Question 1

Sam and Megan are married with two dependent children.Both Sam and Megan work,earning $50,000 and $55,000,respectively.Their AGI totals $110,000.They incur $6,500 of qualifying child care expenses of which $2,500 is reimbursed by Megan's dependent care program at work.
What is the amount of their child and dependent care credit?

Accepted Answer

The answer of Sam and Megan are married with two...

Question 2

If an employee has more than one employer during the year,all employers must withhold federal income taxes but only one employer must withhold FICA tax.

Accepted Answer

All employers must withhold both federal income taxes and FICA taxes from their employees' paychecks. Each employer is required to withhold and report taxes based on the individual employee's earnings with that employer. However, there is a limit to the amount of Social Security tax that can be withheld from an employee's wages in a given year, known as the Social Security wage base. Once an employee reaches this limit with one employer, they will not have additional FICA taxes withheld from their wages for the rest of the year, even if they have another job. However, each employer is still responsible for withholding and reporting their portion of FICA taxes on the employee's behalf.

Question 3

Claire accepts a new job.She will have access to health insurance coverage through her employer.The employer's policy meets the criteria for affordable minimum essential coverage.Claire prefers to purchase her own insurance policy through the state or federal exchange so she can retain access to her doctor.Assuming Claire's income is within the parameters specified,she will be eligible for the health insurance premium assistance credit.

Accepted Answer

If Claire's employer offers affordable minimum essential coverage, she is not eligible for the premium assistance credit for purchasing insurance through the exchange.

Question 4

In 2019,Rita is divorced with one child.She has AGI of $20,000 resulting in a federal income tax liability of $200 and an earned income credit of $3,374.She has had $550 of federal income taxes withheld from her pay.Rita will receive a federal income refund of
A)$550.
B)$2,624.
C)$3,174.
D)$3,724.

Accepted Answer

To calculate the refund, we need to determine Rita's total payments and credits:

Total Payments and Credits = Federal Income Tax Withheld + Earned Income Credit
Total Payments and Credits = $550 + $3,374
Total Payments and Credits = $3,924

Next, we need to determine Rita's total tax liability:

Total Tax Liability = Federal Income Tax Liability
Total Tax Liability = $200

Since Rita's total payments and credits ($3,924) are greater than her total tax liability ($200), she will receive a refund. The amount of the refund is:

Refund = Total Payments and Credits - Total Tax Liability
Refund = $3,924 - $200
Refund = $3,724

Therefore, Rita will receive a federal income refund of $3,724, which is option D.

Question 5

The general business credit may not exceed the net income tax minus the greater of the tentative minimum tax or
A)20% of the net regular tax liability above $20,000.
B)25% of the net regular tax liability above $20,000.
C)20% of the net regular tax liability above $25,000.
D)25% of the net regular tax liability above $25,000.

Accepted Answer

The general business credit limitation is calculated as the net income tax minus the greater of the tentative minimum tax or 25% of the net regular tax liability above $25,000.

Question 6

Which of the following statements is incorrect regarding qualifying criteria for the health insurance premium tax credit?
A)The insurance policy must be purchased directly from an insurance company.
B)Household income must be below designated levels.
C)The taxpayer cannot have access to affordable essential coverage through an employer.
D)The individual may not be eligible as a dependent of another taxpayer.

Accepted Answer

The statement that the insurance policy must be purchased directly from an insurance company is incorrect. The policy can also be obtained through the Health Insurance Marketplace.

Question 7

A taxpayer will be ineligible for the earned income credit if he or she has disqualified investment income of more than $3,600 in 2019.Disqualified income includes all the following except
A)net capital gains.
B)tax-exempt interest.
C)net rental income.
D)self-employment income.

Accepted Answer

Disqualified investment income includes net rental income, net capital gains, and tax-exempt interest. Self-employment income is not considered disqualified investment income and therefore does not affect eligibility for the earned income credit.

Question 8

Individuals without children are eligible for the earned income credit if they meet all the following conditions except
A)file married filing separately.
B)at tax year end are at least age 25 but not more than age 64.
C)for the tax year are not a dependent of another taxpayer.
D)the United States is their principal place of residence for more than one-half of the tax year.

