Question 1

Tamra and Jacob are married and they file a joint tax return.Tamra received nearly five times the salary that Jacob received.Which of the following statements is true?

Accepted Answer

A)  Tamra and Jacob likely pay no tax marriage penalty nor receive a tax marriage benefit.
B)  Tamra and Jacob likely pay a tax marriage penalty.
C)  Tamra and Jacob likely receive a tax marriage benefit.
D)  Tamra and Jacob likely will pay a tax marriage penalty and receive a tax marriage benefit.Couples with a primary bread winner are likely to receive a tax marriage benefit.E) C) and D)
F) A) and D)

Question 2

The computation of the alternative minimum tax base begins with regular taxable income.Which of the following is not part of the formula for computing the alternative minimum tax base?

Accepted Answer

A)  Subtract personal exemptions
B)  Add the standard deduction amount if used for regular tax
C)  Subtract the AMT exemption amount (if any) 
D)  Add back tax exempt interest from a private activity bond not issued in 2009 or 2010.Personal exemptions are added back rather than subtracted.E) A) and D)
F) None of the above

Question 3

Why would a taxpayer file a tax return if not required to do so?

Accepted Answer

A)  to remain in favor with the IRS
B)  to claim a refund of taxes paid
C)  all taxpayers are required to file returns
D)  in order to claim the standard deductionE) None of the above
F) B) and D)

Question 4

Employees must pay both Social Security tax and Medicare tax on all of their wages no matter the amount of their wages.The Social Security wage base is limited;the Medicare wage base is not.

Accepted Answer

A) True 
 B)False

Question 5

The earned income credit is sometimes referred to as a negative income tax.

Accepted Answer

A) True 
 B)False

Question 6

If both spouses of a married couple earn roughly equivalent wages,the couple is likely to pay a marriage penalty due to the nature of the tax rate schedules.

Accepted Answer

A) True 
 B)False

Question 7

The late payment penalty is based on the amount of tax owed and the number of days that the tax is not paid.The maximum amount of the penalty is unlimited.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following statements regarding credits is correct?

Accepted Answer

A)  Business expenses are generally refundable credits
B)  Business credits that are generated in one year but are not utilized in that year expire
C)  Business credits that are generated in one year but are not utilized in that year may be carried forward to future years but not back to a prior year
D)  Business credits that are generated in one year but are not utilized in that year may be carried back to the previous year and then forward to future yearsE) B) and D)
F) A) and D)

Question 9

Which of the following represents the correct order in which credits are applied to gross tax liability (from first to last)  ?

Accepted Answer

A)  Nonrefundable personal,business,refundable
B)  Business,nonrefundable personal,refundable
C)  Refundable,nonrefundable personal,business
D)  Refundable,business,nonrefundable personalE) B) and C)
F) A) and D)

Question 10

The child tax credit is subject to phase-out based on the taxpayer's AGI.

Accepted Answer

A) True 
 B)False

Question 11

What happens if the taxpayer owes an underpayment penalty,but does not compute it on Form 2210?

Accepted Answer

A)  Nothing,unless the taxpayer is audited
B)  The taxpayer is immediately sent to the Tax Court
C)  The IRS will compute and assess the penalty
D)  The penalty is increased by five percentage pointsE) A) and B)
F) A) and C)

Question 12

The kiddie tax does not apply to children over 24 years old at the end of the tax year.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is not true of the lifetime learning credit?

Accepted Answer

A)  It is a nonrefundable credit.
B)  The credit can be claimed by taxpayers who have graduated from college and are taking professional training courses to improve their job skills.
C)  A taxpayer with multiple dependents can claim a credit for each dependent's qualifying expenses.
D)  The credit is subject to phase out based on the taxpayer's AGI.The credit applies to the taxpayer and not to the number of the taxpayer's dependents.E) C) and D)
F) B) and C)

Question 14

Rhianna and Jay are married filing jointly in 2013.They have six children for whom they may claim the child tax credit.Their AGI was $123,440.What amount of child tax credit may they claim on their 2013 tax return?

Accepted Answer

A)  $5,300
B)  $6,000
C)  $12,000
D)  $4,000E) B) and D)
F) A) and D)

Question 15

Which of the following statements regarding the self-employment tax is most accurate?

