Question 1

The earned income credit is available only to low-income taxpayers with dependent children.

Accepted Answer

The earned income credit is available not only to low-income taxpayers with dependent children, but also to individuals without children who meet certain income and other eligibility requirements.

Question 2

It is impossible for a progressive income tax system to be both marriage neutral and horizontally equitable.

Accepted Answer

A progressive income tax system, by design, taxes higher earners at a higher rate. However, if a couple is married, their combined income may push them into a higher tax bracket even though each individual earner would not have been taxed at that rate if they were single. This means that the tax system is not marriage neutral. On the other hand, if the tax system is adjusted to treat married couples as individuals for tax purposes, it may not be horizontally equitable because two individuals with the same income could end up paying different tax rates depending on whether they are married or not. Therefore, it is impossible for a progressive income tax system to be both marriage neutral and horizontally equitable at the same time.

Question 3

Mr.and Mrs.Casey have two dependent children,ages 3 and 6.The Caseys spent $10,300 for child care this year.Mrs.Casey is employed full-time as an attorney.Mr.Casey is an unpublished novelist who has yet to earn any money from his writing.The Caseys are eligible for a dependent care credit.

Accepted Answer

The answer of Mr.and Mrs.Casey have two dependent children,ages 3...

Question 4

The earned income credit offsets the burden of the federal payroll tax on low-income families and encourages individuals to seek employment rather than to depend on welfare.

Accepted Answer

The earned income credit is a tax credit designed to help low- to moderate-income working families and individuals. It offsets the tax burden on these families and individuals and can even result in a refund if the credit exceeds the amount of taxes owed. It is meant as an incentive for individuals to work and earn income rather than relying on government assistance.

Question 5

Based on the 2017 tax rates,an individual is indifferent between filing as a single taxpayer or a head of household if he has $9,325 or less of taxable income.

Accepted Answer

According to the 2017 tax rates, the standard deduction for a single taxpayer is $6,350 and for a head of household, it is $9,350. This means that an individual with taxable income of $9,325 or less would have the same tax liability regardless of whether they file as a single taxpayer or head of household.

Question 6

Miss Blixen's regular income tax is $77,390,and her tentative minimum tax is $74,100.Consequently,Miss Blixen's alternative minimum tax (AMT)is zero.

Accepted Answer

Since Miss Blixen's tentative minimum tax is higher than her regular income tax, there is no need to calculate the alternative minimum tax (AMT). Thus, her AMT is zero.

Question 7

An individual with $500,000 taxable income has the same marginal rate as a single taxpayer or as a head of household.

Accepted Answer

The marginal tax rates for single taxpayers and heads of household are the same for income levels up to $518,400 for the tax year 2020. Therefore, if an individual has a taxable income of $500,000, they would have the same marginal tax rate whether they file as a single taxpayer or head of household.

Question 8

Mr.and Mrs.Kline file a joint return on which they claim the standard deduction and two exemptions.If the taxable income on their return is $55,300,they are not paying a marriage penalty.

Accepted Answer

There is no way to determine whether Mr. and Mrs. Kline are paying a marriage penalty based solely on the information provided. However, their taxable income being $55,300 does not necessarily indicate that they are paying a penalty.

Question 9

An individual must pay the greater of her regular income tax or her alternative minimum tax (AMT)for the year.

Accepted Answer

The answer of An individual must pay the greater of...

Question 10

Jay Blount,26-years old and a full time student,lives in his parents' home.Although Jay earned $8,400 from a part-time job,his parents provide at least 75% of his financial support.Jay's parents may claim him as a dependent this year.

Accepted Answer

The answer of Jay Blount,26-years old and a full time...

Question 11

Mrs.Starling worked for Abbot Inc.from January 1 through September 19.Her salary from Abbot for this period totaled $122,000.Mrs.Starling worked for JJT Inc.from October 1 through December 31.Her salary from JJT for this period totaled $38,000.JJT is not required to withhold Social Security tax from Mrs.Starling's salary because Abbot Inc.already withheld the maximum tax for the year.

Accepted Answer

The answer of Mrs.Starling worked for Abbot Inc.from January 1...

Question 12

Only natural and adopted children or stepchildren can be a qualifying child for tax purposes.

Accepted Answer

In addition to natural and adopted children or stepchildren, other individuals may qualify as a qualifying child for tax purposes, including siblings, grandchildren, nieces/nephews, and certain foster children or descendants of foster children.

Question 13

Mr.and Mrs.Toliver's AGI on their jointly filed return is $339,000.Regardless of the number of their children,the Tolivers are not eligible for a child credit.

Accepted Answer

The eligibility for the child tax credit is based on several factors, including the number of children and the taxpayer's income level. However, without knowing the specific details of the Tolivers' situation, it cannot be definitively stated whether or not they are eligible for the child tax credit.

Question 14

The highest individual marginal rate for regular tax purposes is 39.6%,while the highest individual marginal rate for alternative minimum tax (AMT)purposes is only 28%.

Accepted Answer

This is true. The highest individual marginal rate for regular tax purposes is 39.6%, while the highest individual marginal rate for alternative minimum tax (AMT) purposes is only 28%. The AMT is designed to ensure that high-income taxpayers pay a minimum amount of tax, and it has a different set of rules and rates compared to the regular tax system.

Question 15

The standard deduction and exemption amount are not deductible in the computation of alternative minimum taxable income.

Accepted Answer

The standard deduction and exemption amount are not allowed as deductions when computing alternative minimum taxable income (AMTI) for individuals or corporations.

Question 16

The tax rates for individuals who qualify as a head-of-household are lower than the tax rates for single individuals.

Accepted Answer

The tax rates for head-of-household individuals are lower than the tax rates for single individuals. This is because head-of-household taxpayers generally have more responsibilities and expenses supporting dependents, and the IRS acknowledges this by offering lower tax rates.

Question 17

Married individuals who elect to file separate tax returns may use the single rates to compute their tax.

Accepted Answer

Married individuals who file separately use the "Married Filing Separately" tax rates, which are different from the "Single" filing status rates.

Question 18

In order to be claimed as a dependent,an individual must be either a qualifying child or a qualifying relative.

Accepted Answer

This statement is true. To be claimed as a dependent, an individual must meet the criteria of either a qualifying child or a qualifying relative as defined by the IRS.

Question 19

Mr.and Mrs.Queen provide 90% of the financial support for Mrs.Queen's mother,Doreen,who lives in the couples' home.Doreen's only income this year is a $7,500 taxable pension from her former employer.Mr.and Mrs.Queen can't claim Doreen as a dependent this year.

Accepted Answer

Mr. and Mrs. Queen cannot claim Doreen as a dependent because they provide less than 50% of her financial support. Doreen's taxable pension is not relevant for this determination.

Question 20

Every individual taxpayer is entitled to an AMT exemption,the amount of which varies with filing status.

Accepted Answer

The answer of Every individual taxpayer is entitled to an...

Quiz 14: The Individual Tax Formula