Accepted Answer

Individuals without children can still be eligible for the earned income credit as long as they meet the other three conditions, which are: being between the ages of 25 and 64 at year-end, not being a dependent of another taxpayer for the tax year, and having the United States as their principal place of residence for more than one-half of the tax year. However, filing married filing separately would disqualify them from claiming the earned income credit.

Question 9

With respect to estimated tax payments for a taxpayer with AGI of $150,000 or lower in the prior year,all of the following are generally true with the exception of
A)no penalty is imposed if the estimated tax is less than $1,000.
B)no penalty is imposed if the individual has no tax liability for the prior year.
C)no underpayment penalty is imposed if the estimated payments total at least 90% of the tax due for the current year.
D)no underpayment penalty is imposed if the estimated payments total at least 90% of the actual tax liability for the prior year.

Accepted Answer

The correct statement is that no underpayment penalty is imposed if the estimated payments total at least 100% (110% in certain situations) of the actual tax liability for the prior year, not 90%. Choices A, B, and C are all generally true.

Question 10

An individual with AGI equal to or less than $150,000 in the prior year may generally avoid penalties for underpayment of estimated tax in each of the following cases with the exception of
A)estimated tax is less than $1,500.
B)90% of the tax due for the current year is paid.
C)90% of the tax due for the current year is paid when computed on an annualized basis.
D)100% of the actual tax liability for the prior year is paid.

Accepted Answer

The threshold for avoiding penalties is typically $1,000, not $1,500.

Question 11

Which of the following expenditures will qualify as a research expenditure for purposes of the research credit?
A)An ice cream producer develops a new type of packaging that will keep ice cream frozen while driving home from the grocery store.
B)An ice cream producer develops a new design on the package that will be more pleasing to the culture of a new market it is entering.
C)An ice cream producer develops a new marketing campaign to introduce its brand to a new region of the country it is entering.
D)All of the above qualify as research expenditures for the research credit.

Accepted Answer

Only choice A qualifies as a research expenditure because it involves the development of a new technology (packaging) that requires experimentation and testing to determine its effectiveness. Choices B and C involve market research and advertising, which do not meet the criteria for research expenditures.

Question 12

If estimated tax payments equal or exceed 100% of the actual tax liability for the prior year,there is generally (assuming AGI less than or equal to $150,000)no penalty for underpayment of estimated taxes.

Accepted Answer

This is known as the safe harbor rule and applies to most taxpayers whose AGI is less than or equal to $150,000. If their estimated tax payments for the current year are equal to or exceed 100% of the actual tax liability for the prior year (110% if AGI is over $150,000), there is no penalty for underpayment of estimated taxes.

Question 13

Dwayne has general business credits totaling $30,000 before limitation.His regular tax liability is $83,000 and his tentative minimum tax is $79,000.What amount of general business credit can Dwayne take this year?
A)$4,000
B)$14,500
C)$25,000
D)$30,000

Accepted Answer

The general business credit is limited to the excess of the taxpayer's net income tax over the greater of the tentative minimum tax or 25% of the net regular tax liability above $25,000. Here, the excess is $4,000 ($83,000 - $79,000).

Question 14

ChocoHealth Inc.is developing new chocolate products providing abundant health benefits at low calorie counts.For the past three years,it spent an average of $500,000 per year on research.This year ChocoHealth has spent $900,000 on research.The company has elected the simplified credit.For the current year,it will earn a research credit of
A)$54,000.
B)$126,000.
C)$80,000.
D)$91,000.

Accepted Answer

To calculate the research credit, we need to first determine the base amount, which is the average annual gross receipts of the past four years multiplied by 50%. 
Base amount = (average annual gross receipts for 3 years prior to current year) x 50% 
Base amount = ($500,000 x 3) / 3 x 50% = $250,000

Next, we need to determine the qualified research expenses (QREs) for the current year. 
QREs = $900,000

The simplified credit is calculated as 14% of the excess of current year's QREs over the base amount. 
Simplified credit = 14% x ($900,000 - $250,000) = $91,000

Therefore, the answer is D, and ChocoHealth Inc. will earn a research credit of $91,000 for the current year.

Question 15

Ivan has generated the following taxes and credits this year:
Regular tax $38,000
Tentative minimum tax 28,000
Dependent care credit 1,200
Lifetime Learning credit 800
General business credits 35,000
How much general business credit will he apply to the current year tax liability?

Accepted Answer

The answer of Ivan has generated the following taxes and...

