ACCT 440 CH. 14 Quiz

Tanya has net earnings from self−employment of​ $240,000, resulting in self−employment tax of​ $24,035 and Additional Medicare Tax of​ $360. Due to these​ taxes, Tanya will be allowed a deduction for AGI of

$12,018.

Jake and Christina are married and file a joint return for 2020 with taxable income of​ $100,000 and tax preferences and adjustments of​ $30,000 for AMT purposes. Their regular tax liability is​ $13,580. What is the amount of their total tax​ liability?

$13,580

In​ 2020, Rita is divorced with one child. She has AGI of​ $20,000 resulting in a federal income tax liability of​ $200 and an earned income credit of​ $3,584. She has had​ $550 of federal income taxes withheld from her pay. Rita will receive a federal income refund of

$3,934.

Max and Alexandra are married and incur​ $5,500 of qualifying expenses to care for their two​ children, ages 2 and 5.​ Max's earned income is​ $35,000 and​ Alexandra's earnings from a part−time job are​ $5,000. What is the amount of the qualifying expenses for purposes of computing the child and dependent care​ credit?

$5,000

John has​ $55,000 of self−employment earnings from a sole proprietorship. John is also employed part−time by a major corporation and is paid​ $25,000. John's self−employment tax for 2020 is

$7,771

Reva and Josh Lewis had alternative minimum taxable income of​ $1,200,000 in 2020 and file a joint return. For purposes of computing the alternative minimum​ tax, their exemption is

$72,600.

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?

$769

Mr. and Mrs. Lewis have an alternative minimum tax base of​ $312,000 in 2020. Their tentative minimum tax will be

$83,402.

If a​ taxpayer's AGI is greater than​ $150,000, no penalty will be imposed if the taxpayer pays estimated tax payments in 2020 equal to what percentage of​ 2019's income tax​ liability?

110%

Amelida expects to earn​ $145,000 of AGI and​ $125,000 of taxable income this year. She is concerned about underpayment penalties. Because of a substantial​ bonus, her prior year AGI was​ $155,000 and her taxable income was​ $135,000. Based on her fact​ pattern, which of the following scenarios will not allow her to avoid underpayment​ penalties?

The estimated payments total at least​ 100% of the tax due for the prior year.

A taxpayer who paid AMT in prior​ years, but is not subject to the AMT in the current​ year, may be entitled to an AMT credit against his regular tax liability in the current year.

True

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

True

In computing​ AMTI, tax preference items are

added only

Harley's tentative minimum tax is computed by multiplying the AMT tax rates by her

alternative minimum tax base.

An individual with AGI equal to or less than​ $150,000 in the prior year may generally avoid penalties for underpayment of estimated tax in each of the following cases with the exception of

estimated tax is less than​ $1,500.

A taxpayer will be ineligible for the earned income credit if he or she has disqualified investment income of more than​ $3,650 in 2020. Disqualified income includes all the following except

self−employment income.

All of the following are allowable deductions under the alternative minimum tax except

state income taxes.

​Lavonne, a single​ taxpayer, has a regular tax liability of​ $11,190 on taxable income of​ $70,000. She also has tax preferences of​ $38,000 and positive adjustments attributable to limitations on itemized deductions of​ $10,000. Lavonne's alternative minimum tax for 2020 is

$536.

For purposes of the​ AMT, certain itemized deductions are​ disallowed, but the standard deduction is allowed.

False

If an employee has more than one employer during the​ year, all employers must withhold federal income taxes but only one employer must withhold FICA tax.

False

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.

True

If an individual is classified as an​ employee, the employer is required to withhold the​ employee's share of the FICA tax and to provide a matching amount.

True

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

True