Question 1

If an individual is liable for self-employment tax, a portion of the self-employment tax is
A)a for AGI deduction.
B)from AGI as an itemized deduction.
C)a Schedule C business expense.
D)nondeductible.

Accepted Answer

The answer of If an individual is liable for self-employment...

Question 2

In computing AMTI, tax preference items are
A)excluded.
B)added only.
C)subtracted only.
D)either added or subtracted.

Accepted Answer

The answer of In computing AMTI, tax preference items are
A)excluded.
B)added...

Question 3

All of the following are self-employment income except
A)net income of a sole proprietorship.
B)dividends received by a corporate shareholder.
C)fees received for serving as a director of a corporation.
D)distributive share of partnership income from a partnership operating a business.

Accepted Answer

The answer of All of the following are self-employment income...

Question 4

Lavonne has a regular tax liability of $13,356 on taxable income of $70,000. She also has tax preferences of $25,000 and positive adjustments attributable to limitations on itemized deductions of $15,000. Lavonne is single and takes a $3,950 personal exemption for herself only. Lavonne's alternative minimum tax for 2014 is
A)$0.
B)$2,543.
C)$16,271.
D)none of the above.

Accepted Answer

The answer of Lavonne has a regular tax liability of...

Question 5

Hong earns $127,300 in her job as a physician's assistant. She also has her own business selling cosmetics. This business generated $10,000 of earnings. What is Hong's self-employment tax for 2014?
A)$268
B)$290
C)$1,412
D)$1,530

Accepted Answer

The answer of Hong earns $127,300 in her job as...

Question 6

Self-employment taxes include components for
A)Medicare hospital insurance and SUTA.
B)Social Security and FUTA.
C)FICA and FUTA.
D)Social Security and Medicare hospital insurance.

Accepted Answer

Self-employment taxes include components for Social Security and Medicare hospital insurance, which are both included under FICA (Federal Insurance Contributions Act). Therefore, choice C is incorrect as FUTA (Federal Unemployment Tax Act) is not a component of self-employment taxes. SUTA (State Unemployment Tax Act) is also not a component of self-employment taxes, making choice A incorrect.

Question 7

John has $55,000 net earnings from a sole proprietorship. John is also employed by a major corporation and is paid $25,000. John's self-employment tax (rounded)for 2014 is
A)$3,886.
B)$4,208.
C)$7,771.
D)$8,415.

Accepted Answer

John's net earnings from the sole proprietorship ($55,000) are subject to self-employment tax. The self-employment tax rate for 2014 is 15.3%. So, John's self-employment tax is calculated as follows:

$55,000 x 0.153 = $8,415

This means that John owes $8,415 in self-employment tax for the year.

Question 8

Rex has the following AMT adjustments: -Depreciation of real property acquired in 1996 using MACRS is $22,000 while depreciation for AMT purposes is $15,000.
-R&E expenditures amounting to $60,000 are expensed.
The net adjustment is
A)$7,000.
B)$54,000.
C)$61,000.
D)$67,000.

Accepted Answer

The answer of Rex has the following AMT adjustments: -Depreciation...

Question 9

Nonrefundable tax credits
A)only offset a taxpayer's tax liability.
B)may only be used if the taxpayer is receiving a refund.
C)can be carried back two years and carried forward 15 years if they exceed tax liability in the current year.
D)allow the excess over the taxpayer's tax liability to be paid to the taxpayer.

Accepted Answer

Nonrefundable tax credits can only be used to offset a taxpayer's tax liability. If the credit exceeds the taxpayer's liability, the excess cannot be refunded to the taxpayer but can be carried forward to future tax years within certain limitations.

Question 10

Ava has net earnings from self-employment of $125,000. She also earned salary of $170,000 from a job held earlier in the year. How much Additional Medicare Tax will be owed on the self-employment income?
A)$0
B)$769
C)$855
D)$3,625

Accepted Answer

The answer of Ava has net earnings from self-employment of...

Question 11

All of the following statements regarding self-employment income/tax are true except:
A)The self-employment tax is imposed on net earnings from self-employment over $400.
B)Self-employment tax is computed separately for married individuals filing joint returns.
C)Independent contractors are subject to self-employment tax on the amount of net earnings from the self-employment activity.
D)Employees who have a business in addition to their regular employment are not subject to the self-employment tax since FICA is withheld on their wages.

Accepted Answer

This statement is not true. Employees who have a business in addition to their regular employment are still subject to self-employment tax on the net earnings from their self-employment activity, even if FICA is being withheld from their wages.