Accepted Answer

A)  The self-employment tax base is generally the taxpayer's net income from self-employment (usually net income from Schedule 
C)   .
B)  Taxpayers who report less than $600 of net income from self-employment (usually net income from Schedule 
C)   are not required to pay self employment taxes.
C)  The self-employment tax base is net earnings from self employment which is less than net income from self-employment.
D)  The Social Security tax limit does not apply to self-employment taxes.The tax base for self-employment taxes is net earnings from self-employment which is net income from self-employment multiplied by 92.35%.E) B) and D)
F) A) and B)

Question 16

All capital gains are taxed at preferential rates.Long-term capital gains are taxed at preferential rates.

Accepted Answer

A) True 
 B)False

Question 17

Hestia (age 17)  is claimed as a dependent by her parents,Rhea and Chronus.In 2013,Hestia received $1,000 of interest income from a corporate bond that she owns.In addition,she has earned income of $200.What is her taxable income for 2013?

Accepted Answer

A)  $0
B)  $200
C)  $650
D)  $1,200E) A) and C)
F) A) and D)

Question 18

Which of the following is not typical of taxpayers who are most likely affected by the AMT?

Accepted Answer

A)  Have many dependents
B)  Pay high state income tax
C)  Pay high property taxes
D)  Have relatively low capital gainsE) B) and C)
F) All of the above

Question 19

Taxpayers are not required to file a tax return unless their gross income passes a certain threshold.This threshold is generally the ________.

Accepted Answer

A)  applicable standard deduction amount
B)  personal exemption amount
C)  twice the applicable standard deduction amount
D)  applicable standard deduction amount plus the personal exemption amountE) B) and C)
F) A) and C)

Question 20

Stephanie and Mitch are married and they file a joint tax return.Mitch received a slightly higher salary than Stephanie did during the year.Which of the following statements is true?

Accepted Answer

A)  Stephanie and Mitch likely pay no tax marriage penalty nor receive a tax marriage benefit.
B)  Stephanie and Mitch likely pay a tax marriage penalty.
C)  Stephanie and Mitch likely receive a tax marriage benefit.
D)  Stephanie and Mitch likely will pay a tax marriage penalty and receive a tax marriage benefit.Couples earning similar amounts of income are likely to pay a marriage penalty.E) All of the above
F) B) and D)

Exam 7: Individual Income Tax Computation and Tax Credits

The late payment penalty is based on the amount of tax owed and the number of days that the tax is not paid.The maximum amount of the penalty is unlimited.

Correct AnswerverifiedShow Answer

Tamra and Jacob are married and they file a joint tax return.Tamra received nearly five times the salary that Jacob received.Which of the following statements is true?

Correct AnswerverifiedShow Answer

Taxpayers are not required to file a tax return unless their gross income passes a certain threshold.This threshold is generally the ________.

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Rhianna and Jay are married filing jointly in 2013.They have six children for whom they may claim the child tax credit.Their AGI was $123,440.What amount of child tax credit may they claim on their 2013 tax return?

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Why would a taxpayer file a tax return if not required to do so?

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Which of the following statements regarding the self-employment tax is most accurate?

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What happens if the taxpayer owes an underpayment penalty,but does not compute it on Form 2210?

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The earned income credit is sometimes referred to as a negative income tax.

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Which of the following is not typical of taxpayers who are most likely affected by the AMT?

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All capital gains are taxed at preferential rates.Long-term capital gains are taxed at preferential rates.

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Stephanie and Mitch are married and they file a joint tax return.Mitch received a slightly higher salary than Stephanie did during the year.Which of the following statements is true?

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The computation of the alternative minimum tax base begins with regular taxable income.Which of the following is not part of the formula for computing the alternative minimum tax base?

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The child tax credit is subject to phase-out based on the taxpayer's AGI.

Correct AnswerverifiedShow Answer

Employees must pay both Social Security tax and Medicare tax on all of their wages no matter the amount of their wages.The Social Security wage base is limited;the Medicare wage base is not.

Correct AnswerverifiedShow Answer

Which of the following is not true of the lifetime learning credit?

Correct AnswerverifiedShow Answer

Hestia (age 17) is claimed as a dependent by her parents,Rhea and Chronus.In 2013,Hestia received $1,000 of interest income from a corporate bond that she owns.In addition,she has earned income of $200.What is her taxable income for 2013?

Correct AnswerverifiedShow Answer

Which of the following represents the correct order in which credits are applied to gross tax liability (from first to last) ?

Correct AnswerverifiedShow Answer

If both spouses of a married couple earn roughly equivalent wages,the couple is likely to pay a marriage penalty due to the nature of the tax rate schedules.

Correct AnswerverifiedShow Answer

Which of the following statements regarding credits is correct?

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The kiddie tax does not apply to children over 24 years old at the end of the tax year.

Correct AnswerverifiedShow Answer

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