TAX Chapter 4 SB

In 2021, Ryan files as head of household and has taxable income of $122,500. None of his taxable income consists of capital gains or qualified dividends. Using the tax rate schedule, his tax liability rounded to the nearest dollar, totals __________ (Enter your answer as a whole number without decimals.)

$21,969

Amy and Ethan are married and file a joint return for 2021. Their taxable income is $192,100. The amount of their tax liability, rounded to the nearest dollar, is __________

$34,146

Zack is single and has collected the following information for preparing his 2021 taxes: Gross income $74,000, tax credits $2,500, itemized deductions $9,000, deductions for AGI $5,000, tax prepayments $8,400. Based on this information, Zack's "adjusted gross income" equals __________ and his "taxable income" equals __________

$69000; $60000

Which of the following choices are forms of tax prepayments?

- Estimated tax payments the taxpayer made directly to the IRS - Income tax withheld from a taxpayer's salary or wages by an employer - An overpayment of taxes in the prior year that was applied as an estimated payment for the current year

How does a taxpayer determine which filing status to use?

- Filing status may depend on whether or not the taxpayer has dependents. - Filing status depends on whether or not the taxpayer is married at the end of the year.

Which of the following criteria will contribute toward qualifying a taxpayer for head of household status?

- Have lived with a qualifying person in the taxpayer's home for more than half the year - Provide over half the cost of maintaining a household for a dependent parent not living with the taxpayer - Be unmarried (or considered unmarried under the abandoned spouse provisions) at the end of the year - Pay more than half the costs of keeping up a home for the year

Which of the following criteria is necessary to qualify as a dependent of another taxpayer?

- Must be a citizen of the U.S. or a resident of the U.S., Canada, or Mexico - Must be considered either a qualifying child or a qualifying relative - Must NOT file a joint return unless there is no tax liability on the couple's return and no tax liability on either return if they filed separately

Which of the following individuals would meet the relationship test for being a qualifying relative of the taxpayer if s/he has only lived with the taxpayer for eight months of the year?

- Niece - Grandchild - Brother - Father

Match the type or character of income to its definition.

- Tax-exempt: Income realized during the year that is excluded from gross income and never taxed. - Tax-deferred: Income realized during the year that is not included in gross income until a later year - Ordinary: Income included in gross income in the current year and taxed at the ordinary rates per the tax rate schedules - Capital: Gains (or losses) on investment or personal use assets that may be taxed at favorable rates

Which of the following statements are true regarding the qualifying widow or widower filing status?

- The surviving spouse must have dependents. - The surviving spouse must NOT have remarried during the year. - The status may be used for up to two years after the year the other spouse died.

When can the married filing jointly or married filing separately filing status be used?

- When the taxpayers are married as of the last day of the tax year - When one spouse died during the year and the surviving spouse has not remarried

Put the following items in the order in which they are found in the individual income tax formula.

1. Gross income 2. Minus for AGI deductions 3. Equals adjusted gross income 4. Minus from AGI deductions 5. Equals taxable income

Which of the following individuals meet the requirements to be qualifying children for Tonya?

1. Vinnie (17) does not provide half of his own support. He is in high school, earned $5,000, and lives with his mother, Tonya 2. Sandy (23) does not provide half of her own support. She is a full-time college, earned $7,000 this year and lives with her aunt Tonya

Which of the following statements is TRUE regarding the individual income tax formula?

A taxpayer may deduct the greater of his standard deduction or his itemized deductions from AGI to arrive at taxable income.

Which of the choices below is NOT one of the tests that must be met to qualify as a qualifying relative?

Age

Ashley and Roland were married and had two dependent children. Roland died last year. What filing status will Ashley use for the year Roland died and for the current year (assuming she does not remarry)?

Ashley will use married filing jointly in the prior year and qualifying widow in the current year.

Which of the following statements is INCORRECT?

Both tax deductions and tax credits reduce taxable income.

Which one of the following individuals would NOT meet the relationship test for being a qualifying relative of the taxpayer through a qualifying family relationship?

Cousin

True or false: A taxpayer may deduct both his standard deduction and his itemized deductions from AGI in order to calculate taxable income.

False

True or false: An individual will qualify as a qualifying child if he satisfies at least one of the following tests: age, support, relationship, and residence.

False

True or false: In order to meet the support test for a qualifying child, the taxpayer must provide more than half of the individual's support for the year.

False

When a divorced taxpayer pays over half the cost of maintaining a home where she and a dependent child lived for over half the year, she qualifies for which filing status?

Head of household

Corey is 25 and has a full-time job. His younger brother, James, is 20 and was enrolled as a full-time student at the community college during the summer and fall semesters. James lives with Corey. Which of the following statements is correct with respect to the age requirement for a qualifying child?

James meets the age test because he is younger than Corey, and he is under age 24 and a full-time student.

Kayla and Ben were married in November of the current year. What will be their filing status for the current year?

Married filing jointly (or separately) because they were married as of the end of the year

Which of the following criteria is NOT necessary to qualify as a dependent of another taxpayer?

Must be unmarried for at least a portion of the year

Which one of the following individuals meet the requirements to be a a qualifying relative (not a qualifying child) for Owen?

Owen provides over half of his son, Vinnie's (age 20) support. Vinnie, a part-time college student, earned $3,800 and lived with Owen.

Ruida divorced on October 31 of the current year. He does NOT have any dependents. Which filing status should Ruida use for the current year?

Single

Chasity is 20, has a full-time job, and supports herself. Her brother, William, age 22, has decided to go back to college. He moved in with Chasity and is attending college full-time. Which of the following statements is accurate regarding the age test for a qualifying child and how it applies to William?

William does NOT meet the age test because he is older than Chasity.

In addition to the individual income tax, individuals may be required to pay other taxes. Taxpayers with a large amount of tax preference items and itemized deductions may be subject to the __________ __________ tax.

alternative; minimum

In order to meet the criteria for a qualifying __________ (choose either: child/relative), the dependent must NOT have provided more than half of his or her own support for the year. However, the support may have been provided by someone other than the taxpayer.

child

A tax __________ reduces taxable income and a tax __________ reduces the tax liability dollar for dollar.

deduction; credit

What is meant by the all-inclusive concept when referring to the US tax laws?

gross income includes all realized income from whatever source derived

For tax years beginning in 2018, a taxpayer's from AGI deductions include the greater of the standard deduction or the taxpayer's __________ deductions and 20% of the taxpayer's qualified __________ income.

itemized; business

A taxpayer's filing status depends on his or her __________ status at the end of the year and whether the taxpayer has any __________

marital; dependents

Income that is taxed in the current year according to the tax rate schedule is referred to as __________ income.

ordinary

Examples of a tax __________ include income taxes withheld from a taxpayer's salary by an employer, estimated tax payments paid directly to the IRS, and amounts from a prior year overpayment that were applied to the current year's tax liability.

prepayment

In addition to the individual income tax, individuals may be required to pay other taxes. Owners of unincorporated businesses may have to pay __________ tax.

self-employment

A taxpayer may file as a single taxpayer when:

she is unmarried at the end of the tax year

The U.S. tax laws are based on the all-inclusive concept where gross income includes all realized income from "whatever __________ __________."

source; derived