ACCTG325- tax section
Marissa is a single mom with two dependent children. She is 30 years old. Her standard deduction is $.
$18,350, 18,350, or 18350
Molly was employed by Inside Interiors from January to July, earning $70,000 and with Middlebrook Designs from August to December, earning $100,000. For 2019, her excess social security credit is $
Blank 1: 2300 or 2,300
Ryland is a single taxpayer with a 32% marginal tax rate. Each year, his itemized deductions include $3,000 in property taxes and a $6,500 donation to his university, thus he typically does not exceed the standard deduction. If Ryland decides to bunch his deductions by donating $13,000 to his university every other year instead of $6,500 annually, his total deductions over two years will increase by $, and it will result in a total tax savings of $ .
Blank 1: 3,800 or 3800 Blank 2: 1216 or 1,216
Jim is single. His AMTI is $610,300. He is entitled to an AMT exemption of $.
Blank 1: 46,700 or 46700
Eileen and Elliot are married and file a joint return. Their AGI is $105,000, and they report total itemized deductions of $23,250. If they are subject to a 22% marginal tax rate, the incremental tax benefit from itemizing is ______.
$0 They will take the standard deduction of $24,400, so there is no incremental benefit from itemizing.
Michael is claimed as a dependent on his parent's 2019 tax return. This year, he earned $600 from mowing lawns and $220 in dividend income from stock gifted to him several years ago from his grandparents. His standard deduction for 2019 is ______.
$1,050 The standard deduction is $1050. His earned income is $600 plus $350 = $950 which is less than the standard amount of $1050.
Rian reports AMTI of $119,000 in excess of his permitted exemption amount. His regular tax liability is $22,960. His AMT is ______.
$7,980 Reason: ($119,000 × 26%) less his regular tax liability of $22,960 = $7,980
Juan is unmarried with no dependents. In 2019, he reports $125,000 of AGI. Included in his AGI is $15,000 of qualified business income. He also reports $7,800 of itemized deductions. Juan's taxable income is $
109,800 or 109800
Mr. and Mrs. Short are married and file a joint return. They report the following items: Salary - Mrs. Short $100,000 Dividend Income 2,000 Share of partnership income 24,000 Above-the-line deductions 3,000 Itemized deductions 14,000
123000 or 123,000
Missy is claimed as a dependent on her parent's 2019 tax return. She earned $2,000 from her job at Yummy Yogurt Shop in 2019. Her standard deduction for 2019 is $
2350 or 2,350
Mark and Mary file a joint return. They are both 40 years old and have two young children. Their standard deduction is $
24,400 or $24,400
Allie is single with no dependent children. Her 2019 tax information is as follows: Wages $60,000 Dividends 500 Itemized Deductions 4,000 Allie's AGI is $ and her taxable income is $
60500 48300
Which of the following statements is true?
A child who is considered a dependent of another taxpayer and who earns income is required to file as a single taxpayer.
Which of the following statements about a qualifying relative as defined under the dependency rules is false?
A qualifying relative must be related to the taxpayer.
Which of the following statements is false with respect to tax payments?
A tax refund indicates that the taxpayer has engaged in careful tax preparation and planning.
Which of the following statements about AGI is false?
AGI equals total income less itemized deductions.
Which of the following reflects the due dates for quarterly estimated tax payments?
April 15; June 15; September 15; January 15 of the following year
To avoid an underpayment penalty, a taxpayer is required to make timely payments of at least % of their current tax liability or meet the safe-harbor estimate provisions. The threshold for the safe-harbor estimate is % of prior year taxes for taxpayers with AGI less than $150,000 and % for taxpayers above that threshold.
Blank 1: 90 Blank 2: 100 Blank 3: 110
Erik and Francesca are married with a newborn daughter. Their 2019 tax information is as follows: Wages $60,000 Qualified Business Income from sole proprietorship 40,000 Itemized deductions 14,000 Allowable deduction for self employment tax 2,826 Erik and Francesca's AGI is $ and their taxable income is $
Blank 1: 97,174 or 97174 Blank 2: 64774 or 64,774
Which of the following statements is true?
Differences exist in the computation of taxable income for individuals depending on their filing status.
True or false: The classification of an individual as a dependent only has the potential to affect a taxpayers filing status.
False
True or false: The original purpose of AMT was to ensure that tax preferences did not result in low income taxpayers not paying an equitable share of taxes.
False Reason: AMT is targeted at high income taxpayers.
True or false: If requested by the filing deadline, a taxpayer may request a six month extension to both file their return and pay their outstanding tax obligation.
