Question 1

What happens if the taxpayer owes an underpayment penalty, but does not compute it onForm 2210?

Accepted Answer

If the taxpayer owes an underpayment penalty but does not compute it on Form 2210, the IRS will compute and assess the penalty. It is important for taxpayers to accurately calculate and report any underpayment penalties on their tax returns to avoid any additional penalties or interest in the future.

Question 2

Which of the following statement(s) concerning estimated tax payments and underpayment penalties for individuals is (are) true?

Accepted Answer

All of these statements are true. The underpayment penalty for individuals is calculated on a quarterly basis and is based on the amount of the underpayment, among other factors. The due dates for estimated tax payments are April 15, June 15, September 15 of that year, and January 15 of the next year, but these dates may be adjusted if they fall on a weekend or holiday.

Question 3

Why would a taxpayer file a tax return if not required to do so?

Accepted Answer

A taxpayer who is not required to file a tax return may still file one in order to claim a refund of any taxes paid. This could occur if the taxpayer had taxes withheld from their paycheck but did not earn enough income to require filing a return.

Question 4

Which of the following statements regarding the earned income credit is true?

Accepted Answer

The earned income credit is based on earned income, meaning income from working rather than investment income. Therefore, a taxpayer whose only source of income is interest from corporate bonds would not be eligible for the credit. The credit is also refundable, so if the credit exceeds the taxpayer's tax liability, they will receive the excess as a refund. The amount of the credit is based on income and the number of dependents, so it is possible for a taxpayer with more earned income to receive more credit than a taxpayer with less earned income. Finally, there are age and dependency requirements to qualify for the credit, but a 70-year-old taxpayer with no dependents may still qualify if they meet other criteria.

Question 5

If there is not enough gross tax liability to use the foreign tax credit,

Accepted Answer

The foreign tax credit can be carried back 1 year or forward 10 years if there is not enough gross tax liability to use it.

Question 6

Which of the following is not true of the extension to file an individual tax return?

Accepted Answer

An extension to file an individual tax return only extends the time to file the return, not the time to pay any taxes owed. Taxes are still due by the original due date.

Question 7

Which of the following is not true of the lifetime learning credit?

Accepted Answer

The lifetime learning credit can only be claimed for the taxpayer's own qualifying expenses, not for those of dependents.

Question 8

Which of the following is not a true statement about the American opportunity credit (AOC) and lifetime learning credits (assume the 2016 rules apply for the qualified education expense deduction)?

Accepted Answer

This statement is not true. Taxpayers may report both an AOC and a lifetime learning credit on the same tax return, as long as they do not claim the credits for the same qualifying educational expenses.

Question 9

Which of the following statements about estimated tax payments and underpayment penalties is true for individual taxpayers?

Accepted Answer

Taxpayers with uneven income streams can make estimated tax payments in uneven amounts as long as they meet the safe harbor rules, which can protect them from underpayment penalties.

Question 10

Taxpayers are not required to file a tax return unless their gross income passes a certain threshold. This threshold is generally the ________.

Accepted Answer

The answer of Taxpayers are not required to file a...

Question 11

Which of the following tax credits is fully refundable?

Accepted Answer

The earned income credit is the only fully refundable tax credit among the options given. This means that if the credit exceeds the taxpayer's tax liability, they can still receive the remaining amount as a refund. The American opportunity credit and dependent care credit are both partially refundable, meaning that only a portion of the credit can be refunded if it exceeds the tax liability.

Question 12

Looking at the following partial calendar for April, when will individual tax returns be due?121)

Accepted Answer

The answer of Looking at the following partial calendar for...

Question 13

Carolyn has an AGI of $38,000 (all from earned income), two qualifying children, and is fili1n0g6)as a head of household. What amount of earned income credit is she entitled to?

Accepted Answer

The answer of Carolyn has an AGI of $38,000 (all...

Question 14

Cassy reports a gross tax liability of $1,000. She also claims $400 of nonrefundablepersonal credits, $700 of refundable personal credits, and $200 of business credits. What is Cassy's tax refund or tax liability due after applying the credits?

Accepted Answer

Cassy's gross tax liability is $1,000. She can use the $400 nonrefundable personal credits and $200 business credits to reduce her tax liability to $400. The $700 refundable personal credits exceed the remaining liability, resulting in a $300 refund.

Question 15

Which of the following does not affect the amount of the earned income credit?

Accepted Answer

The amount of credit taken in previous years does not affect the amount of the earned income credit because it is based on the current year's income and family size. The other options, AGI, number of qualifying children, and filing status, all have an impact on the amount of the earned income credit.

Question 16

Which of the following statements regarding credits is correct?

Accepted Answer

Business credits that are not utilized in the year they are generated can typically be carried back one year and then carried forward up to 20 years.

Question 17

Sheryl's AGI is $250,000. Her current tax liability is $52,068. Last year, her tax liability was $48,722. She will not owe underpayment penalties if her total estimated taxpayments are at least which of the following (rounded) amounts (assume she makes the required payments each quarter)?

Accepted Answer

The answer of Sheryl's AGI is $250,000. Her current tax...

Question 18

If an employer withholds taxes from an employee, in general, when are these taxes treated as paid to the IRS?

Accepted Answer

The answer of If an employer withholds taxes from an...

Question 19

How could an individual obtain a business tax credit?

Accepted Answer

All of the choices are correct. An individual can obtain a business tax credit through self-employment activities, working overseas and obtaining a foreign tax credit, or through flow-through from a partnership or S corporation. Each scenario may provide different types of tax credits, but they are all valid ways for an individual to obtain a business tax credit.

Question 20

Which of the following represents the correct order in which credits are applied to gross tax liability (from first to last)?

Accepted Answer

Nonrefundable personal credits are applied first, followed by business credits, and finally refundable credits are applied to the gross tax liability.

Quiz 8: Individual Income Tax Computation and Tax Credits