Individual Income Taxes
Select 3 reasons that apply
A significant portion of Kami's time was not spent working in the medical lab and never reached 500 hour test. She participates more than 100 hrs. during the year, but it is not more thtn anyone else's participation for the year. Kami does not participate in the activity on a regular, continuous, and substantial basis during the year
Although Virginia is entitled to five personal and dependency exemptions on her income tax return, she claims only one withholding allowance on Form W-4.
A. Is it permissible to claim fewer allowances than an individual is entitled to? Yes, Virgnia may claim fewer allowances than allowed. B Why would an individual claim fewer allowances? An individual might claim fewer allowances to increase the amount of tax withheld, if they anticipate that taxes will be owed at the end of the year and they do not wish to make quarterly estimated tax payments. For example, this situation occurs for taxpayers earning both wage and nonwage income. C. . Is it possible for Virginia to claim more than five withholding allowances? Virginia can claim more than five withholding allowances in a tax year if she has larger than average deductible expenses (for example, mortgage interest expenses on a newly-financed house) relative to the average for a family of Virginia's income amount.
Allison is a single mother, 37 years old, and has two qualifying children, ages 3 and 6. In 2017, she receives $ 4 comma 400$4,400 alimony and earns $18,200 in wages resulting in $22,600 of AGI. Is Allison eligible for the earned income credit?
Allison is eligible for the earned income credit because she has qualifying children and because she has earned income which does not emceed the phase-out limitation amount of $18,340. Allison's tentative earned income credit (before phaseout) amounts to $5,616 and the credit allowed equals $4,719.
Which of the following itemized deductions are deductible when computing the alternative minimum tax for individuals?
Charitable contributions, Mortgage interests on a loan used to acquire a personal residence, Medical expenses in excess of 10%AGI (taxpayer age 74) (These are NOT DEDUCTIBLE FOR AMT State and local income taxes, Interest related to an investment in undeveloped land where the individual has no investment income.)
Which of the following categories of individuals or income are exempt from the federal income tax withholding requirements?
EXEMPT: Household employees, Independent contractors, Tips under $20 per month from a single employer. NOT EXEMPT: Newspaper carriers over age 18, Bonuses, Commissions, Vacation pay
Theresa is a college professor who wants to work for a consulting firm during the summer. She will be working on special projects relating to professional development programs. What advantages might accrue to the consulting firm if the engagement is set up as a consulting arrangement rather than an employment contract?
If the engagement is set up as a consulting arrangement rather than an employment contract, then the consulting firm will be able to avoid making matching FICA contributions for Theresa's earnings. In addition, the consulting firm will not be required to withhold the employee's share of FICA tax. If the compensation paid to Theresa would be the same whether she was an employee or independent consultant, the cost of Theresa's services would be less if she were a consultant rather than an employee.
Select three reasons that apply.
More that 100 hrs have been spent for each operation, which allows Kami to have significant participation. The aggregate participation in these three activities causes her participation to exceed the 500 hour test. Kami's time is spent on one activity allowing for a regular, continuous, and substantial basis.
Why are most individuals not subject to the self-employment tax?
Most people are not subject to the self-employment tax because they are classified as employees for tax purposes. employees pay employment taxes through withholding and in amounts which must be matched by their employers.
Why are most taxpayers not subject to the alternative minimum tax (AMT)?
Most taxpayers do not have substantial tax preferences and AMT adjustments. AND There is a generous exemption amount to reduce the tax base on which the AMT is calculated.
Does the AMT apply if an individual's tax liability as computed under the AMT rules is less than his or her regular tax amount?
NO
Assume the same facts in part b. In addition, assume that the same group of doctors have formed two other partnerships. One is a medical supply partnership. Kami spent 150 hours working for this partnership. The medical supply partnership has five full-time employees. Kami also spent 250 hours during the year working for the other partnership. The partnership specializes in providing medical services to individuals from out of town who are staying at local hotels and motels. This partnership hires two full-time and six part-time nurses. Are the lab and the two other partnerships passive activities with respect to Kami?
No
Laura owns a rental unit that she rents out to students. The rental unit is Laura's only business and she spends approximately 875 hours per year managing, collecting the rent, advertising, and performing minor repairs. At times she must hire professionals such as plumbers to do the maintenance. Is the rental unit a passive activity with respect to Laura?
No
If an employer fails to withhold federal income taxes and FICA taxes on wages or fails to make payment to the IRS, what adverse tax consequences may result? May corporate officers or other corporate officials be held responsible for the underpayment?
Penalties are imposed if an employer fails to withhold federal payroll tax and income tax and pay them to the IRS. Corporate officers, directors, and other officials may also be held personally liable for payment of the tax.
On September 30 of the current year, Brown Fox Corporation files for bankruptcy. At the time, it estimates that the total FMV of its assets is $675,000, whereas the total amount of its outstanding debt amounts to $905,000. Brown Fox Corporation has been engaged in the resale of tax preparation and tax research-related books and software for several years.
Requirement A: does not, a long-tern capital loss, 280,000 Requirement B: does, a $50,000 ordinary loss and $230,000 long-term capital loss. Requirement C: a $280,000 ordinary loss Requirement D: a $280,000 ordinary loss
Discuss the major differences between the American Opportunity credit and the Lifetime Learning credit. Include in your discussion the type of taxpayers who would likely qualify for each of the credits.
The AOTC applies per student (maximum $2,500 per student) whereas the LLC applies per taxpayer ($2,000). The AOTC only applies during a student's first four years of post-secondary education, whereas the LLC applies to undergraduate, graduate, and professsional education. The AOTC and LLC have different phaseout rules. The LLC phase-out occurs at lower income levels. Because the LLC phaseout ranges are adjusted annually for inflation (and AOTC ranges are fixed) over time, this may decrease in importance as a disavantage.
What is the maximum child and dependent care credit available to an employed individual who has $14,000 of qualifying child care expenses and two or more qualifying dependents?
The maximum amount of child and dependent care expenses that qualify for the credit for a taxpayer with two or more qualifying individuals is $6000. A taxpayer who has $14,000 of eligible expenses may claim a maximum credit of $2,100. the credit rate decreases to a minimum of 20% as the taxpayer's AGI increases from $15,000 to $43,000. If the taxpayer's AGI exceeds $43,000, the maximum credit is $1,200.
An individual has increasing levels of income each year and is uncertain regarding the amount of his estimated taxable income for any given year. What tax planning strategy can be used to avoid the penalty for underpayment of estimated tax?
To avoid the estimated tax underpayment penalty, the taxpayer should make combined estimated payments and withholdings that are equal to or exceed the required percentage of the preceding year's tax liability. A taxpayer must prepay 100% of the preceding year's tax liability if his AGI was $150,000 or less in the previous year. If the taxpayer's previous year AGI exceeded $150,000, to avoid the penalty, for the current year, the taxpayer would need to prepay 110% of his previous year tax liability.
Kami is a medical doctor who works four days a week in a medical practice that she and five other doctors formed. Last year she and her partners formed another partnership that owns and operates a medical lab. The lab employs ten technicians, one of whom also acts as manager. During the year Kami spent 120 hours in meetings, reviewing records, etc., for the lab. Is the lab a passive activity with respect to Kami?
Yes