False Reason: The taxpayer may request an extension to file their return, but not to pay their tax obligation.
Which of the following statements about the dependent credit is false?
High income taxpayers are not eligible for the credit.
Marcus is a single taxpayer. His AGI is $75,500 and his itemized deductions total to $7,500. Which of the following statements is true?
His itemized deductions yield no tax benefit.
The Hamiltons had the following tax information for 2019: 2018 GI $180,000 2018 Tax liability $36,200 2019 Estimated AGI $200,000 2019 Estimated tax liability $36,000 Which of the following statements is false regarding their 2019 tax obligation?
If the Hamiltons choose not to rely on their estimates, they may avoid an underpayment penalty if they pay $36,200 by April 15, 2020.
Mario and Maria Moreno have no children of their own. However, their niece, Lupe, lives with them, and they provide more than one-half of her financial support. Which describes a scenario in which the Moreno's may not consider Lupe a qualifying child?
Lupe is 22 years old, lives with the Morenos full time, and is not a full-time student.
Which of the following statements is false?
Married individuals must file a joint return.
Jennifer and Justin were married with two young children. Justin died during 2018. Which tax rates will Jennifer use for 2018 and 2019?
Married, filing jointly for both tax years
Which of the following is false regarding AGI?
No deductions are included in the computation of AGI.
Indicate which of the following is not a filing status.
Permanent resident of the U.S.
Which of the following items are included in total income? (Select all that apply.)
Revenues less deductions from rental activities Wages Interest income from savings account Revenues less deductions from sole proprietorship
In 2019, Marshall was employed by Buckeye, Inc. until September when he accepted a new position with Spartan Company. Marshall earned $100,000 from Buckeye and $70,000 from Spartan. Which of the following reflects the amount of wages on which Spartan must withhold Social Security and Medicare tax?
Social Security on $70,000; Medicare tax on $70,000 Spartan must apply withholding rules without considering any other employment. Therefore, Spartan withholds Social Security and Medicare tax on the full $70,000. Marshall may claim a credit for any excess amounts paid.
Which of the following statements regarding tax payments is true?
Sole proprietors must make quarterly estimated tax payments for both income and self-employment tax.
Which of the following is false regarding the computation of federal income tax?
Tax is computed by applying the tax rate tables to AGI.
Which of the following could potentially meet the requirements of a qualifying child under the dependency rules? (Select all that apply.)
Taxpayer's sister or brother Taxpayer's niece or nephew Taxpayer's child Taxpayer's grandchild
Which of the following is not a feature of the kiddie tax?
The kiddie tax applies only to earned income.
Which of the following statements is false regarding marginal tax rates for individual taxpayers?
The marginal tax rate can always be determined by consulting the appropriate line on the tax rate schedule. Reason: Other factors may make the marginal tax rate vary from what is indicated by consulting the tax rate schedule. One potential factor is the impact of phase-outs related to deductions and exemptions.
Jamal is single. His AGI is $56,000 and he reports $7,200 of itemized deductions. What amount will Jamal subtract from AGI?
The standard deduction of $12,200
Trent has a 24% marginal tax rate. He is offered the following option: A tax credit of $1,000 or an additional itemized deduction of $4,000. Assuming that his itemized deductions exceed the standard deduction, which of the following statements are true? (Select all that apply.)
The value of the $4,000 deduction is $960. As Trent's marginal tax rate increases, the value of the deduction increases.
Which of the following statements about total income is false?
Total income excludes income from business ventures in which the taxpayer engages.
Mr. and Mrs. White file a joint return. They have two children. Both are full-time college students, and the Whites provide more than half of their financial support. Trenton is 22 years old, lives on campus, and he earned $7,000 from a part-time job. Lisa is 26 years old, lives at home, and earns $2,000 from a part-time job. Which of the following statements are true? (Select all that apply.)
Trenton is a qualifying child. Lisa is a qualifying relative.
AGI is ______.
a measure often used to determine whether the taxpayer is eligible for a deduction or credit
Milton is a retired, unmarried taxpayer with no dependents. In a typical year, his only itemized deductions are his property taxes of $4,500 and a $6,000 donation to his church. His tax accountant has advised him to consider making an $12,000 contribution to his church every other year instead of an annual $6,000 contribution. This technique is best described as ______.
bunching
The earned income credit is ______.
designed to financially encourage unemployed individuals to enter the workforce
An extension of time to file an individual tax return ______.
does not extend the time for payment of tax
The QBI deduction is ______.
equal to 20% of qualified business income
Itemized deductions only create a tax savings when itemized deductions ______ the standard deduction.
