Fundamentals of Taxation

Business

Quiz 2 :

Expanded Tax Formula, Forms 1040a and 1040, and Basic Concepts

Quiz 2 :

Expanded Tax Formula, Forms 1040a and 1040, and Basic Concepts

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What are the five specific tests necessary to be a qualifying child of the taxpayer?
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Income tax is the tax paid by individuals, household, and business entities to the government on the earnings that they have. The rules and regulations are supervised by IRS which is a government body. Form 1040 is the expanded and biggest tax form followed by 1040A. These forms have several sections which are related to earning, deduction, credits, and expenses.
Dependent is the one who depends on the taxpayers for his expenses and survival and is relative of the taxpayer. Dependency exemption is the amount that the taxpayer is allowed to deduct from his gross income for each of his qualifying dependent.
Qualifying dependent could be a relative, spouse, child, etc. Qualifying dependent is the one who has passed several test depending upon the relationship with the taxpayer, and taxpayer is allowed to take exemptions on these dependents.
The five tests which are necessary to qualify as child of the taxpayer are as follows:
• Relationship test: The child should have certain specific relationship to qualify like descendant, stepchild, foster child, sibling, etc.• Age test: The child should be less than 19 years of age, or less than 24 if he is full-time student. There is no age limit in case of totally and permanently disabled child.• Residency test: The child should live with the taxpayer for at least half year except for the reasons of studies, military service, vacation, or illness.
• Support test: The taxpayer should provide money for more than 50 percent support item including food, clothing, accommodation, healthcare, education, etc.• Special test: This is applicable in case of divorced or legally separated couple and all other test should lead to qualification. This tells the scenario when a non-custodial parent could show kid as dependent in their returns.

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George and Debbie were legally married on December 31, 2010. Can they file their 2010 income tax return using the status of married filing jointly? Why or why not? What other filing status choices do they have, if any?
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Income tax:
Income tax is the part of the income that the earner pays in return to the government of the country. It is a compulsory obligation of every earner. It is calculated by the income tax department of the country as per pre-determined slabs.
Mr. G and Mrs. D can file an income tax return using the status of married filing jointly. According to section 7703(a)(1) and 601(a) of IRC, a couple can file one joint tax return even if they married on the last date of the year. Joint filing combines all income, deductions, and of both spouses. They can file an income tax return using the status of married filing jointly even if only one of them is earning the whole income.A married couple doesn't need to file an income tax return using the status of married filing jointly, they can file two separate returns but under unusual circumstances.

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Under what circumstances must a taxpayer use a tax rate schedule rather than using a tax table?
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Income tax is the tax paid by individuals, household and business entities to the government on the earnings that they have. The rules and regulations are supervised by IRS which is a government body. Form 1040 is the expanded and biggest tax form followed by 1040A. These forms have several sections which are related to earning, deduction, credits and expenses.
Tax table is a tabular representation which shows the tax liability of the taxpayer depending upon his/her taxable income when income is less than $100,000. Tax rate schedule is a tabular representation of the tax rates for different slab of income.Taxpayer has to either use tax rate schedule or tax table depending upon the income. If taxable income is less than $100,000 then tax table is used, and if taxable income is $100,000 or more than $100,000 then tax rate schedule is used.

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What is the amount of the personal and dependency exemptions for 2010?
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Payment of alimony by the taxpayer is a for AGI deduction. Which form can the taxpayer use to claim this benefit? a. 1040. B) 1040A. C) Either 1040 or 1040A. D) None of the above.
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What qualifications are necessary to file as head of household?
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When and at what rate is interest calculated on amounts owed to the IRS?
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Jose and Dora Hernandez are married filing jointly. They are 50 and 45 years old, respectively. Their address is 32010 Lake Street, Atlanta, Georgia 30300. Additional information about Mr. and Mrs. Hernandez is as follows: Social security numbers Jose: 412-34-5670. Dora: 412-34-5671. img Form 1099-INT for Jose and Dora shows this amount: Box 1 = $300 from City Bank. Dependent: Daughter, Adela is 5 years old. Her social security number is 412-34-5672. Jose is a store manager and Dora is a receptionist. Prepare the tax return for Mr. and Mrs. Hernandez using the appropriate form. They want to contribute to the presidential election campaign.
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Prepare a table of the possible IRS penalties listed in the text and give a brief summary of the purpose of each penalty.
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What is the standard deduction for each filing status?
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What are the four specific tests necessary to be a qualifying relative of the taxpayer?
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What are the three general tests that a qualifying person must meet to be a dependent of the taxpayer?
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What is a multiple support agreement, and what is its purpose?
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A single taxpayer is 27 years old and has wages of $15,000 and interest income of $400. Which is the simplest tax form this person can file? a. 1040. B) 1040EZ. C) 1040A. D) 1040Z.
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What is a for AGI deduction? Give three examples.
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Marie Lincoln is a head of household. She is 37 years old and her address is 4110 N.E. 13 Street, Miami, Florida 33000. Additional information about Ms. Lincoln is as follows: Social security number: 412-34-5670. W-2 for Marie shows these amounts: Box 1 = $43,600.00 Box 2 = $ 6,540.00 Box 3 = $43,600.00 Box 4 = $ 2,703.20. Box 5 = $43,600.00 Box 6 = $ 632.20. Form 1099-INT for Marie shows this amount: Box 1 = $500 from A D Bank. Dependent: Son, Steven is 10 years old. His Social Security number is 412-34-5672. Marie is an administrative assistant. Prepare the tax return for Ms. Lincoln using the appropriate form. She wants to contribute to the presidential election campaign.
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What age must a child be at the end of the year to meet the age test under the qualifying child rules?
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Margaret O'Hara has been divorced for about two years. She is 28 years old and her address is 979 S. E. 32 Street, Jacksonville, Florida 33111. Additional information about Ms. O'Hara is as follows: Social security number: 412-34-5670. Alimony received = $24,000.00 W-2 for Margaret shows these amounts: Box 1 = $38,000.00 Box 2 = $ 9,500.00 Box 3 = $38,000.00 Box 4 = $ 2,356.00 Box 5 = $38,000.00 Box 6 = $ 551.00 Margaret is a research assistant. Prepare the tax return for Ms. O'Hara using the appropriate form. She does not want to contribute to the presidential election campaign.
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Mimi is 22 years old and is a full-time student at Ocean County Community College. She lives with her parents, who provide all of her support. During the summer, she put her Web design skills to work and earned $4,000. Can Mimi's parents claim her as a dependent on their joint tax return? Why or why not? Assume that all five tests under qualifying child are met.
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What are the five types of filing status?
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