Deck 14: The Individual Tax Formula

Question 1

In order to be considered a dependent, an individual must be either a qualifying child or a qualifying relative.

Answer 1

True

Question 2

Mr and Mrs Queen provide 90% of the financial support for Mrs Queen's mother, Doreen, who lives in the couples' home. Doreen's only income this year is a $7,500 taxable pension from her former employer. Doreen is not considered a dependent of Mr and Mrs Queen this year for tax purposes.

Answer 2

True

Question 3

A taxpayer who knowingly signs a joint return on which his spouse has failed to report her income is liable for any tax assessments made by the IRS on that income.

Answer 3

True

Question 4

The standard deduction for single individuals equals one-half of the standard deduction for married individuals filing jointly.

Question 5

For the taxable year in which a married person dies, the widow or widower can file a joint return with the deceased.

Question 6

Jay Blount, 26-years old and a full-time student, lives in his parents' home. Although Jay earned $8,400 from a part-time job, his parents provide at least 75% of his financial support. For tax purposes, this year Jay is considered a dependent of his parents.

Question 7

Adjusted gross income equals total income less itemized deductions.

Question 8

Mr Lenz died on May 4, 2017. His widow, Mrs Lenz, maintains a home for her three children, ages 4, 6, and 11. Mrs Lenz must file as a head of household in 2018.

Question 9

Mr Andrews is age 58, legally blind, and files as a single taxpayer. His standard deduction for 2018 is $12,000.

Question 10

Bill and Afton are married and file a joint tax return. Bill is 67 and Afton is 66, and neither is legally blind. Their standard deduction for 2018 is $26,600.

Question 11

Mrs Paley died on July 14, 2017. Her husband has not remarried. The Paleys' two children, ages 34 and 36, are financially independent. Mr Paley may file as a surviving spouse in 2017 and 2018.

Question 12

The majority of individual taxpayers take the standard deduction rather than itemizing.

Question 13

Harry and Sally were married on December 23, 2017. Their income for the entire year is reported on a joint return.

Question 14

Only natural and adopted children or stepchildren can be a qualifying child for tax purposes.

Question 15

Charlie is single and provides 100% of the financial support for his dependent mother, Angela, who lives with Charlie. Charlie's filing status is head of household.

Question 16

In computing taxable income, an individual is allowed to deduct both the standard deduction and any itemized deduction for the year.

Question 17

In computing taxable income, an individual will deduct the lesser of itemized deductions or the standard deduction.

Question 18

An individual's taxable income equals adjusted gross income less the Section 199A deduction.

Question 19

Mr Thomas is age 69, has perfect vision, and files as a single taxpayer. His standard deduction for 2018 is $13,600.

Question 20

An individual's taxable income equals adjusted gross income less the greater of the standard deduction or itemized deductions less the Section 199A deduction.

Question 21

An individual with $700,000 taxable income has the same marginal rate as a single taxpayer or as a head of household.

Question 22

The Section 199A deduction always has the impact of lowering AGI. 

Question 23

Married individuals who elect to file separate tax returns may use the single rates to compute their tax.

Question 24

The Section 199A deduction always has the impact of lowering taxable income. 

Question 25

Mrs Starling worked for Abbot Inc. from January 1 through September 19. Her salary from Abbot for this period totaled $150,000. Mrs Starling worked for JJT Inc. from October 1 through December 31. Her salary from JJT for this period totaled $38,000. JJT is not required to withhold Social Security tax from Mrs Starling's salary because Abbot Inc. already withheld the maximum tax for the year.

Question 26

Mr and Mrs Casey have two dependent children, ages 3 and 6. The Caseys spent $10,300 for child care this year. Mrs Casey is employed full-time as an attorney. Mr Casey is an unpublished novelist who has yet to earn any money from his writing. The Caseys are eligible for a dependent care credit.

Question 27

It is impossible for a progressive income tax system to be both marriage neutral and horizontally equitable.

Question 28

Because a Section 199A deduction affects AGI, it may impact the ability to claim a deduction for unreimbursed medical expenses. 

Question 29

An above-the-line deduction reduces both adjusted gross income and taxable income.

Question 30

An itemized deduction doesn't result in any tax savings in a year in which an individual taxpayer takes the standard deduction.

Question 31

The earned income credit offsets the burden of the federal payroll tax on low-income families and encourages individuals to seek employment rather than to depend on welfare.

Question 32

The earned income credit is available only to low-income taxpayers with dependent children.

Question 33

The tax rates for individuals who qualify as a head-of-household are lower than the tax rates for single individuals.

