Question 1

Ruth Anne,a single taxpayer,reported $529,500 alternative minimum taxable income before any exemption on her 2019 Form 1040.Calculate Ruth Anne's AMT exemption.

Accepted Answer

The AMT exemption for a single taxpayer in 2019 is $71,700. However, the exemption is phased out for taxpayers with AMTI above certain levels. For AMTI between $510,300 and $1,020,600, the exemption is reduced by 25 cents for each dollar of AMTI in excess of $510,300. Ruth Anne's AMTI is $529,500, which is $19,200 above the threshold. Therefore, her exemption is reduced by $4,800 (25 cents x $19,200). This leaves her with an AMT exemption of $66,900 ($71,700 - $4,800).

Question 2

Mr.and Mrs.Harvey's tax liability before credits was $1,675.Their income tax withholding was $1,050,and they are entitled to a $1,189 earned income credit.Which of the following statements is true?

Accepted Answer

The Harveys' tax liability before credits was $1,675. However, they are entitled to an earned income credit of $1,189, which reduces their tax liability to $486 ($1,675 - $1,189 = $486).

Their income tax withholding was $1,050, which means they have already paid more than their remaining tax liability of $486. Therefore, they are entitled to a refund of the difference, which is $564 ($1,050 - $486 = $564).

So, the correct answer is C. The Harveys are entitled to a $564 tax refund.

Question 3

Which of the following statements regarding the calculation of regular tax liability is false?

Accepted Answer

All the statements provided are true regarding the calculation of regular tax liability.

Question 4

Mr.Marshall was employed by IMP Inc.until October,when he accepted a new position with Turine Inc.Mr.Marshall earned $140,000 compensation from IMP and $36,000 compensation from Turine.Which of the following statements is false?

Accepted Answer

Turine must withhold both Social Security and Medicare taxes from Mr. Marshall's compensation. Mr. Marshall may be entitled to a credit for excess Social Security tax if the combined withholding from both employers exceeds the annual limit. Therefore, none of the statements are false.

Question 5

Mr.and Mrs.Daniels,ages 45,and 42,had the following income items in 2019:  Mr.and Mrs.Daniels have no dependents and claim the standard deduction.Compute their income tax liability on a joint return.

Accepted Answer

The answer of Mr.and Mrs.Daniels,ages 45,and 42,had the following income...

Question 6

Alice is an unmarried individual.She has $182,340 taxable income in 2019.Compute Alice's regular tax liability if she files as a single taxpayer and if she files as a head of household.

Accepted Answer

The answer of Alice is an unmarried individual.She has $182,340...

Question 7

Mr.and Mrs.Borem spent $1,435 for child care for their two dependent children,who are two and four years old.Mr.Borem's earned income was $55,870,Mrs.Borem had no earned income,and the AGI on their joint return was $66,210.Calculate their dependent care credit.

Accepted Answer

The answer of Mr.and Mrs.Borem spent $1,435 for child care...

Question 8

Mr.and Mrs.Kain reported $80,000 AGI on their joint return.The couple has four dependent children: Beatrice,age 19; Bruce,age 16; Angie,age 11,and Arnold,age 8.Compute the Kains' child tax credit.

Accepted Answer

The Kains have three qualifying children under the age of 17 (Bruce, Angie, and Arnold). Each qualifying child is eligible for a $2,000 child tax credit, totaling $6,000. Beatrice, at age 19, does not qualify for the child tax credit.

Question 9

Mr.and Mrs.David file a joint tax return.They have $169,300 taxable income in 2019,$120,300 of which is ordinary income and $49,000 of which is taxed at a 15% preferential rate.Compute their tax savings from the preferential rate.

Accepted Answer

The tax savings from the preferential rate is calculated by finding the difference between the tax on $49,000 at the ordinary rate and the tax at the preferential rate. Assuming the ordinary rate is 22% (for simplicity), the tax on $49,000 would be $10,780. At a 15% preferential rate, the tax is $7,350. The savings is $10,780 - $7,350 = $3,430, which is closest to option B.

Question 10

Which of the following situations result in a marriage penalty for federal income tax purposes?

Accepted Answer

The marriage penalty occurs when two individuals who are married file a joint tax return and end up paying more in taxes than they would if they were single and filed individual tax returns. In option D, Mr. Langley and Ms. Nuyen both earn a salary in excess of $350,000, which means they may be subject to the marriage penalty as their combined income may push them into a higher tax bracket. The other options do not involve situations that would result in a marriage penalty.

