Question 1

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.

Accepted Answer

The answer of A small employer incurs $1,500 for consulting...

Question 2

BlueCo incurs $900,000 during the year to construct a facility that will be used exclusively for the care of its employees' pre­school age children during normal working hours. The credit for employer­provided child care available to BlueCo this year is $225,000.

Accepted Answer

The credit for employer-provided child care facilities is limited to 25% of the qualified expenses, plus 10% of qualified resource and referral expenditures, with an overall limit of $150,000 per year. Therefore, 25% of $900,000 is $225,000, but the credit cannot exceed $150,000.

Question 3

The child tax credit is based on the number of the taxpayer's qualifying children under age 17.

Accepted Answer

The child tax credit is indeed based on the number of the taxpayer's qualifying children under age 17.

Question 4

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

Accepted Answer

Single and unmarried taxpayers with children may also qualify for the earned income credit.

Question 5

A taxpayer's earned income credit is dependent on the number of his or her qualifying children.

Accepted Answer

The earned income credit is determined based on the taxpayer's income and the number of qualifying children they have.

Question 6

A taxpayer who meets the age requirement and receives no Social Security benefits will be entitled to the full tax credit for the elderly.

Accepted Answer

The answer of A taxpayer who meets the age requirement...

Question 7

The earned income credit is available only if the taxpayer has at least one qualifying child in the household.

Accepted Answer

The earned income credit is available to taxpayers with or without qualifying children, but the credit amount increases with the number of qualifying children.

Question 8

All foreign taxes qualify for the foreign tax credit.

Accepted Answer

Only certain foreign taxes that meet specific criteria qualify for the foreign tax credit. The IRS provides detailed rules on which taxes qualify, such as income taxes, property taxes, and certain taxes on dividends and royalties. It is important to carefully determine which foreign taxes qualify for the credit.

Question 9

An individual generally may claim a credit for adoption expenses in the year in which the expenses are paid.

Accepted Answer

The answer of An individual generally may claim a credit...

Question 10

The earned income credit, a form of a negative income tax, is a refundable credit.

Accepted Answer

The earned income credit is a refundable credit, meaning if the credit exceeds the tax owed, the taxpayer can receive the excess as a refund.

Question 11

If a taxpayer chooses to claim a foreign tax credit, part of the foreign income taxes paid can also be claimed as a deduction.

Accepted Answer

This statement is false. A taxpayer cannot claim a foreign tax credit and a deduction for the same taxes paid. They must choose one or the other.

Question 12

If the cost of a building constructed and placed into service by an eligible small business in the current year includes the cost of a wheelchair ramp, the cost of the ramp qualifies for the disabled access credit.

Accepted Answer

The answer of If the cost of a building constructed...

Question 13

Unless a taxpayer is disabled, the tax credit for the elderly or disabled is available only if the taxpayer is at least 59 1/2 years old.

Accepted Answer

The statement is incorrect. The tax credit for the elderly or disabled is available only if the taxpayer is at least 65 years old or retired on permanent and total disability.

Question 14

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

Accepted Answer

The statement accurately describes the purpose of the disabled access credit.

Question 15

Because current U.S. corporate income tax rates are higher than many foreign corporate income tax rates, the overall limitation does not yield a lower foreign tax credit than the amount of foreign taxes actually paid.

Accepted Answer

This statement is true because if the foreign corporate income tax rate is lower than the U.S. rate, then the foreign tax credit limitation will not limit the amount of foreign taxes that can be credited against U.S. tax liability. Therefore, the foreign tax credit will not be lower than the actual amount of foreign taxes paid.

Question 16

The maximum child tax credit under current law is $1,500 per qualifying child.

Accepted Answer

The maximum child tax credit under current law is $2,000 per qualifying child as of 2021. However, this amount is subject to change based on future legislation.

Question 17

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

Accepted Answer

The answer of Unused foreign tax credits can be carried...

Question 18

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

Accepted Answer

The disabled access credit is computed at the rate of 50% of the eligible access expenditures for the year that exceed $250 and do not exceed $10,250.