Question 34

Mr and Mrs Kline file a joint return on which they claim the standard deduction. If the taxable income on their return is $35,000, they are not paying a marriage penalty.

Question 35

Based on the 2017 tax rates, an individual is indifferent between filing as a single taxpayer or a head of household if he has $9,325 or less of taxable income. 

Question 36

Mr Jackson has $100,000 of qualified business income, he is entitled to a Section 199A deduction of $25,000. 

Question 37

A taxpayer with a non-child dependent may be eligible for the full $2,000 child tax credit provided the taxpayer's AGI does not exceed the phase-out thresholds.

Question 38

An individual who files his own tax return but is claimed as a dependent on another individual's return is not allowed any standard deduction.

Question 39

The goal of the Section 199A deduction is to lower the effective tax rate on business profit earned by pass through entities.

Question 40

Mr and Mrs Toliver's AGI on their jointly filed return is $339,000. Regardless of the number of their children, the Tolivers are not eligible for a child credit.

Question 41

Which of the following statements regarding filing status is false?

A) A widow or widower maintaining a home for a dependent child qualifies as surviving spouse for two tax years following the year of the spouse's death.
B) Marital status for tax purposes is determined on the last day of the year.
C) Any unmarried individual with a dependent child qualifies as head of household.
D) An unmarried individual without children or other dependents files as a single taxpayer.

Question 42

The highest individual marginal rate for regular tax purposes is 37%, while the highest individual marginal rate for alternative minimum tax (AMT) purposes is only 28%.

Question 43

Miss Blixen's regular income tax is $77,390, and her tentative minimum tax is $74,100. Consequently, Miss Blixen's alternative minimum tax (AMT) is zero.

Question 44

Mr Pearl's total income and self-employment tax on this year's Form 1040 is $72,610. If Mr Pearl paid at least $65,349 of this tax in the form of withholding or quarterly estimated payments, he will not incur an underpayment penalty.

Question 45

The unextended due date for the individual tax return (Form 1040) is the 15th day of the third month following the close of the taxable year.

Question 46

An extension of the time to file an individual tax return also extends the time to pay any balance of tax due with the return.

Question 47

Every individual taxpayer is entitled to an AMT exemption, the amount of which varies with filing status.

Question 48

Individual taxpayers can obtain an automatic extension of time to file a calendar year Form 1040 until October 15 of the following year.

Question 49

 Ms. Dolan, a divorced individual, invited her elderly uncle, Martin, to move into her home in January of this year. Martin's only income item was $2,390 of taxable interest on a savings account. Ms. Dolan provides over 90% of her uncle's financial support. What is Ms. Dolan's filing status for the year? 

A) Single
B) Head of household
C) Married filing separately
D) None of the above

Question 50

An individual must pay the greater of her regular income tax or her alternative minimum tax (AMT) for the year.

Question 51

 Kent, an unmarried individual, invited his widowed father, Martin, to move into his home in January of this year. Martin's only income item was a $14,000 taxable pension from his former employer. Kent provides about 75% of his father's financial support. What is Kent's filing status for the year? 

A) Single
B) Head of household
C) Married filing separately
D) None of the above

Question 52

Which of the following taxpayers can't use the tax rates for married filing jointly in 2018?

A) Mr. Lane died on August 10, 2018. Mrs Lane has not remarried and has no dependent children.
B) Mrs Holden died on January 15, 2017. Mr. Holden has not remarried and maintains a home for two dependent children.
C) Mr. and Mrs West were legally divorced on December 21, 2018. Mrs West has not remarried and maintains a home for three dependent children.
D) All of the above taxpayers qualify for married filing jointly filing status.

Question 53

The standard deduction is not deductible in the computation of alternative minimum taxable income.

Question 54

Mr and Mrs Warren's AGI last year was $90,300, and their total tax was $13,988. This year, the couple's total tax is $14,700. Unless the Warrens paid at least $13,988 in the form of withholding and quarterly estimated payments, they will incur an underpayment penalty this year.

Question 55

Mrs Raines died on June 2, 2017. Mr Raines has not remarried and has no children or other dependents. What is his filing status for 2017 and 2018?

A) Surviving spouse for 2017 and 2018.
B) Surviving spouse for 2017; single for 2018.
C) Married filing jointly for 2017; surviving spouse for 2018.
D) Married filing jointly for 2017; single for 2018.

Question 56

Mr and Mrs Eller's AGI last year was $287,300, and their total tax was $70,268. The couple's safe-harbor estimate of current year tax is $77,295.

Question 57

Mr Jones and his first wife were legally divorced on February 19, 2018. Mr Jones remarried the second Mrs Jones on December 20, 2018. Which of the following describes Mr Jones' filing status in 2018?