Question 11

Which of the following statements regarding the calculation of regular tax liability is false?

Accepted Answer

The tax brackets for single filers are not exactly one-half of those for married-filing-jointly filers. The tax code is structured to account for different filing statuses, but the brackets are not simply halved.

Question 12

Mr.and Mrs.Arlette spent $5,900 for child care for their 12-year-old daughter.Mr.Arlette's earned income was $178,000,Mrs.Arlette's earned income was $33,100,and the AGI on their joint return was $225,200.Calculate their dependent care credit.

Accepted Answer

The dependent care credit for taxpayers is a percentage of their qualified expenses, which in this case is $5,900. However, the credit is limited to the lesser of the earned incomes of the two spouses. Mrs. Arlette's earned income is the lower at $33,100. For 2021, the maximum expense allowed for two or more qualifying persons is $8,000, but since they only spent $5,900, that is the amount considered. The applicable percentage for their AGI level ($225,200) would typically be 20%. Therefore, the credit is 20% of $5,900, which equals $1,180. However, given the specific details provided, it seems there might have been a misunderstanding in the calculation process. For a couple with an AGI of $225,200, the credit rate should indeed be lower due to phaseouts, but without specific phaseout details or changes in tax law provided in the question, the calculation based on the standard understanding of the dependent care credit would lead to a different conclusion than the options suggest. Given the options provided and typical tax law, the correct calculation seems to be missing, suggesting a need for clarification or an assumption that there's a specific tax law or limit being applied that isn't detailed in the question. Based on standard tax law understanding and the information given, the expected answer would be $1,180, but none of the options directly match a standard calculation, indicating a possible specific scenario or a mistake in the question setup or understanding of the tax law as it applies here.

Question 13

Lennie and Margo spent $2,800 for child care for their 7-year-old son.Lennie's earned income was $41,000,Margo's earned income was $24,800,and the AGI on their joint return was $71,200.Calculate their dependent care credit.

Accepted Answer

The dependent care credit for taxpayers is a percentage of their qualified expenses, which in this case is $2,800. The maximum expense allowed for one qualifying person is $3,000. Since their AGI is $71,200, their credit percentage is 20%. Therefore, their credit is 20% of $2,800, which equals $560.

Question 14

Mr.and Mrs.Lansing,who file a joint tax return,have four dependent children under age 17.Which of the following statements is false?

Accepted Answer

The answer of Mr.and Mrs.Lansing,who file a joint tax return,have...

Question 15

Ms.Kilo is an unmarried individual.She has $219,344 taxable income in 2019.Compute Ms.Kilo's regular tax liability if she files as a single taxpayer and if she files as a surviving spouse.

Accepted Answer

The answer of Ms.Kilo is an unmarried individual.She has $219,344...

Question 16

Benjamin,who files as a single taxpayer,has $359,900 taxable income in 2019.Compute his regular tax liability.

Accepted Answer

For a single taxpayer in 2019, the tax brackets are as follows: 10% on income up to $9,700, 12% on income over $9,700 up to $39,475, 22% on income over $39,475 up to $84,200, 24% on income over $84,200 up to $160,725, 32% on income over $160,725 up to $204,100, 35% on income over $204,100 up to $510,300, and 37% on income over $510,300. Benjamin's income of $359,900 falls into the 35% bracket. Calculating the tax for each bracket and summing them gives a total tax liability of $101,159.

Question 17

Linda and Raj are engaged to be married.Linda's 2019 taxable income as a single individual would be $212,000.Raj's 2019 taxable income as a single individual would be $418,000.When they marry before the end of 2019,how much of a marriage penalty will they incur?

Accepted Answer

The answer of Linda and Raj are engaged to be...

Question 18

Which of the following statements concerning the individual alternative minimum tax (AMT)is true?

Accepted Answer

The calculation of the individual alternative minimum tax (AMT) begins with taxable income for regular tax purposes and makes certain adjustments and additions to arrive at alternative minimum taxable income (AMTI). Option B is incorrect because a taxpayer can still be liable for AMT even if they have no tax preference items. Option C is incorrect because the standard deduction is one of the AMT adjustments in calculating AMTI. Option D is incorrect because the individual AMT rate is not a flat 28%; rather, it is 26% for AMTI up to $194,800 (for single filers) or $389,800 (for married filing jointly) and 28% for AMTI above those thresholds.

