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Exam 8: Individual Income Tax Computation and Tax Credits

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Question 61

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Harrison received a qualified dividend. Without knowing any additional facts, which of the following statements is true regarding the rate at which the dividend will be taxed to Harrison?

A) The dividend will be taxed at a 15 percent tax rate.
B) The dividend will be taxed at a 20percent tax rate.
C) The entire dividend will be taxed at 15percent or the entire dividend will be taxed at 20percent, depending on Harrison's marginal ordinary income tax rate.
D) None of the choices are correct.

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Question 62

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Jerusha is married and she files a separate tax return in 2020. She claimed the standard deduction for regular tax purposes ($12,400). She had no other adjustments. Her regular taxable income was $67,800. What is Jerusha's AMTI?

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$80,200
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Question 63

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Which of the following statements regarding credits is correct?

Julien and Sarah are married, file a joint return, and have two children, Kaya and Christopher. Kaya just finished her third year at college and Christopher just finished his first year of graduate school (fifth year of college). Tuition and books for the past year were $1,800 for Kaya and $5,000 for Christopher. How much can Julien and Sarah claim in educational credits if their joint AGI was $128,000 for 2020?

Assume Georgianne underpaid her estimated tax liability by $150 in the first quarter, $500 in the second quarter, $400 in the third quarter, and $200 in the fourth quarter. Calculate her underpayment penalty for the year, assuming the federal short-term interest rate is 5 percent.

Regular taxable income is the starting point for determining the alternative minimum tax.

Hestia (age 17) is claimed as a dependent by her parents, Rhea and Chronus. In 2020, Hestia received $1,060 of interest income from a corporate bond that she owns. In addition, she has earned income of $260. What is her taxable income for 2020?

Maria and Tony are married. They are preparing to file their 2020 tax return. If they were to file as single taxpayers, Maria and Tony would report $10,000 and $70,000 of taxable income, respectively. On their joint tax return, their taxable income is $80,000. How much of a marriage penalty or benefit will Maria and Tony experience in 2020? (Use tax rate schedules.)

Harmony reports a regular tax liability of $16,500 and tentative minimum tax of $18,650. Given just this information, what is her alternative minimum tax liability for the year?

Sam is 30 years old. In 2020, he reported an AGI of $12,000, all from his job as a server at the local café. He is single and has no dependents. What amount of earned income credit may he claim in 2020? (Use Exhibit 8-10)

Candace is claimed as a dependent on her parent's tax return. In 2020, Candace received $5,000 of interest income from corporate bonds she obtained several years ago. This is her only source of income. She is 15 years old at year-end. What is her gross tax liability? (Use Tax Rate Schedule, Standard deduction, Estates and Trusts.)

Alton reported net income from his sole proprietorship of $90,000. To determine his self-employment tax, he would multiply $90,000 by the self-employment tax rate.

For taxpayers who receive both salary as an employee and self-employment income as an independent contractor in the same year, which of the following statements regarding FICA and self-employment taxes is most accurate?

In 2020, Shawn's AGI is $170,000. He earned the income evenly throughout the year. He owed $29,890 in federal income tax and self-employment taxes of $2,590. Last year, he had a gross tax liability of $50,000. What is the minimum quarterly estimated tax payment Shawn must pay each quarter to avoid underpayment penalties for 2020?

An 80-year-old taxpayer with earned income and no dependent children could qualify for the earned income credit.

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

Which of the following statements concerning estimated tax payments and underpayment penalties for individuals is true?

Katlyn reported $300 of net income from her sole proprietorship. She is not required to pay self-employment tax.

Looking at the following partial calendar for a typical April (not 2020) , when will individual tax returns be due?

Which of the following statements regarding late filing penalties and/or late payment penalties is true?