Question 1

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

Accepted Answer

D)If an individual is an employee and also has income from self-employment,the maximum tax base for computing the self-employment tax is reduced by the wages that are subject to the FICA tax.

Question 2

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?

Accepted Answer

B)Earned income in excess of $200,000 is subject to the tax.$200,000 - 170,000 salary = $30,000 remaining threshold.Self-employment income = $125,000 × .9235 = $115,438.$115,438 - 30,000 = $85,438 × .009 = $769.

Question 3

The Lifetime Learning Credit is partially refundable.

Accepted Answer

The LLC is nonrefundable.It is the American Opportunity Tax Credit that is partially refundable.

Question 4

To claim the Lifetime Learning Credit,a student must take at least one-half of a full-time course load during the year.

Accepted Answer

There is no minimum enrollment requirement for the Lifetime Learning Credit.

Question 5

Tanya has earnings from self-employment of $240,000,resulting in self-employment tax of $22,200 and Additional Medicare Tax of $360.Due to these taxes,Tanya will be allowed a deduction for AGI of

Accepted Answer

C)A self-employed taxpayer will take a deduction for AGI of one-half of the self-employment tax,but no deduction is allowed for the Additional Medicare Tax.

Question 6

Qualified tuition and related expenses eligible for the American Opportunity Tax Credit are limited to those incurred the first two years of postsecondary education.

Accepted Answer

Qualifying expenses for the AOTC are limited to the first four years of postsecondary education.

Question 7

For purposes of the limitation on qualifying expenses for the child and dependent care credit,a spouse who is either a full-time student or is incapacitated is deemed to have earned income of $250 per month,or $500 per month if there are two or more qualifying individuals in the household.

Accepted Answer

A full-time student or incapacitated taxpayer is allowed to impute earned income for purposes of the child and dependent care limitations.

Question 8

The child and dependent care credit is available to any parent who pays for child care for a child under age 13.

Accepted Answer

The expenses must be incurred so the parent can be gainfully employed.

Question 9

The adoption credit based on qualified adoption expenses is generally allowed in the year the adoption is finalized.

Accepted Answer

The year of the finalization of the adoption is the determinant year for the adoption credit.

Question 10

Joan earns $118,700 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 Joan's self-employment tax for 2017?

Accepted Answer

B)10,000 × .9235 = 9,235 × .029 = $268 Medicare tax
(127,200 - 118,700)× .124 = 1,054 Social Security tax
$1,322
OASDI does not apply to the full self-employment income because she has already been taxed on the $118,700 from her job.

Question 11

Taxpayers with income below phase-out amounts are allowed a child credit of $1,000 for each qualifying child under age 19 or under age 24 if a full-time student.

Accepted Answer

The tax law provides taxpayers with a credit for each qualifying child.For this purpose,a child must be under age 17.

Question 12

The qualified retirement savings contributions credit is based on a maximum contribution of $2,000.

Accepted Answer

A credit to encourage moderate income taxpayers to contribute to retirement plans is based on a maximum annual contribution of $2,000.

Question 13

Jay and Cara's daughter is starting her freshman year of college.Jay and Cara will be able to claim the American Opportunity Tax Credit for a percentage of the cost of tuition,required fees and course materials,but the room and board charges will not qualify for the credit.

Accepted Answer

Only tuition,required fees and course materials qualify for the American Opportunity Tax Credit.

Question 14

The child and dependent care credit is partially refundable.

Accepted Answer

The child and dependent care credit is nonrefundable.It is the child tax credit that is partially refundable.

Question 15

Lara started a self-employed consulting business in the last part of the year and earned $60,000 of self- employment earnings.She had been employed as manager in a consulting firm prior to starting her own business and had earned $175,000.
(a)What is Lara's Additional Medicare Tax for 2017,if any?
(b)What is Lara's deduction for AGI for the Additional Medicare Tax?

Accepted Answer

The answer of Lara started a self-employed consulting business in...

Question 16

For purposes of the child and dependent care credit,qualifying employment-related expenses cannot include payments to a relative.

Accepted Answer

Payments to a relative qualify unless the relative is a dependent or a child (under age 19)of the taxpayer.

Question 17

Sonya started a self-employed consulting business in the last part of the year and earned $40,000.She had been employed as manager in a consulting firm prior to starting her own business and had earned $135,000.
(a)What is Sonya's self employment tax for 2016?
(b)What is Sonya's deduction for AGI for the SE tax?

Accepted Answer

The answer of Sonya started a self-employed consulting business in...

Question 18

Nonrefundable credits may offset tax liability but may not result in additional payments to the taxpayer.

Accepted Answer

Nonrefundable tax credits can only offset tax liability.

Question 19

All of the following are self-employment income except

Accepted Answer

B)Dividends are investment income.

Question 20

Nonrefundable personal tax credits can only offset an individual's regular tax,not AMT.

Accepted Answer

Nonrefundable personal tax credits can offset an individual's regular tax liability (minus foreign tax credit)and AMT.

Quiz 30: Special Tax Computation Methods, tax Credits, and Payment of Tax