Question 19

Mr.and Mrs.Cox reported $490,000 AGI on their joint return.The couple has three dependent children under age 17.Compute their child tax credit.

Accepted Answer

The answer of Mr.and Mrs.Cox reported $490,000 AGI on their...

Question 20

Mrs.Lincoln was employed by GGH Inc.until October,when he accepted a new position with Murdock Inc.Mrs.Lincoln earned $145,000 compensation from GGH and $36,000 compensation from Murdock.Which of the following statements is false?

Accepted Answer

Mrs. Lincoln is only entitled to an income tax credit for excess Social Security tax withheld, not for excess Medicare tax, as there is no cap on Medicare tax.

Quiz 14: The Individual Tax Formula

Ruth Anne,a single taxpayer,reported $529,500 alternative minimum taxable income before any exemption on her 2019 Form 1040.Calculate Ruth Anne's AMT exemption.

Mr.and Mrs.Harvey's tax liability before credits was $1,675.Their income tax withholding was $1,050,and they are entitled to a $1,189 earned income credit.Which of the following statements is true?

Which of the following statements regarding the calculation of regular tax liability is false?

Mr.Marshall was employed by IMP Inc.until October,when he accepted a new position with Turine Inc.Mr.Marshall earned $140,000 compensation from IMP and $36,000 compensation from Turine.Which of the following statements is false?

Mr.and Mrs.Daniels,ages 45,and 42,had the following income items in 2019: Mr.and Mrs.Daniels have no dependents and claim the standard deduction.Compute their income tax liability on a joint return.

Alice is an unmarried individual.She has $182,340 taxable income in 2019.Compute Alice's regular tax liability if she files as a single taxpayer and if she files as a head of household.

Mr.and Mrs.Borem spent $1,435 for child care for their two dependent children,who are two and four years old.Mr.Borem's earned income was $55,870,Mrs.Borem had no earned income,and the AGI on their joint return was $66,210.Calculate their dependent care credit.

Mr.and Mrs.Kain reported $80,000 AGI on their joint return.The couple has four dependent children: Beatrice,age 19; Bruce,age 16; Angie,age 11,and Arnold,age 8.Compute the Kains' child tax credit.

Mr.and Mrs.David file a joint tax return.They have $169,300 taxable income in 2019,$120,300 of which is ordinary income and $49,000 of which is taxed at a 15% preferential rate.Compute their tax savings from the preferential rate.

Which of the following situations result in a marriage penalty for federal income tax purposes?

Which of the following statements regarding the calculation of regular tax liability is false?

Mr.and Mrs.Arlette spent $5,900 for child care for their 12-year-old daughter.Mr.Arlette's earned income was $178,000,Mrs.Arlette's earned income was $33,100,and the AGI on their joint return was $225,200.Calculate their dependent care credit.

Lennie and Margo spent $2,800 for child care for their 7-year-old son.Lennie's earned income was $41,000,Margo's earned income was $24,800,and the AGI on their joint return was $71,200.Calculate their dependent care credit.

Mr.and Mrs.Lansing,who file a joint tax return,have four dependent children under age 17.Which of the following statements is false?

Ms.Kilo is an unmarried individual.She has $219,344 taxable income in 2019.Compute Ms.Kilo's regular tax liability if she files as a single taxpayer and if she files as a surviving spouse.

Benjamin,who files as a single taxpayer,has $359,900 taxable income in 2019.Compute his regular tax liability.

Linda and Raj are engaged to be married.Linda's 2019 taxable income as a single individual would be $212,000.Raj's 2019 taxable income as a single individual would be $418,000.When they marry before the end of 2019,how much of a marriage penalty will they incur?

Which of the following statements concerning the individual alternative minimum tax (AMT) is true?

Mr.and Mrs.Cox reported $490,000 AGI on their joint return.The couple has three dependent children under age 17.Compute their child tax credit.

Mrs.Lincoln was employed by GGH Inc.until October,when he accepted a new position with Murdock Inc.Mrs.Lincoln earned $145,000 compensation from GGH and $36,000 compensation from Murdock.Which of the following statements is false?