A) Married filing jointly with the second Mrs Jones
B) Married filing jointly with the first Mrs Jones
C) Married filing separately (can't file jointly with either spouse)
D) None of the above

Question 58

Leon died on August 23, 2016, and his wife Mary has not remarried. Since her husband's death, Mary has maintained a home for her two dependent children, who were ages 7 and 4 when their father died. Which of the following describes Mary's filing status for 2017, 2018, and 2019?

A) Surviving spouse for 2017, 2018, and 2019.
B) Surviving spouse for 2017 and 2018; head of household for 2019.
C) Head of household for 2017, 2018, and 2019.
D) Surviving spouse for 2017; head of household for 2018 and 2019.

Question 59

Samantha died on January 18, 2018. Her husband Dave lived by himself until he remarried in 2019. What was Dave's filing status in 2018 and 2019?

A) Married filing jointly in 2018; surviving spouse in 2019.
B) Married filing jointly in 2018; single in 2019.
C) Surviving spouse in 2018 and 2019.
D) Surviving spouse in 2018; single in 2019.

Question 60

Marie, an unmarried taxpayer, is 26 years old. This year, Marie earned $50,000 gross income. Her itemized deductions totaled $5,100. Marie maintained a home for her 12-year-old sister who qualifies as Marie's dependent. Compute Marie's taxable income.

A) $40,900
B) $32,000
C) $26,900
D) None of the above

Question 61

Mr and Mrs Steel, who file a joint return, have $513,200 taxable income in 2018. Compute their regular tax liability.

A) $105,062
B) $130,999
C) $179,620
D) None of the above

Question 62

 Mr and Mrs Anderson file a joint return. They provide more than 50% of the financial support of their two children, Dana, age 26, and John, age 17. Both children live in the Andersons' home. Dana earned $7,100 from a part-time job, while John earned no income this year. Which of the following statements is true? 

A) Both Dana and John are qualifying children of the Andersons.
B) Dana is a qualifying relative and John is a qualifying child of the Andersons.
C) John is a qualifying child of the Andersons.
D) Neither Dana nor John is a qualifying child of the Andersons.

Question 63

 Ms. Lewis maintains a household which is the principal place of residence for Kathy. Ms. Lewis' provides more than 50% of Kathy's financial support. In which of the following cases can Ms. Lewis' claim Kathy as a qualifying child? 

A) Kathy is age 8 and the child of Ms. Lewis' best friend, who died three years ago.
B) Kathy is Ms. Lewis' 15-year old niece.
C) Kathy is Ms. Lewis' 30-year old unmarried sister.
D) Both B. and C.

Question 64

Mr and Mrs Dell, ages 29 and 26, file a joint return and have no dependents for the year. Here is their relevant information. Standard Deduction Table.
Salaries $ 163,000
Dividend income 1,900
Above-the-line deductions 6,200
Itemized deductions 26,200
Compute their adjusted gross income (AGI) and taxable income.

A) AGI $164,900; taxable income $134,700
B) AGI $158,700; taxable income $132,500
C) AGI $158,700; taxable income $108,500
D) AGI $164,900; taxable income $8,500

Question 65

Mr and Mrs Upton's marginal tax rate on their joint return is 32%. This year, their itemized deductions totaled $24,800, and their standard deduction (MFJ) was $24,000. Compute their incremental tax savings from their itemized deductions.

A) $0
B) $256
C) $7,680
D) $7,936

Question 66

Melissa, age 16, is claimed as a dependent on her parents' tax return. This year, Melissa earned $2,000 from babysitting and $1,280 interest income from a savings account. Compute Melissa's standard deduction.

A) $2,000
B) $2,350
C) $0
D) $1,050

Question 67

Julie, an unmarried individual, lives in a home with her 13-year-old dependent son, Oscar. This year, Julie had the following tax information. Standard Deduction Table.
Salary $ 95,000
Interest and dividend income 12,800
Capital gain from sale of investments 11,000
Above-the-line deductions 800
Itemized deductions 6,900
Compute Julie's adjusted gross income (AGI) and taxable income.

A) AGI $118,000; taxable income $97,800
B) AGI $118,000; taxable income $90,900
C) AGI $118,000; taxable income $100,000
D) AGI $107,000; taxable income $88,700

Question 68

In determining the standard deduction, which of the following statements is true?

A) The standard deduction is a function of filing status.
B) An individual who is both blind and age 65 by the last day of the taxable year is entitled to one additional standard deduction amount.
C) An individual who is considered a dependent or another person for tax purposes is not allowed a standard deduction.
D) The standard deduction for a head of household is twice the standard deduction for a single individual.

