Tax 7

Kevin, a single taxpayer, has a taxable income of $333,350. His share of the income from a law firm LLC is $50,000, and his share of W-2 wages is $70,000. What is Kevin's deductible qualified business income (QBI) amount for the law firm LLC?

$0

A single taxpayer has $130,000 in wages and $200,000 in net self-employment income. What is the amount of additional Medicare tax that would be due on Form 1040 for the year?

$1,170

On their joint tax return, Wade and Dorothy, both age 40, had adjusted gross income (AGI) of $150,000 and claimed the following itemized deductions:Interest of $15,000 on a $100,000 home equity loan to purchase a motor homeReal estate tax and state income taxes of $18,000Unreimbursed medical expenses of $13,250 (prior to AGI limitation)Based on these deductions, what would be the amount of AMT add-back adjustment in computing alternative minimum taxable income?

$10,000

Shirley, a single taxpayer, has taxable income of $150,000. She has qualified business income (QBI) of $50,000. The qualified business paid a total of $15,000 in wages. Under Sec. 199A, what is Shirley's deductible amount for the qualified business?

$10,000

Ernesto was an employee of Med-Tech Corporation for all of 2022. He earned $149,000 in salary. What is the amount of FICA taxes paid by Med-Tech Corporation with respect to Ernesto?

$11,275

Amy, a single taxpayer age 65, had AGI of $130,000 and taxable income of $107,750 for the current year. Her tax return for the year reflects the following items that may impact on her alternative minimum tax liability: Tax-exempt interest on private activity bonds issued in 1987 $5,000 Medical expenses (after the 7.5% floor) 6,000 Real property taxes 5,000 Home mortgage interest 6,250 What is Amy's alternative minimum taxable income for the current year?

$117,750

Mr. Harrison received $80,000 of wages in 2022. What is the total amount of FICA tax payable to the government on his behalf?

$12,240

Bennie Boyd, a single taxpayer and employee of a toy manufacturing company, received wages of $150,000 and a bonus of $70,000 during the current year. What is the total amount Bennie needs to pay for the FICA and additional Medicare taxes for the current year?

$12,484

Johanna, an unmarried taxpayer, had $70,000 of adjusted gross income and the following deductions for regular income tax purposes:Home mortgage interest on a loan to acquire a principal residence$11,000State income tax2,000Real property tax3,000Medical expenses (after the 7.5% floor)2,000What are Johanna's total allowable itemized deductions for computing alternative minimum taxable income?

$13,000

Hannah, a single taxpayer, owns 50% of a partnership and has taxable income of $85,000. She has qualified business income (QBI) of $70,000 from the partnership. The partnership paid a total of $27,500 in W-2 wages and does not have any qualified property. Under Sec. 199A, what is Hannah's deductible amount for the partnership (i.e., before applying the taxable income/overall limitation)?

$14,000

Fact Pattern: Sabrina is a cash-basis self-employed accountant. During 2022, she had the following income and expense items:Gross receipts$178,900 Operating expenses31,000 Guaranteed payments from partnership for service to partnership6,000 Share of income from general partnership that operates bakery10,000 Net operating loss carryover(6,000)Share of S corporation's ordinary income7,000 Gain on sale of a computer used in the business500 Question45)What is the amount of earnings Sabrina will have to pay the OASDI portion of the self-employment tax on for 2022?

$147,000

Knight Cafe, an eating and drinking establishment, employs three people. Given the following wage information, what is the total amount of gross wages subject to federal unemployment tax for the year?EmployeeWages Paid during the YearLee$3,000Nora 5,400Taylor 9,600In addition, Taylor, the only employee who is not paid on a daily basis, has earned accrued wages of $400 as of December 31.

$15,400

Fact Pattern: Sabrina is a cash-basis self-employed accountant. During 2022, she had the following income and expense items:Gross receipts$178,900 Operating expenses31,000 Guaranteed payments from partnership for service to partnership6,000 Share of income from general partnership that operates bakery10,000 Net operating loss carryover(6,000)Share of S corporation's ordinary income7,000 Gain on sale of a computer used in the business500 Question50)What is the amount of earnings on which Sabrina will have to pay the Medicare portion of the self-employment tax for 2022?

$151,362

Given the following wage information, what are the total gross wages subject to Federal Unemployment Tax for the current year?EmployeeWages Paid during the Current YearT$ 4,200E 5,800M 22,900

$17,000

Rev. Janice Burton is a full-time minister at the Downtown Missionary Church. The church allows her to use the parsonage that has an annual fair rental value of $4,800. The church pays an annual salary of $13,200, of which $1,200 is designated for utility costs. Her utility costs during the year were $1,000. What is Rev. Burton's income for self-employment tax purposes?

$18,000

The 2022 wage threshold for Social Security and Medicare taxes for a household employee is

$2,400 or more in a year.