Question 12

All of the following are allowable deductions under the alternative minimum tax except
A)charitable contributions.
B)gambling losses.
C)qualified housing interest.
D)personal property taxes.

Accepted Answer

The answer of All of the following are allowable deductions...

Question 13

In 2014 Charlton and Cindy have alternative minimum taxable income of $130,000 and file a joint return. For purposes of computing the alternative minimum tax, their exemption is
A)$0.
B)$7,900.
C)$52,800.
D)$82,100.

Accepted Answer

The answer of In 2014 Charlton and Cindy have alternative...

Question 14

Suzanne, a single taxpayer, has the following tax information for the current year. • Charitable contribution of real property with a FMV of $25,000 (adjusted basis $20,000)for which a $25,000 deduction was taken.
• Research and experimental expenses of $40,000 deducted in full for regular tax.
Suzanne's total tax preferences and adjustments equals
A)$5,000.
B)$36,000.
C)$41,000.
D)$45,000.

Accepted Answer

The answer of Suzanne, a single taxpayer, has the following...

Question 15

In computing the alternative minimum taxable income, no deduction is allowed for
A)alimony.
B)moving expenses.
C)personal exemptions.
D)individual retirement account contributions.

Accepted Answer

Personal exemptions are not allowed as a deduction when computing the alternative minimum taxable income.

Question 16

Joe has $130,000 net earnings from a sole proprietorship. Joe's self-employment tax (rounded)for 2014 is
A)$17,990.
B)$18,368.
C)$19,890.
D)None of the above.

Accepted Answer

The answer of Joe has $130,000 net earnings from a...

Question 17

Reva and Josh Lewis had alternative minimum taxable income of $350,000 in 2014 and file a joint return. For purposes of computing the alternative minimum tax, their exemption is
A)$33,725.
B)$52,800.
C)$48,375.
D)$82,100.

Accepted Answer

The answer of Reva and Josh Lewis had alternative minimum...

Question 18

Harley's tentative minimum tax is computed by multiplying the AMT tax rates by her
A)taxable income.
B)alternative minimum tax base.
C)alternative minimum taxable income.
D)tentative alternative taxable income.

Accepted Answer

The answer of Harley's tentative minimum tax is computed by...

Question 19

In computing AMTI, adjustments are
A)limited.
B)added only.
C)subtracted only.
D)either added or subtracted.

Accepted Answer

Adjustments in AMTI can either be added (e.g. for tax-exempt interest) or subtracted (e.g. for depreciation). Therefore, the best choice is D - either added or subtracted.

Question 20

A wage cap does not exist for which of the following self-employment taxes?
A)Social Security tax
B)FICA
C)FUTA
D)Medicare hospital insurance

Accepted Answer

D)There is a ceiling on the Social Security portion but not on the HI portion.

Quiz 14: Special Tax Computation Methods, Tax Credits, and Payment of Tax

If an individual is liable for self-employment tax, a portion of the self-employment tax is

In computing AMTI, tax preference items are

All of the following are self-employment income except

Hong earns $127,300 in her job as a physician's assistant. She also has her own business selling cosmetics. This business generated $10,000 of earnings. What is Hong's self-employment tax for 2014?

Self-employment taxes include components for

John has $55,000 net earnings from a sole proprietorship. John is also employed by a major corporation and is paid $25,000. John's self-employment tax (rounded) for 2014 is

Rex has the following AMT adjustments: -Depreciation of real property acquired in 1996 using MACRS is $22,000 while depreciation for AMT purposes is $15,000. -R&E expenditures amounting to $60,000 are expensed. The net adjustment is

Nonrefundable tax credits

Ava has net earnings from self-employment of $125,000. She also earned salary of $170,000 from a job held earlier in the year. How much Additional Medicare Tax will be owed on the self-employment income?

All of the following statements regarding self-employment income/tax are true except:

All of the following are allowable deductions under the alternative minimum tax except

In 2014 Charlton and Cindy have alternative minimum taxable income of $130,000 and file a joint return. For purposes of computing the alternative minimum tax, their exemption is

In computing the alternative minimum taxable income, no deduction is allowed for

Joe has $130,000 net earnings from a sole proprietorship. Joe's self-employment tax (rounded) for 2014 is

Reva and Josh Lewis had alternative minimum taxable income of $350,000 in 2014 and file a joint return. For purposes of computing the alternative minimum tax, their exemption is

Harley's tentative minimum tax is computed by multiplying the AMT tax rates by her

In computing AMTI, adjustments are

A wage cap does not exist for which of the following self-employment taxes?