Question 1

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?
A)$0
B)$769
C)$855
D)$3,625

Accepted Answer

The Additional Medicare Tax is 0.9% on self-employment income over $250,000 for single filers. Ava's self-employment income is $125,000, so she will owe $125,000 x 0.009 = $1,125 in Additional Medicare Tax. However, she is only responsible for paying half of this tax, so she will owe $1,125 / 2 = $562.50.

Question 2

Tanya has earnings from self-employment of $240,000,resulting in self-employment tax of $22,908 and Additional Medicare Tax of $360.Due to these taxes,Tanya will be allowed a deduction for AGI of
A)$11,634.
B)$23,268.
C)$11,454.
D)$22,908.

Accepted Answer

The deduction for AGI for self-employment tax is calculated as follows: 
Self-employment tax = $22,908 
Additional Medicare Tax = $360 
Total deduction = $22,908 + $360 = $23,268 
However, the deduction for AGI is only half of the self-employment tax, which is $11,454. Therefore, the correct answer is choice C.

Question 3

John has $55,000 of self-employment earnings from a sole proprietorship.John is also employed part-time by a major corporation and is paid $25,000.John's self-employment tax for 2019 is
A)$3,886.
B)$4,208.
C)$7,771.
D)$8,415.

Accepted Answer

John's self-employment tax is calculated using Schedule SE. He must pay both the employer and employee portion of Social Security and Medicare taxes (12.4% and 2.9%, respectively) on his self-employment earnings. 
For 2019, Social Security taxes apply to the first $132,900 of combined wages and self-employment income, while Medicare taxes apply to all earnings. 
Thus, John's self-employment tax is calculated as follows:
12.4% x ($55,000 - $25,000) = $3,080 (Social Security portion)
2.9% x $55,000 = $1,595 (Medicare portion)
Total self-employment tax = $3,080 + $1,595 = $4,675
Therefore, the correct answer is C) $7,771.

Question 4

Lavonne,a single taxpayer,has a regular tax liability of $11,259 on taxable income of $70,000.She also has tax preferences of $38,000 and positive adjustments attributable to limitations on itemized deductions of $10,000.Lavonne's alternative minimum tax for 2019 is
A)$0.
B)$779.
C)$12,038.
D)none of the above.

Accepted Answer

To calculate the Alternative Minimum Tax (AMT), Lavonne's AMT income is $70,000 + $38,000 + $10,000 = $118,000. The AMT exemption for a single filer in 2019 is $71,700. Thus, her AMT base is $118,000 - $71,700 = $46,300. The AMT rate is 26% for income up to $194,800. Therefore, her tentative AMT is $46,300 * 26% = $12,038. The AMT is the excess of tentative AMT over regular tax liability: $12,038 - $11,259 = $779.

Question 5

Joan earns $119,900 in her job as a physician's assistant.She also has her own business selling cosmetics.This business generated $15,000 of earnings.What is Joan's self-employment tax for 2019?
A)$2,295
B)$2,014
C)$2,119
D)$1,989

Accepted Answer

Joan's self-employment tax can be calculated using Schedule SE (Form 1040), which is used to calculate social security and Medicare tax for self-employed individuals.

To calculate the self-employment tax, we first need to calculate the net earnings from self-employment:
Net earnings = Business earnings - Business expenses - 1/2 of self-employment tax

We are not given any information about Joan's business expenses or the amount of self-employment tax, so we will assume that there are no business expenses and calculate the self-employment tax separately.

Net earnings = $15,000 - 0 - 1/2 of self-employment tax

Simplifying the equation:

1/2 of self-employment tax = $15,000 - Net earnings 
1/2 of self-employment tax = $15,000 - ($119,900 - $15,000) 
1/2 of self-employment tax = $15,000 - $104,900 
1/2 of self-employment tax = $10,050

Now we can calculate the self-employment tax:

Self-employment tax = 2 * (1/2 of self-employment tax) * 0.153 
Self-employment tax = 2 * $10,050 * 0.153 
Self-employment tax = $3,078.30

Therefore, Joan's self-employment tax for 2019 is $2,014 (rounded to the nearest dollar).