Danny had current-year adjusted gross income of $80,000 and potential itemized deductions as follows:Medical expenses (before percentage limitations)$12,000State income taxes4,000Real estate taxes3,500Qualified housing and residence mortgage interest10,000Home equity mortgage interest(used to consolidate personal debts)4,500Charitable contributions (cash)5,000What are Danny's itemized deductions for alternative minimum tax?

$21,000

Robin and Monica are married and filing a joint return. They have a taxable income of $300,000. Robin owns a qualified sole proprietorship that generates qualified business income (QBI) of $50,000, and Monica is the sole owner of a qualified S corporation that generates a QBI of $75,000. How much is Robin and Monica's combined QBI deduction (QBID) amount for the year?

$25,000

A taxpayer who earned $190,000 in wages and files as head of household also received $100,000 from a passive activity interest, for a total MAGI of $290,000. How much net investment income tax does the taxpayer owe?

$3,420

Jack and Janice had adjusted gross income of $145,000 on their joint return for the current year. They planned to itemize the following deductions on their tax return:State income taxes$ 2,000Gambling losses (with gambling winnings of $2,000)1,800Charitable contributions1,300Real property taxes1,500Medical expenses (before the AGI limitation)20,000Mortgage interest3,000What is the total amount of adjustments needed when computing the alternative minimum taxable income (AMTI) on Jack and Janice's joint return?

$3,500

Rev. Elvin Snider is the ordained minister at Crossroads United Methodist Church. His salary on his Form W-2 is $20,000. He also receives a $12,000 housing allowance. His housing costs for the year are $14,000. What is Rev. Snider's self-employment income?

$32,000.

When determining his alternative minimum tax, Leslie had the following adjustments and preference items: Itemized deduction for state taxes $2,800 Refund of prior-year state income tax 300 Cash contributions 2,250 Capital gain 700 Depletion in excess of adjusted basis 400 What are the amounts of tax preference items and adjustments to taxable income for alternative minimum tax purposes on Leslie's 2022 tax return?

$400 Adjustments $2,500

Taxpayers A and B, filing a joint return, earned box 5 Medicare wages of $190,000 and $110,000, respectively. Determine the amount of additional Medicare tax they owe on their final Form 1040.

$450

Lana and Luke are married and have a taxable income of $340,100. Their share of the income from an accounting partnership is $250,000. The accounting partnership pays a total of $90,000 in W-2 wages. What is their allowed qualified business income deduction (QBID) for the partnership?

$50,000

Tom owns a domestic sole proprietorship that allocates $55,000 of income to him and pays $30,000 of wages to employees. He also owns 30% of a foreign trust that allocates $60,000 of income to him and pays him $50,000 of wages. Neither the sole proprietorship nor the trust are specified service businesses. What is the total amount of qualified business income (QBI) for Tom?

$55,000

In 2021, Ted and Alice had an alternative minimum tax liability of $19,000. This is the first tax year in which they ever paid the alternative minimum tax. They recomputed the alternative minimum tax using only exclusion preferences and adjustments. This resulted in an $8,500 alternative minimum tax liability. In 2022, Ted and Alice have a regular tax liability of $45,000. Their tentative minimum tax liability is $42,000. What is the Minimum Tax Credit carryover to 2023?

$7,500

Mr. and Mrs. B file a joint income tax return. Mr. B owns and operates a grocery store that had a net income of $15,000 in 2022. Mrs. B is a self-employed physical therapist, and her net income was $42,900. What is the total amount of self-employment tax Mr. and Mrs. B must report on their joint return for 2022?

$8,181

Taxpayer A and B file a joint return showing each reported $170,000 from box 5 Medicare wages on their respective W-2s. How much, combined, additional medicare tax should be reported on Schedule 2, Form 1040, under "other taxes?"

$810

Zachary owns 40% of an S corporation that pays him $70,000 of wages and $10,000 of dividends and allocates him $89,000 of income. What is Zachary's qualified business income (QBI)?

$89,000

Gilda Bach is a cash-basis, self-employed consultant. For the year 2022, she determined that her net income from self-employment was $80,000. In reviewing her books, you determine that the following items were deducted in arriving at the net income of $80,000:Salary drawn by Gilda Bach$20,000Estimated federal income taxes paid6,000Malpractice insurance premiums4,000Cost of attending professional seminar1,000Based upon the above information, what should Gilda Bach report as her net earnings from self-employment for 2022?

$97,891

Which of the following statements is correct regarding Form 8995, Qualified Business Income (QBI) Deduction Simplified Computation?

A single individual with QBI, whose taxable income does not exceed the threshold amount, should use the Form 8995 to claim the QBI deduction.

Which of the following is NOT a tax preference item or an adjustment to taxable income for alternative minimum tax purposes?

Addition of all itemized deductions (if claimed).

Alternative minimum tax for individuals requires certain adjustments and preferences. Which of the following is a preference or adjustment item for noncorporate taxpayers?

