Question 1

All of the following statements regarding self- employment income/tax are true except

Accepted Answer

Employees who have a business in addition to their regular employment are still subject to self-employment tax on their net earnings from the business, even if FICA is withheld on their wages from employment.

Question 2

Hong earns $128,500 in her job as a physician's assistant. She also has her own business selling cosmetics. This business generated $10,000 of earnings. What is Hong's self- employment tax for 2018?

Accepted Answer

The answer of Hong earns $128,500 in her job as...

Question 3

Nonrefundable credits may offset tax liability but may not result in additional payments to the taxpayer.

Accepted Answer

Nonrefundable credits can only reduce the amount of tax liability owed by the taxpayer. They cannot result in a refund or additional payments to the taxpayer beyond reducing their tax liability.

Question 4

Sonya started a self- employed consulting business in the last part of the year and earned $40,000. She had been employed as manager in a consulting firm prior to starting her own business and had earned $135,000.
a. What is Sonya's self employment tax for 2018?
b. What is Sonya's deduction for AGI for the SE tax?

Accepted Answer

The answer of Sonya started a self- employed consulting business...

Question 5

The adoption credit based on qualified adoption expenses is generally allowed in the year the adoption is finalized.

Accepted Answer

The adoption credit is generally allowed in the year the adoption is finalized. However, if the adoption is not finalized by the end of the year, the credit may still be available in certain circumstances, such as when the adoption is finalized in a subsequent year but the qualified adoption expenses were paid in the current year.

Question 6

All of the following are self- employment income except

Accepted Answer

Dividends received by a corporate shareholder are not self-employment income.

Question 7

Jay and Cara's daughter is starting her freshman year of college. Jay and Cara will be able to claim the American Opportunity Tax Credit for a percentage of the cost of tuition, required fees and course materials, but the room and board charges will not qualify for the credit.

Accepted Answer

The American Opportunity Tax Credit can only be claimed for tuition, required fees, and course materials. Room and board charges do not qualify for the credit.

Question 8

Ava has net earnings from self- employment of $125,000. She also earned salary of $170,000 from a job held earlier in the year. How much Additional Medicare Tax will be owed on the self- employment income?

Accepted Answer

The answer of Ava has net earnings from self- employment...

Question 9

A taxpayer supports an elderly relative who satisfies the Sec. 152 criteria for "qualifying relative." The taxpayer may claim a $500 tax credit.

Accepted Answer

A taxpayer can claim a $500 tax credit for supporting a qualifying relative who meets the criteria set under Sec. 152.

Question 10

For purposes of the child and dependent care credit, qualifying employment- related expenses cannot include payments to a relative.

Accepted Answer

Qualifying employment-related expenses can include payments made to a relative for care of a qualifying individual, as long as the relative is not the taxpayer's spouse or the parent of the qualifying individual.

Question 11

The child and dependent care credit is partially refundable.

Accepted Answer

The answer of The child and dependent care credit is...

Question 12

Taxpayers with income below phase- out amounts are allowed a child credit of $2,000 for each qualifying child under age 19 or under age 24 if a full- time student.

Accepted Answer

The answer of Taxpayers with income below phase- out amounts...

Question 13

For purposes of the limitation on qualifying expenses for the child and dependent care credit, a spouse who is either a full- time student or is incapacitated is deemed to have earned income of $250 per month, or $500 per month if there are two or more qualifying individuals in the household.

Accepted Answer

This is stated in the IRS publication 503.

Question 14

Tanya has earnings from self- employment of $240,000, resulting in self- employment tax of $22,350 and Additional Medicare Tax of $360. Due to these taxes, Tanya will be allowed a deduction for AGI of

Accepted Answer

The answer of Tanya has earnings from self- employment of...

Question 15

Lara started a self- employed consulting business in the last part of the year and earned $60,000 of self- employment earnings. She had been employed as manager in a consulting firm prior to starting her own busines had earned $175,000.
a. What is Lara's Additional Medicare Tax for 2018, if any?
b. What is Lara's deduction for AGI for the Additional Medicare Tax?

Accepted Answer

The answer of Lara started a self- employed consulting business...

Question 16

Nonrefundable personal tax credits can only offset an individual's regular tax, not AMT.

Accepted Answer

The answer of Nonrefundable personal tax credits can only offset...

Question 17

The Lifetime Learning Credit is partially refundable.

Accepted Answer

The answer of The Lifetime Learning Credit is partially refundable....

Question 18

Qualified tuition and related expenses eligible for the American Opportunity Tax Credit are limited to those incurred the first two years of postsecondary education.

Accepted Answer

The answer of Qualified tuition and related expenses eligible for...

Question 19

Joan earns $119,900 in her job as a physician's assistant. She also has her own business selling cosmetics. This business generated $10,000 of earnings. What is Joan's self- employment tax for 2018?

Accepted Answer

The answer of Joan earns $119,900 in her job as...

Question 20

The child and dependent care credit is available to any parent who pays for child care for a child under age 13.

Accepted Answer