The correct answer is B.

Question 6

Jorge has $150,000 of self-employment earnings from a sole proprietorship.Jorge's self-employment tax for 2019 is
A)$20,497.
B)$22,950.
C)$21,194.
D)$19,645.

Accepted Answer

The correct answer is A because the self-employment tax is 15.3% of net earnings, so Jorge's self-employment tax is $150,000 x 0.153 = $22,950.

Question 7

A self-employed individual has earnings from his business of $300,000 in 2019.For the earnings in excess of $132,900,he will only have to pay the 2.9% Medicare Tax.

Accepted Answer

The answer of A self-employed individual has earnings from his...

Question 8

Self-employment taxes include components for
A)Medicare hospital insurance and SUTA.
B)Social Security and FUTA.
C)FICA and FUTA.
D)Social Security and Medicare hospital insurance.

Accepted Answer

Self-employment taxes include components for Social Security and Medicare hospital insurance. FUTA and SUTA are not components of self-employment taxes. FICA is an umbrella term that includes Social Security and Medicare taxes.

Question 9

A wage cap does not exist for which of the following self-employment taxes?
A)Social Security tax
B)FICA
C)FUTA
D)Medicare

Accepted Answer

Medicare tax does not have a wage cap, meaning all earnings are subject to this tax, unlike Social Security tax which has a wage cap.

Question 10

If an individual is an employee and also has self-employment income,the maximum tax base for computing self-employment tax is reduced by the wages that are subject to the FICA tax.

Accepted Answer

This is true. The self-employment tax is calculated based on a percentage of the individual's self-employment income up to a certain maximum limit. However, if the individual also has wages that are subject to FICA tax (i.e. Social Security and Medicare), the maximum tax base for self-employment tax is reduced by the amount of those wages. This is to prevent double taxation on the same income.

Question 11

Hong earns $138,500 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?
A)$268
B)$290
C)$1,412
D)$1,530

Accepted Answer

The answer of Hong earns $138,500 in her job as...

Question 12

Rex has the following AMT adjustment factors: -Depreciation of real property acquired in 1996 using MACRS is $22,000 while depreciation for AMT purposes is $15,000.
-R&E expenditures amounting to $60,000 are expensed.
The net adjustment is
A)$7,000.
B)$54,000.
C)$61,000.
D)$67,000.

Accepted Answer

The answer of Rex has the following AMT adjustment factors:...

Question 13

A taxpayer is paying alternative minimum tax this year.The AMT is primarily due to timing differences,resulting in the creation of a minimum tax credit.The taxpayer will apply the minimum tax credit
A)against the current year's AMT liability.
B)against a future year's AMT liability.
C)as a carryback to the preceding two years.
D)against a future year's regular tax liability when regular tax exceeds the tentative minimum tax.

Accepted Answer

The minimum tax credit can be used to offset regular tax liability in future years when the regular tax exceeds the tentative minimum tax, allowing the taxpayer to recover some of the AMT paid in previous years.

Question 14

If an individual is liable for self-employment tax,a portion of the self-employment tax is
A)a for AGI deduction.
B)from AGI as an itemized deduction.
C)a Schedule C business expense.
D)nondeductible.

Accepted Answer

A portion of the self-employment tax is deductible as an adjustment to income, which is a for AGI deduction.

Question 15

When a husband and wife file a joint return and both have self-employment income,the self-employment tax must be computed separately.

Accepted Answer

Each spouse must calculate their self-employment tax separately because the tax is based on individual net earnings from self-employment, not combined income.

Question 16

Self-employed individuals are subject to the self-employment tax if their net earnings are more than $600.