exceed
A taxpayer's is determined by marital status and family situation, and it determines the rates at which a taxpayer will be taxed.
filing status
The Alternative Minimum Tax (AMT) computation ______.
has a carryforward provision to alleviate the AMT tax burden for taxpayers who are only subject to AMT on a very temporary basis
Hunt is single. His disabled father lives with him and is considered a dependent. Hunt's filing status is ______.
head of household
Total income ______.
includes both income earned from business ventures and as an employee
Alternative Minimum Taxable Income (AMTI) ______.
is computed as regular tax purposes adjusted upward or downward for AMT adjustment and preferences
The AMT exemption is ______.
is phased-out in an amount equal to 25% of AMTI in excess of the AMTI threshold
John finished graduate school on December 20, 2019 and married on December 27, 2019. His 2019 filing status is ______.
married, filing jointly
Qualified dividend income is ______.
permitted a preferential tax rate
The safe-harbor estimate provision ______.
provides taxpayers with certainty because accurately estimating current year tax obligation can be difficult
Tax credits ______.
reduce the tax liability by $1 for every $1 of credit
The kiddie tax ______.
refers to rules that require a child's unearned income to be taxed at the rate that applies to estates
The marriage penalty ______.
refers to the notion that the tax system is not neutral with respect to marital status
Congress enacted the earned income credit as a(n) credit so that taxpayers receive any excess of the credit over the tax liability to offset the payroll tax burden.
refundable
The determination that an individual is a dependent has the potential to impact all of the following except ______.
the due date of the return
True or false: In the event total itemized deductions do not exceed the standard deduction, a taxpayer receives no tax benefit for itemized deductions.
true
For a given year, filing status is determined ______.
with respect to the criteria evaluated on the last day of the taxable year
Jim is single. His AMTI is $610,300. He is entitled to an AMT exemption of $
Blank 1: 46,700 or 46700
In 2019, Julia and Rob are both unmarried and file as single taxpayers. Julia's individual tax liability is $22,500 and Rob's is $32,000. If Julia and Rob were married, they would file jointly and their joint tax would be $60,000 which is $5,500 more than the amount computed by adding their individual tax liabilities together. This illustrates the present in the U.S. federal income tax structure.
Blank 1: marriage Blank 2: penalty
Mr. and Mrs. Backlund file a joint return. They provide more than 50% support for their three children, Lindsay (age 27, full-time college student, earned $10,000 from part-time job), Louisa (age 21, full-time college student, earned $17,000 from part-time job) and John (age 17, earned no income). All three children live full time in the Backlund's home. Which of the following statements is true?
Both John and Louisa are qualifying children of the Backlunds.
In 2019, Taylor was employed as an executive with Pier 2 Exporters from January to November, earning $130,000 and with Global Associates starting in December, earning $30,000. His excess social security credit is ______.
$1,860 Reason: Pier 2 only withheld on $132,900, satisfying Taylor's total social security obligation for 2019. The excess withheld by Global Associates ($30,000 × 6.2%) reflects Taylor's $1,860 credit.
Kristen and Austin married in 2012. They have no children. Kristen died on January 2, 2018. Which tax rates will Austin use for 2018 and 2019?
Married, filing jointly for 2018 and single for 2019
An above-the-line deduction ______ reduces AGI and ______ reduces taxable income. An itemized deduction ______ reduces AGI and ______ reduces taxable income.
always; always; never; sometimes
Mr. and Mrs. Jinx are married and file jointly. They have two children, ages 10 and 12. They report AGI of $450,000. Mr. and Mrs. Jinx can claim a child credit of
$1,500. Reason: For married taxpayers, the credit phases out starting at AGI of $400,000. They are $50,000 over the threshold which is 50 x $1000. The credit phases out by $50 for each $1,000 or, in this case, $50 x 50 or $2,500. Thus, the are eligible for $1,500 credit ($4,000 - $2,500).
Jenna and Jordan are married and file a joint return. Their AMTI is $850,000 before the exemption. Compute their AMT.
$202,828 Reason: Their exemption is $109,400. AMTI less exemption is $850,000 - $111,700 = $738,300. AMT is computed as: $194,800 × 26% = $50,648 $543,500 × 28% = $152,180 TOTAL = $202,828
Meaghan is a single taxpayer. Her AGI is $37,000, and she reports total itemized deductions of $14,300. If she is subject to a 12% marginal tax rate, the incremental tax benefit from itemizing is ______.
$252 Reason: Tax savings from standard deduction: $12,200 × 12% = $1,464. Tax savings from itemizing: $14,300 × 12% = $1,716. The additional tax savings is $1,716 - 1,464 = $252.
