Question 1

Cooper is a single dad with 1 child and his TOTAL tax liability for the current tax year is $2,100.His EIC amount is $3,094 and he had no withholdings during the year.What amount of tax refund or tax owed would be on Cooper's tax return?

Accepted Answer

Since Cooper's Earned Income Credit (EIC) of $3,094 is more than his total tax liability of $2,100, and he had no withholdings, he would receive the difference as a refund. Subtracting his tax liability from his EIC ($3,094 - $2,100) equals $994, which is the amount of his tax refund.

Question 2

Sam is a single father with two dependent twin daughters,Amy and Amanda,ages 4.He has AGI of $31,000 and paid $5,300 to a qualified day care center.What amount of credit can Sam receive for child and dependent care credit?

Accepted Answer

The maximum credit percentage for child and dependent care expenses is 35%. Therefore, Sam's maximum credit amount is 35% of $5,300, or $1,855.

However, the credit is limited to the taxpayer's earned income. In Sam's case, his AGI of $31,000 is greater than the expenses he paid for child care. Therefore, the credit is limited to the amount of expenses he paid.

Thus, Sam can receive a credit of $5,300, which is the amount he paid for child care.

Option A is incorrect because it is less than 20% of the expenses he paid for child care. Option C is incorrect because it exceeds the maximum credit amount of 35%. Option D is incorrect because it suggests that the credit is based on AGI, which is not correct for the child and dependent care credit.

Question 3

Which of the following statements is false regarding the earned income credit (EIC)?

Accepted Answer

This statement is false because a taxpayer without children can still claim the earned income credit, although the maximum amount they can receive will be lower than a taxpayer with children.

Question 4

Bob and Joyce are married,file a joint return,and have one dependent child,Dane,age 9.Bob has earned income of $72,000.Joyce was a full-time student (for nine months)with no income.They paid a qualified day care center $4,000.What amount of child and dependent care credit can Bob and Joyce receive?

Accepted Answer

The answer of Bob and Joyce are married,file a joint...

Question 5

Which of the following is not a qualifying child for purposes of calculating the EIC?

Accepted Answer

The answer of Which of the following is not a...

Question 6

Lupe paid the following expenses during December 2014 for her son David's spring 2015 college expenses.The semester begins in February 2015.  In addition,David's grandfather paid $500 in fees on behalf of David directly to the college.David is claimed as a dependent on Lupe's tax return.How much of the above expenses qualify for purposes of Lupe's education credit deduction in 2014?

Accepted Answer

The expenses paid by Lupe for David's spring 2015 college expenses qualify for the American Opportunity Credit only if they were paid by Lupe in the tax year 2014. As per the question, the expenses were paid in December 2014, which is in the tax year 2014. Therefore, the total expenses paid by Lupe in December 2014 for David's college expenses are $16,000.

However, the $500 that David's grandfather paid directly to the college on behalf of David cannot be included in the education credit deduction as it is not paid by Lupe. Therefore, the qualified education expenses for the American Opportunity Credit are $16,000.

Question 7

Matt is a single father.He paid $5,000 in qualifying expenses for his son,Kyle,to attend the University of Oregon.Kyle is a sophomore.Matt's AGI is $47,000.What is his allowable American opportunity tax credit after the credit phaseout based on AGI is taken into account?

Accepted Answer

The American opportunity tax credit allows for a maximum credit of $2,500 per eligible student per year. Matt's qualifying expenses for Kyle's education meet the criteria for the credit, so he could claim the full $2,500 credit. However, the credit begins to phase out for taxpayers with AGIs over $80,000 ($160,000 for married filing jointly), and is completely phased out for AGIs over $90,000 ($180,000 for married filing jointly). Matt's AGI of $47,000 is well below these phaseout limits, so he can claim the full $2,500 credit. Therefore, the answer is B, $2,500.

Question 8

Conner and Matsuko paid $1,000 and $2,000,in qualifying expenses for their two sons,Jason and Justin,respectively,to attend Arizona State University.Jason is a sophomore and Justin is a freshman.Conner and Matsuko's AGI is $195,000.What is their allowable American opportunity tax credit after the credit phase-out based on AGI is taken into account?

Accepted Answer

The American Opportunity Tax Credit begins to phase out for married couples filing jointly with an AGI over $160,000 and is completely phased out at $180,000. Since Conner and Matsuko's AGI is $195,000, they are not eligible for the credit.

Question 9

Which of the following is a refundable credit?

Accepted Answer

Only the earned income credit (EIC) is a refundable credit. This means that even if the credit exceeds the amount of taxes owed, the taxpayer can still receive a refund for the difference. The foreign tax credit (FTC) and child and dependent care expenses credit are non-refundable, meaning they can only reduce the amount of taxes owed. The lifetime learning credit is partly refundable and partly non-refundable, meaning it can reduce the amount of taxes owed and may result in a limited refund if the credit exceeds the tax liability.

Question 10

Ian and Jolene are ages 70 and 72,respectively,and file a joint return.They have AGI of $15,000 and received $1,000 in nontaxable social security benefits.How much can Ian and Jolene take as a credit for the elderly or the disabled?