Question 16

Kors Corporation has 30 employees and $5 million of gross receipts.Kors spends $15,000 for qualified structural improvements for access for the disabled.The disabled access credit is
A)$5,000.
B)$5,125.
C)$0.
D)$7,500.

Accepted Answer

The disabled access credit is calculated as 50% of the amount over $250, up to $10,250. So, ($15,000 - $250) * 50% = $7,375, but the maximum credit allowed is $5,000.

Question 17

The health insurance premium assistance credit is designed to help lower and middle income taxpayers who purchase their own health insurance directly from an insurance company or through a state or federal exchange.

Accepted Answer

The answer of The health insurance premium assistance credit is...

Question 18

Which one of the following is a refundable credit?
A)earned income credit
B)child and dependent care credit
C)lifetime learning credit
D)credit for the elderly and disabled

Accepted Answer

The earned income credit is a refundable credit, meaning that if the credit exceeds the taxpayer's tax liability, the taxpayer can receive the excess as a refund. The other options are non-refundable credits, meaning they can only reduce the taxpayer's tax liability to zero, but any excess cannot be refunded.

Question 19

Layla earned $20,000 of general business credits from her sole proprietorship.Her regular tax liability is $45,000,and her tentative minimum tax is $49,000.During the current year Layla will apply general business credits of
A)$0.
B)$4,000.
C)$20,000.
D)$45,000.

Accepted Answer

Layla cannot apply any general business credits because her tentative minimum tax ($49,000) is higher than her regular tax liability ($45,000), which means she is subject to the alternative minimum tax (AMT) and cannot use the credits to reduce her tax liability.

Question 20

Doggie Rx Inc.is a new company developing a tasty chewable pill for dogs that will protect them from all types of fleas,ticks and intestinal parasites.This is its first year of business,and it has spent $500,000 on qualifying research expenditures.Doggie Rx will earned a simplified research credit of
A)$30,000.
B)$70,000.
C)$15,000.
D)$250,000.

Accepted Answer

The simplified research credit is 20% of the first $50,000 of qualified research expenditures, plus 10% of the next $50,000. Therefore, Doggie Rx will earn a simplified research credit of $30,000.

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

If an employee has more than one employer during the year,all employers must withhold federal income taxes but only one employer must withhold FICA tax.

In 2019,Rita is divorced with one child.She has AGI of $20,000 resulting in a federal income tax liability of $200 and an earned income credit of $3,374.She has had $550 of federal income taxes withheld from her pay.Rita will receive a federal income refund of

The general business credit may not exceed the net income tax minus the greater of the tentative minimum tax or

Which of the following statements is incorrect regarding qualifying criteria for the health insurance premium tax credit?

A taxpayer will be ineligible for the earned income credit if he or she has disqualified investment income of more than $3,600 in 2019.Disqualified income includes all the following except

Individuals without children are eligible for the earned income credit if they meet all the following conditions except

With respect to estimated tax payments for a taxpayer with AGI of $150,000 or lower in the prior year,all of the following are generally true with the exception of

An individual with AGI equal to or less than $150,000 in the prior year may generally avoid penalties for underpayment of estimated tax in each of the following cases with the exception of

Which of the following expenditures will qualify as a research expenditure for purposes of the research credit?

If estimated tax payments equal or exceed 100% of the actual tax liability for the prior year,there is generally (assuming AGI less than or equal to $150,000)no penalty for underpayment of estimated taxes.

Dwayne has general business credits totaling $30,000 before limitation.His regular tax liability is $83,000 and his tentative minimum tax is $79,000.What amount of general business credit can Dwayne take this year?

Ivan has generated the following taxes and credits this year: Regular tax $38,000 Tentative minimum tax 28,000 Dependent care credit 1,200 Lifetime Learning credit 800 General business credits 35,000 How much general business credit will he apply to the current year tax liability?

Kors Corporation has 30 employees and $5 million of gross receipts.Kors spends $15,000 for qualified structural improvements for access for the disabled.The disabled access credit is

The health insurance premium assistance credit is designed to help lower and middle income taxpayers who purchase their own health insurance directly from an insurance company or through a state or federal exchange.

Which one of the following is a refundable credit?

Layla earned $20,000 of general business credits from her sole proprietorship.Her regular tax liability is $45,000,and her tentative minimum tax is $49,000.During the current year Layla will apply general business credits of