Mildred and Milton and married and filing a joint return. Mildred is 72 years old and blind. Milton 70 years old. Their standard deduction is ______.
$28,300 The standard deduction is increased by $1,300 if the taxpayer is blind or over the age of 65. Because both are over the age of 65 and Mildred is blind, the standard deduction of $24,400 is increased by 3 × $1,300 = $3,900 to be $28,300.
Jillian is a single parent of two children, ages 14 and 16. She reports AGI of $65,000. Jillian can claim a child credit of ______.
$4,000 Reason: Jillian may claim a $2,000 credit for each of her children. A child must be under the age of 17 to be eligible. Her AGI is below the phase-out threshold, so she may claim the full $4,000.
Clint and Charlotte are married with one dependent child, and AGI of $120,000. They pay $12,000 per year for their 2-year old daughter to attend the daycare in the building in which they are employed. Their dependent care credit is ______.
$600 Reason: Because their AGI is high, they are permitted the minimum credit. Maximum expenses permitted under the credit are $3,000, and they are permitted 20% or $600.
Lily is unmarried with no dependents. In 2019, she reports $97,000 of AGI. Included in AGI is $20,000 of qualified business income. She also reports $13,000 of itemized deductions. Lily's taxable income is ______.
$80,000 Reason: Taxable income is $80,000 computed as AGI of $97,000 less $13,000 itemized deduction and $4,000 QBI deduction (20% × $20,000).
Mr. Jones is single. He reports the following items: Net profit from sole proprietorship $75,000 Dividend income 12,000 Interest income 322 Deduction for self-employment tax 5,299 Itemized deductions 14,000 Mr Jones's AGI is $______.
$87,322 Reason: Net Profit from sole proprietorship 75,000 + Dividend 12,000 + Interest 322 - deduction for self-employment tax 5,299 = $82,023.
Which of the following statements is false?
All taxpayers are entitled to an AMT exemption.
Which of the following statements about deductions is true?
An above-the-line deduction always reduces taxable income.
Which of the following statements about the individual AMT is false?
An individual will pay either AMT or regular tax, depending on which is greater.
Brianna has a 25% marginal tax rate. She is offered the following option: A refundable tax credit of $1,000 or an additional itemized deduction of $3,000. Assuming that her itemized deductions exceed the standard deduction, the value of the credit is $ and the value of the deduction is $
Blank 1: 1,000 or 1000 Blank 2: 750
Mr. and Mrs. Grekas had the following tax information for 2019: 2018 AGI $140,000 2018 Tax liability $26,200 2019 Estimated AGI $140,000 2019 Estimated tax liability $32,000 To avoid an underpayment penalty, Mr. and Mrs. Grekas must pay $ towards their 2019 tax liability by April 15, 2020.
Blank 1: 26200 or 26,200
Ryland is a single taxpayer with a 32% marginal tax rate. Each year, his itemized deductions include $3,000 in property taxes and a $6,500 donation to his university, thus he typically does not exceed the standard deduction. If Ryland decides to bunch his deductions by donating $13,000 to his university every other year instead of $6,500 annually, his total deductions over two years will increase by $, and it will result in a total tax savings of $
Blank 1: 3,800 or 3800 Blank 2: 1216 or 1,216
Allie is single with no dependent children. Her 2019 tax information is as follows: Wages $60,000 Dividends 500 Itemized Deductions 4,000 Allie's AGI is $ and her taxable income is $
Blank 1: 60500 Blank 2: 48300
Erik and Francesca are married with a newborn daughter. Their 2019 tax information is as follows: Wages $60,000 Qualified Business Income from sole proprietorship 40,000 Itemized deductions 14,000 Allowable deduction for self employment tax 2,826 Erik and Francesca's AGI is $ and their taxable income is $.
Blank 1: 97,174 or 97174 Blank 2: 64774 or 64,774
Mr. and Mrs. Henley could not complete their 2019 Form 1040 before April 15, 2020. They estimate that they will owe a balance of $2,500 with the return. Which of the following statements is true?
The Henleys can file an extension request by April 15 to extend the filing deadline six months, but they must pay the balance with the request.
Which of the following statements is false regarding the administration of Social Security tax?
The Social Security Administration is responsible for refunding excess Social Security withheld on a taxpayer.
Which of the following statements are false?
The amount of the standard deduction is directly related to a taxpayer's cash flows.
Which of the following statements concerning the individual alternative minimum tax (AMT) computation is true?
The calculation of alternative minimum taxable income begins with taxable income for regular tax purposes.
