Question 1

A couple has filed a joint tax return since they were first married.Because of self-employment income and significant investment income,they have made joint quarterly estimated tax payments.Before year-end the couple has divorced,and they will each file their own individual returns.The estimated payments made jointly while still married earlier in the year will be divided evenly between the two individual returns.

Accepted Answer

The IRS does not automatically divide estimated tax payments evenly between divorced individuals. They must agree on how to allocate the payments or follow IRS guidelines to determine the division.

Question 2

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.

Accepted Answer

Receiving a tax refund means the taxpayer overpaid during the year, effectively giving the government an interest-free loan. It's generally better to owe a small amount, as the taxpayer can use the money throughout the year for savings or investments.

Question 3

Amelida expects to earn $145,000 of AGI and $125,000 of taxable income this year.She is concerned about underpayment penalties.Because of a substantial bonus,her prior year AGI was $155,000 and her taxable income was $135,000.Based on her fact pattern,which of the following scenarios will not allow her to avoid underpayment penalties?
A)The estimated payments total at least 90% of the tax due for the current year.
B)The estimated payments total at least 100% of the tax due for the prior year.
C)The estimated payments total at least 110% of the tax due for the prior year.
D)The estimated tax is less than $1,000.

Accepted Answer

The answer of Amelida expects to earn $145,000 of AGI...

Question 4

An individual taxpayer who is self-employed and an active investor has qualified for foreign tax credits,nonrefundable personal tax credits and general business credits.Because he knows there are differing limitations on the application of these credits,with resulting interrelated aspects,he wants to know the appropriate order for their application.The appropriate order of the application of these three classes of tax credits is as follows
A)(1)foreign tax credits; (2)general business credits; (3)nonrefundable personal tax credits.
B)(1)general business credits; (2)foreign tax credits; (3)nonrefundable personal tax credits.
C)(1)foreign tax credits; (2)nonrefundable personal tax credits; (3)general business credits.
D)(1)nonrefundable personal tax credits; (2)foreign tax credits; (3)general business credits.

Accepted Answer

The correct order for applying these tax credits is: (1) nonrefundable personal tax credits, (2) foreign tax credits, and (3) general business credits. This order ensures that the credits are applied in a manner that maximizes their benefit and adheres to tax regulations.

Question 5

If a taxpayer's AGI is greater than $150,000,no penalty will be imposed if the taxpayer pays estimated tax payments in 2019 equal to what percentage of 2018's income tax liability?
A)100%
B)90%
C)110%
D)120%

Accepted Answer

For taxpayers with an AGI greater than $150,000, they must pay estimated tax payments equal to 110% of the previous year's tax liability to avoid a penalty.

Question 6

Beth and Jay project the following taxes for the current year:
Regular tax $50,000
AMT 10,000
Self-employment tax 12,000
How much in estimated tax payments (including withholding from wages and quarterly estimated payments)should the taxpayers pay this year in order to avoid underpayment penalties under the following assumptions regarding the preceding tax year?
a.Preceding tax year-AGI of $140,000 and total taxes of $30,000.
b.Preceding tax year-AGI of $175,000 and total taxes of $48,000.

Accepted Answer

The answer of Beth and Jay project the following taxes...

Question 7

Bob's income can vary widely from year-to-year because much of his compensation comes from sales commissions and bonuses.It generally is in the $200,000 to $300,000 range.To minimize the risk of underpayment penalties for estimated tax,he should pay in,through payroll withholding and estimated tax payments,100% of the prior year tax liability.

Accepted Answer

The answer of Bob's income can vary widely from year-to-year...

Question 8

A taxpayer at risk for AMT should consider which of the following decisions?
A)investing in corporate bonds
B)timing of state income tax estimated payments
C)choosing a depreciation method for a new business building
D)all of the above

Accepted Answer

Investing in corporate bonds and choosing a depreciation method for a new business building won't have much impact on AMT status. However, timing of state income tax estimated payments can affect AMT liability. Taxpayers subject to AMT lose the full benefit of their state income tax deduction, so they may want to adjust their estimated payments accordingly to avoid underpayment penalties while still minimizing AMT liability.

Question 9

Yulia has some funds that she wishes to invest,but is concerned that she is at risk for AMT.Yulia should avoid investing in all municipal bonds.

Accepted Answer

Municipal bonds are generally exempt from federal income taxes and may also be exempt from state and local taxes. This makes them an attractive investment for those concerned about taxes, but they can still be subject to the alternative minimum tax (AMT). However, not all municipal bonds are subject to AMT. Yulia should speak with a financial advisor to determine which types of municipal bonds may or may not subject her to AMT. Additionally, there may be other types of investments that Yulia can consider that may also be tax-efficient and not subject to AMT.

Question 10

Form 6251,Alternative Minimum Tax,must be filed in any of the following situations except
A)the taxpayer has general business tax credits that are limited by the tentative minimum tax.
B)the AMT base exceeds the exemption amounts and an individual has AMT adjustments or tax preference items.
C)the tentative minimum tax exceeds the regular tax.
D)the earned income tax credit exceeds the tentative minimum tax.

Accepted Answer

Form 6251, Alternative Minimum Tax, must be filed in situations A, B, and C, but not in situation D. If the earned income tax credit exceeds the tentative minimum tax, the taxpayer does not need to file Form 6251.

Quiz 30: Special Tax Computation Methods,tax Credits,and Payment of Tax

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.

If a taxpayer's AGI is greater than $150,000,no penalty will be imposed if the taxpayer pays estimated tax payments in 2019 equal to what percentage of 2018's income tax liability?

A taxpayer at risk for AMT should consider which of the following decisions?

Yulia has some funds that she wishes to invest,but is concerned that she is at risk for AMT.Yulia should avoid investing in all municipal bonds.

Form 6251,Alternative Minimum Tax,must be filed in any of the following situations except