Fed Tax 1 CH 14 Quiz

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 False

True

The maximum amount of the American Opportunity Tax Credit for each qualified student is A. $2,500. B. $1,500. C. $2,000. D. $3,000.

A. $2,500.

A wage cap does not exist for which of the following self−employment ​taxes? A. FICA B. Medicare C. FUTA D. Social Security tax

B. Medicare

Which statement is correct​? A. The benefit of a tax credit depends on the​ taxpayer's marginal tax rate. B. Tax credits reduce tax liability on a dollar−for−dollar basis. C. Tax deductions are less valuable for high−income taxpayers than for low−income taxpayers. D. Tax deductions reduce tax liability on a dollar−for−dollar basis.

B. Tax credits reduce tax liability on a dollar−for−dollar basis.

In computing​ AMTI, all of the following must be added back except A. state income taxes. B. home mortgage interest​ (on mortgage in effect since home was​ purchased). C. property taxes on an​ individual's home. D. All of the itemized deductions noted above must be added back.

B. home mortgage interest​ (on mortgage in effect since home was​ purchased).

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 A. $24,395. B. $12,198. C. $12,018. D. $24,035.

C. $12,018.

Evan and Barbara incurred qualified adoption expenses in 2019 of​ $6,000, and then incurred​ $9,000 more in 2020 when the adoption of their child became final. Their 2019 AGI was​ $110,000 and their 2020 AGI was​ $100,000. The allowable adoption credit is A. $15,000 in 2020. B. $6,000 in 2019 and​ $9,000 in 2020. C. $14,300 in 2020. D. $6,000 in 2019 and​ $8,300 in 2020.

C. $14,300 in 2020.

Mingming and​ Xavier, unrelated single​ taxpayers, have each incurred a​ $1,000 expenditure. Before considering this​ expenditure, Mingming has taxable income of​ $600,000 and Xavier has taxable income of​ $32,000. Assume the expenditure qualifies as either a tax deduction or a​ 25% credit. Which of the following statements is correct​? A. Mingming will prefer the​ credit, but Xavier will prefer the deduction. B. Both taxpayers will prefer the deduction. C. Mingming will prefer the​ deduction, but Xavier will prefer the credit. D. Both taxpayers will prefer the credit.

C. Mingming will prefer the​ deduction, but Xavier will prefer the credit.

If an individual is liable for self−employment ​tax, a portion of the self−employment tax is A. from AGI as an itemized deduction. B. a Schedule C business expense. C. a for AGI deduction. D. nondeductible.

C. a for AGI deduction.

In computing​ AMTI, tax preference items are A. subtracted only. B. either added or subtracted. C. added only. D. excluded.

C. added only.

Harley's tentative minimum tax is computed by multiplying the AMT tax rates by her A. taxable income. B. alternative minimum taxable income. C. alternative minimum tax base. D. tentative alternative taxable income.

C. alternative minimum tax base.

Which one of the following is a refundable​ credit? A. credit for the elderly and disabled B. lifetime learning credit C. earned income credit D. child and dependent care credit

C. earned income credit

All of the following are allowable deductions under the alternative minimum tax except A. charitable contributions. B. qualified housing interest. C. state income taxes. D. medical expenses.

C. state income taxes.

In the fall of​ 2020, James went back to school to earn a master of accountancy degree. He incurred​ $7,000 of qualified educational expenses and his modified AGI for the year was​ $40,000. His Lifetime Learning Credit is A. $1,000. B. $1,800. C. $2,500. D. $1,400.

D. $1,400.

Self−employment taxes include components for A. FICA and FUTA. B. Medicare hospital insurance and SUTA. C. Social Security and FUTA. D. Social Security and Medicare hospital insurance.

D. Social Security and Medicare hospital insurance.

All of the following are self−employment income except A. distributive share of partnership income from a partnership operating a business. B. fees received for serving as a director of a corporation. C. net income of a sole proprietorship. D. dividends received by a corporate shareholder.

D. dividends received by a corporate shareholder.

In computing​ AMTI, adjustments are A. subtracted only. B. limited. C. added only. D. either added or subtracted.

D. either added or subtracted.

The general business credit includes all of the following with the exception of A. research credit. B. disabled access credit. C. credit for rehabilitation expenditure. D. foreign tax credit.

D. foreign tax credit.

Assume a taxpayer projects that his total income tax for the year will​ $25,000. A taxpayer with savings should prefer to structure his tax prepayments so that he will receive a tax refund of​ $2,500 rather than a tax due of​ $2,500. True False

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. True False

False

The earned income credit is available only to taxpayers with qualifying children. True False

False

The earned income credit is refundable only if a tax has been withheld. True False

False

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. True False

True

One−half of the self−employment tax imposed is allowed as a for AGI deduction. True False

True

When a husband and wife file a joint return and both have self−employment ​income, the self−employment tax must be computed separately. True False

True