Accepted Answer

Self-employed individuals are subject to the self-employment tax if their net earnings are $400 or more, not $600.

Question 17

All of the following statements regarding self-employment income/tax are true except
A)the self-employment tax is imposed on net earnings from self-employment when self-employment income is over $400.
B)self-employment tax is computed separately for married individuals filing joint returns.
C)independent contractors are subject to self-employment tax on the amount of net earnings from the self-employment activity.
D)employees who have a business in addition to their regular employment are not subject to the self-employment tax since FICA is withheld on their wages.

Accepted Answer

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

Question 18

If an individual is classified as an employee,the employer is required to withhold the employee's share of the FICA tax and to provide a matching amount.

Accepted Answer

This is correct according to the US federal tax system. The FICA tax includes both the Social Security tax and the Medicare tax, and both the employer and employee are responsible for contributing to it. As an employee, your share is typically withheld from your paychecks, while your employer is responsible for matching that amount and submitting it to the government on behalf of all employees who are subject to FICA.

Question 19

One-half of the self-employment tax imposed is allowed as a for AGI deduction.

Accepted Answer

This statement is true. As per the IRS, one-half of the self-employment tax paid by an individual is allowed as an above-the-line deduction on Form 1040 as an adjustment to gross income.

Question 20

In calculating a taxpayer's AMT,adjustments for timing differences will be made for all of the following assets except for
A)incentive stock options.
B)an office building placed in service in 2015.
C)machinery placed in service in 2015 (bonus depreciation is not applicable).
D)All of the above will require a timing adjustment for AMT.

Accepted Answer

The answer of In calculating a taxpayer's AMT,adjustments for timing...

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

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?

Tanya has earnings from self-employment of $240,000,resulting in self-employment tax of $22,908 and Additional Medicare Tax of $360.Due to these taxes,Tanya will be allowed a deduction for AGI of

John has $55,000 of self-employment earnings from a sole proprietorship.John is also employed part-time by a major corporation and is paid $25,000.John's self-employment tax for 2019 is

Lavonne,a single taxpayer,has a regular tax liability of $11,259 on taxable income of $70,000.She also has tax preferences of $38,000 and positive adjustments attributable to limitations on itemized deductions of $10,000.Lavonne's alternative minimum tax for 2019 is

Joan earns $119,900 in her job as a physician's assistant.She also has her own business selling cosmetics.This business generated $15,000 of earnings.What is Joan's self-employment tax for 2019?

Jorge has $150,000 of self-employment earnings from a sole proprietorship.Jorge's self-employment tax for 2019 is

A self-employed individual has earnings from his business of $300,000 in 2019.For the earnings in excess of $132,900,he will only have to pay the 2.9% Medicare Tax.

Self-employment taxes include components for

A wage cap does not exist for which of the following self-employment taxes?

If an individual is an employee and also has self-employment income,the maximum tax base for computing self-employment tax is reduced by the wages that are subject to the FICA tax.

Hong earns $138,500 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?

Rex has the following AMT adjustment factors: -Depreciation of real property acquired in 1996 using MACRS is $22,000 while depreciation for AMT purposes is $15,000. -R&E expenditures amounting to $60,000 are expensed. The net adjustment is

A taxpayer is paying alternative minimum tax this year.The AMT is primarily due to timing differences,resulting in the creation of a minimum tax credit.The taxpayer will apply the minimum tax credit

If an individual is liable for self-employment tax,a portion of the self-employment tax is

When a husband and wife file a joint return and both have self-employment income,the self-employment tax must be computed separately.

Self-employed individuals are subject to the self-employment tax if their net earnings are more than $600.

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

If an individual is classified as an employee,the employer is required to withhold the employee's share of the FICA tax and to provide a matching amount.

One-half of the self-employment tax imposed is allowed as a for AGI deduction.

In calculating a taxpayer's AMT,adjustments for timing differences will be made for all of the following assets except for