA taxes should Jackson's employer withhold from his paycheck?

In 2020, Shawn's adjusted gross income (AGI)is $170,000. He earned the income evenly throughout the year. He owed $29,890 in federal income tax 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 2020?

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.

Max is a 14-year-old dependent of his parents. During 2020, Max earned $1,800 working part-time jobs, and he received $1,500 of interest income from corporate bonds that were given to him last year. What is Max's 2020 taxable income?

Which of the following statements regarding the child and dependent care credit is true?

During all of 2020, 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 2020. Neither is blind, and both are under age 65. They reported the following tax-related information for the year. (Use the tax rate schedules, 2020 Alternative minimum tax (AMT)exemption) What are the Clays' taxes payable or refund due? (Ignore the alternative minimum tax.)What are the Clays' tentative minimum tax and alternative minimum tax?