Question 69

Which of the following statements regarding the calculation of taxable income is false?

A) The first step in the calculation of taxable income is determining the taxpayer's total income.
B) Adjusted gross income is equal to total income less above-the-line deductions.
C) Adjusted gross income can be reduced by the greater of the standard deduction or itemized deductions.
D) Taxpayers are allowed to deduct the greater of itemized deductions or above-the-line deductions in calculating taxable income.

Question 70

Hunter, age 17, is considered a dependent of his parents for tax purposes. This year, Hunter earned $16,000 for appearing in a television commercial. Compute Hunter's standard deduction. 

A) $12,350
B) $16,000
C) $12,000
D) $0

Question 71

Which of the following statements describing individual tax deductions is false?

A) Individuals can take both above-the-line and the standard deduction in the same year.
B) Individuals elect to itemize deductions in a tax year in which total itemized deductions exceed the standard deduction.
C) In a year in which an individual takes the standard deduction, any itemized deductions yield no tax benefit.
D) Individuals who pay self-employment tax can deduct the tax as an itemized deduction.

Question 72

Which of the following statements describing individual tax deductions is false?

A) In a year in which an individual takes the standard deduction, any itemized deductions yield no tax benefit.
B) The majority of individual taxpayers itemize rather than taking the standard deduction.
C) Individuals elect to itemize deductions in a tax year in which total itemized deductions exceed the standard deduction.
D) Individuals who pay self-employment tax can deduct one half of the tax as an above-the-line deduction.

Question 73

Mr and Mrs Kay, ages 68 and 66, file a joint return. Mrs Kay is legally blind. Compute their standard deduction.

A) $24,000
B) $27,900
C) $25,300
D) $26,600

Question 74

 Which of the following statements is false? 

A) The determination that an individual is a qualifying child of the taxpayer has the potential to impact the availability of certain credits for the taxpayer.
B) A qualifying child must be the natural child, the adopted child, or the stepchild of the taxpayer.
C) A qualifying relative may include an unrelated individual who is a member of the taxpayer's household for the year.
D) There is no limit on the amount of gross income that a qualifying child may earn in a year.

Question 75

 Which of the following statements regarding a qualifying child is false? 

A) The child must have been alive at least 180 days during the tax year.
B) The child must be a U.S. citizen or resident of the United States, Canada, or Mexico.
C) The child must not have provided more than 50% of his or her own financial support during the year.
D) The child must not have filed a joint return with a spouse unless the return was filed only as a refund claim.

Question 76

Jennifer, an unmarried individual, lives in a home with her 13-year-old dependent son, Oscar. This year, Jennifer had the following tax information.
Qualified Business income from sole proprietorship $ 95,000
Dividend income 2,800
Deduction for self-employment tax 6,712
Itemized deductions 19,200
Compute Jennifer's adjusted gross income (AGI) and taxable income.

A) AGI $97,800; taxable income $69,188.
B) AGI $95,000; taxable income $75,900.
C) AGI $91,088; taxable income $34,888.
D) AGI $91,088; taxable income $52,888.

Question 77

Tamara and Todd Goble, ages 66 and 60, file a joint return. Todd is legally blind. Compute their standard deduction.

A) $21,400
B) $24,000
C) $25,300
D) $26,600

Question 78

Mr and Mrs Liddy, ages 39 and 41, file a joint return and have no dependents for the year. Here is their relevant information. Standard Deduction Table.
Salaries $ 47,000
Taxable interest income 5,000
Above-the-line deductions 1,800
Itemized deductions 16,250

A) AGI $50,200; taxable income $26,200.
B) AGI $52,000; taxable income $35,750.
C) AGI $52,000; taxable income $33,950.
D) AGI $50,200; taxable income $9,950.

Question 79

Meraleigh, age 16, is claimed as a dependent on her parents' tax return. This year, Meraleigh earned $510 from babysitting and $220 interest income from a savings account. Compute Meraleigh's standard deduction.

A) $730
B) $860
C) $510
D) $1,050

Question 80

 Mr and Mrs Jelk file a joint return. They provide 65% of the financial support for David, the 14-year old son of a friend who died three years ago. David lives in the home of his aunt Sarah, who provides 35% of his financial support. Which of the following statements is true? 

A) David is a qualifying child of the Jelks.
B) If David earns less than $4,150 gross income this year, he is a qualifying child of the Jelks.
C) If David earns less than $4,150 gross income this year, he is a qualifying relative of the Jelks.
D) David is neither a qualifying child nor a qualifying relative of the Jelks.