All of the answers are correct.

Which of the following items are included in qualified business income (QBI)?

Allocable losses associated with a qualified trade or business.

A taxpayer may NOT claim the qualified business income (QBI) deduction if (s)he has qualified business income from which of the following entities?

C corporations.

With respect to the alternative minimum tax for individuals, all of the following are tax preference items EXCEPT

Casualty (federally declared disaster) loss from Schedule A.

In the alternative minimum tax, all of the following are considered adjustment items for noncorporate taxpayers EXCEPT

Charitable contributions.

Which of the following is considered a specified service trade or business?

Collegiate athlete with name, image, and likeness compensation.

Regarding the FICA tax, which of the following statements is false?

Contributions made by the employee are tax deductible by the employee.

In computing the alternative minimum tax for individuals, which one of the following is NOT an adjustment or tax preference for alternative minimum tax purposes?

Contributions to an Individual Retirement Arrangement (IRA).

Patsy pays Anne, an unrelated person, $100 per week to come to her home and care for her children while she works part-time. Anne requests that Patsy withhold $10 federal income tax from each paycheck. Patsy has no other employees. She has other filing obligations, such as Form W-2. Patsy must do which of the following?

File Schedule H (Form 1040) as an attachment to her Form 1040 or Form 1040SS and report Social Security, Medicare, FUTA, and federal tax withholding.

All of the following are considered adjustments for arriving at alternative minimum taxable income EXCEPT

Home mortgage interest (debt used to purchase, build, or substantially improve a residence).

Which of the following items are NOT adjustments or tax preference items for computing alternative minimum tax?

Interest income.

Kathy is an employee of ABC Company. In 2022, she earned $149,500 in salary and received a $20,000 bonus. What is the amount of FICA taxes paid by Kathy and ABC Company with respect to her earnings (round answer to nearest dollar)?

Kathy $11,572 ABC Company $11,572

The Social Security tax does NOT apply to which of the following?

Medical and hospital reimbursements by the employer that are excluded from gross income.

Which of the following itemized deductions is NOT an adjustment when determining the alternative minimum taxable income (AMTI) from taxable income?

Medical expenses in excess of 7.5% of AGI.

With regard to the alternative minimum tax for individuals, all of the following are adjustments or preferences in the computation of alternative minimum taxable income EXCEPT

Moving expenses (for military).

All investment income in excess of deductions allowable for such income and income from passive activities are subject to an additional tax, the net investment income tax. Which of the following individuals are NOT subject to this tax?

Non-resident aliens.

In which situation would Janice NOT be required to file Schedule H, Household Employment Taxes, for the year 2022?

Paid $2,400 to her mother for housekeeping.

When determining his alternative minimum tax, Edward had the following adjustments and preference items:Itemized deduction for state taxes$1,800Refund of prior-year state income tax300Cash contributions800Capital gain700Depletion in excess of adjusted basis700What are the amounts of tax preference items and adjustments to taxable income for alternative minimum tax purposes on Edward's 2022 tax return?

Preference $700 Adjustments $1,500

Randy Lee is an ordained minister of a tax-exempt church. Randy receives a salary plus a housing allowance for rent and utilities. Which of the following statements is correct?

Randy has to pay both income tax and self-employment tax on his salary, but only self-employment tax for the housing allowance. The housing allowance is not subject to income tax.

Which of the following would NOT be a part of the computation of alternative minimum tax?

Self-employment tax.

With regard to the alternative minimum tax for individuals, which of the following is always an adjustment or preference in the computation of alternative minimum taxable income?

State income tax payments.

When taxable income exceeds the upper threshold limit, for each qualified trade or business, the qualified business income (QBI) deductible amount with respect to the qualified trade or business is

Subject to additional limitations beyond the 20% overall limit.

Which of the following is NOT a tax preference item when determining the alternative minimum taxable income from taxable income?

Tax-exempt interest on a private activity bond issued in 2009.

Alternative minimum taxable income is

Taxable income increased by tax preferences and increased or decreased by adjustments and other statutory modifications.

The net investment income tax may apply to which of the following?

Taxable mutual fund distribution.

A single taxpayer filed their 2008 return and claimed $7,500 for the first-time homebuyer credit. The home was used as a primary residence until it was foreclosed on in the current tax year. Which is correct regarding the first-time homebuyer credit?

The balance of the credit must be repaid and is reported on the tax return for the tax year in which the foreclosure is completed.

Regarding the FUTA tax, which of the following statements is false?

The tax is imposed on employees. The employer does not pay any portion of FUTA tax.

A couple filed their 2008 return as married filing jointly and claimed $7,500 for the First-Time Homebuyer Credit. The couple used this home as a primary residence. In the current year, they converted the home into rental property. What, if any, is the tax obligation of the taxpayers regarding the First-Time Homebuyer Credit?

They must pay the unpaid balance of the credit.