Question 19

In computing the foreign tax credit, the greater of the foreign income taxes paid or the overall limitation is allowed.

Accepted Answer

The foreign tax credit is limited to the lower of the foreign income taxes paid or the overall limitation, which is calculated based on the taxpayer's U.S. tax liability on their foreign taxable income.

Question 20

Cardinal Company incurs $800,000 during the year to construct a facility that will be used exclusively for the care of its employees' pre­school age children during normal working hours. Assuming Cardinal claims the credit for employer-provided child care this year, its basis in the newly constructed facility is $640,000.

Accepted Answer

The answer of Cardinal Company incurs $800,000 during the year...

Quiz 12: Tax Credits and Payments

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.

BlueCo incurs $900,000 during the year to construct a facility that will be used exclusively for the care of its employees' preschool age children during normal working hours. The credit for employerprovided child care available to BlueCo this year is $225,000.

The child tax credit is based on the number of the taxpayer's qualifying children under age 17.

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

A taxpayer's earned income credit is dependent on the number of his or her qualifying children.

A taxpayer who meets the age requirement and receives no Social Security benefits will be entitled to the full tax credit for the elderly.

The earned income credit is available only if the taxpayer has at least one qualifying child in the household.

All foreign taxes qualify for the foreign tax credit.

An individual generally may claim a credit for adoption expenses in the year in which the expenses are paid.

The earned income credit, a form of a negative income tax, is a refundable credit.

If a taxpayer chooses to claim a foreign tax credit, part of the foreign income taxes paid can also be claimed as a deduction.

If the cost of a building constructed and placed into service by an eligible small business in the current year includes the cost of a wheelchair ramp, the cost of the ramp qualifies for the disabled access credit.

Unless a taxpayer is disabled, the tax credit for the elderly or disabled is available only if the taxpayer is at least 59 1/2 years old.

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

Because current U.S. corporate income tax rates are higher than many foreign corporate income tax rates, the overall limitation does not yield a lower foreign tax credit than the amount of foreign taxes actually paid.

The maximum child tax credit under current law is $1,500 per qualifying child.

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.

In computing the foreign tax credit, the greater of the foreign income taxes paid or the overall limitation is allowed.

Quiz 12: Tax Credits and Payments

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.

BlueCo incurs $900,000 during the year to construct a facility that will be used exclusively for the care of its employees' pre­school age children during normal working hours. The credit for employer­provided child care available to BlueCo this year is $225,000.

The child tax credit is based on the number of the taxpayer's qualifying children under age 17.

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

A taxpayer's earned income credit is dependent on the number of his or her qualifying children.

A taxpayer who meets the age requirement and receives no Social Security benefits will be entitled to the full tax credit for the elderly.

The earned income credit is available only if the taxpayer has at least one qualifying child in the household.

All foreign taxes qualify for the foreign tax credit.

An individual generally may claim a credit for adoption expenses in the year in which the expenses are paid.

The earned income credit, a form of a negative income tax, is a refundable credit.

If a taxpayer chooses to claim a foreign tax credit, part of the foreign income taxes paid can also be claimed as a deduction.

If the cost of a building constructed and placed into service by an eligible small business in the current year includes the cost of a wheelchair ramp, the cost of the ramp qualifies for the disabled access credit.

Unless a taxpayer is disabled, the tax credit for the elderly or disabled is available only if the taxpayer is at least 59 1/2 years old.

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

Because current U.S. corporate income tax rates are higher than many foreign corporate income tax rates, the overall limitation does not yield a lower foreign tax credit than the amount of foreign taxes actually paid.

The maximum child tax credit under current law is $1,500 per qualifying child.

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.

In computing the foreign tax credit, the greater of the foreign income taxes paid or the overall limitation is allowed.

BlueCo incurs $900,000 during the year to construct a facility that will be used exclusively for the care of its employees' preschool age children during normal working hours. The credit for employerprovided child care available to BlueCo this year is $225,000.