Accepted Answer

To calculate the credit for the elderly or the disabled, we first need to determine Ian and Jolene's "base amount" by adding their nontaxable social security benefits to their AGI:

$15,000 + $1,000 = $16,000 (base amount)

Since their base amount is less than the maximum allowed for their filing status ($23,500), we can calculate their credit by taking 15% of the amount that their base amount is below the maximum:

$23,500 - $16,000 = $7,500
$7,500 x 15% = $1,125

However, the credit is also subject to a limit based on their tax liability, which in this case is zero since their AGI and nontaxable income exceed their total income. Therefore, their credit is limited to $600 ($1,125 minus any tax liability).

Question 11

Kevin paid $2,550 in qualifying expenses for his daughter,Jasmine,who attended a community college.What is Kevin's lifetime learning credit without regard to AGI limitations or other credits?

Accepted Answer

The answer of Kevin paid $2,550 in qualifying expenses for...

Question 12

Juan paid $1,750 in qualifying expenses for his daughter who attended a community college.How much is Juan's lifetime learning credit without regard to AGI limitations or other credits?

Accepted Answer

The answer of Juan paid $1,750 in qualifying expenses for...

Question 13

Arin and Bo have $74,000 total taxable income,which includes $13,500 of taxable income from France.They paid $1,600 in foreign income taxes,and their U.S.tax liability is $17,610.Arin and Bo's foreign tax credit is:

Accepted Answer

The foreign tax credit is designed to prevent double taxation by allowing taxpayers to credit the amount of foreign taxes paid against their U.S. tax liability. Since Arin and Bo paid $1,600 in foreign income taxes, they can claim the full amount as a credit against their U.S. tax liability, assuming it does not exceed the limit based on their taxable income from foreign sources and their total U.S. tax liability.

Question 14

Nick and Katelyn paid $1,600 and $2,100 in qualifying expenses for their two daughters,Nicole and Naomi,respectively,to attend the University of Nevada.Nicole is a sophomore and Naomi is a freshman.Nick and Katelyn's AGI is $202,000.What is their allowable American opportunity tax credit after the credit phaseout based on AGI is taken into account?

Accepted Answer

Nick and Katelyn's AGI exceeds the phaseout threshold for the American Opportunity Tax Credit, which begins at $160,000 for married couples filing jointly and is completely phased out at $180,000. Therefore, they are not eligible for the credit.

Question 15

Tuan and Marisa are married,file a joint return,and have two dependent children,Zack,age 6 and Aaron,age 5.Tuan has earned income of $72,000.Marisa was a full-time student (for nine months)with no income.They paid a qualified day care center $5,000.How much is Tuan and Marisa's child and dependent care credit for the year?

Accepted Answer

The child and dependent care credit for Tuan and Marisa would be $900. This is calculated based on their expenses for child care, which allows them to work or, in Marisa's case, attend school full-time. The maximum expense allowed for two or more dependents is $6,000, but they only spent $5,000. The credit is 20% of the allowable expenses, so 20% of $5,000 is $1,000. However, since their AGI (Adjusted Gross Income) is over $43,000, the credit percentage decreases to 20%, making the credit $900 (20% of $5,000).

Question 16

Guillermo and Felicia are married,file a joint return,and have one dependent child; Hannah,age 6.Guillermo has earned income of $38,000.Felicia was a full-time student (for 8 months)with no income.They paid a qualified day care center $4,800.What is the amount of their child and dependent care credit for the year?

Accepted Answer

The child and dependent care credit is calculated based on expenses paid for the care of qualifying individuals (in this case, their dependent child Hannah) to allow the taxpayer(s) to work or look for work. Since Felicia was a full-time student (considered as actively looking for work for the purpose of this credit) and they have expenses of $4,800, they can claim the credit. The maximum expense allowed for one qualifying person is $3,000, and the credit rate for their income level is 20%, making their credit $600 (20% of $3,000). However, since Guillermo's earned income is $38,000 and Felicia has no earned income, the credit is based on the lower earned income between the two, which in this case is $0 because Felicia has no earned income. However, because Felicia is a full-time student, her lack of earned income is treated as $250 per month for one child, for a total of $2,000 (8 months x $250), which is less than the $3,000 expense limit. Therefore, the calculation should indeed be based on the actual expenses up to the limit that apply ($3,000), but considering the error in my explanation regarding how Felicia's student status affects their earned income for the purpose of this credit, the correct calculation for their credit is 20% of $3,000, which is $600, aligning with the initial correct choice provided. My previous explanation mistakenly overlooked the specific provision for students and earners with no income, which impacts the calculation for the child and dependent care credit.

Question 17

Edward and Ethel are ages 71 and 59,respectively,and file a joint return.They have AGI of $11,000 and received $2,000 in nontaxable social security benefits.How much can Edward and Ethel take as a credit for the elderly or the disabled?

Accepted Answer

To calculate the credit for the elderly or disabled, we first need to determine the taxable portion of their Social Security benefits. We can do this using the base amount and the formula for Social Security taxation. The base amount for a married couple filing jointly in 2021 is $32,000.

$2,000 (nontaxable Social Security benefits) + $11,000 (AGI) = $13,000

$32,000 - $13,000 = $19,000 (this is the excess over the base amount)

Since the excess ($19,000) is less than the $25,000 threshold for a married couple filing jointly, all of their Social Security benefits are nontaxable.

To calculate the credit, we need to look at their AGI. The credit is equal to 15% of the amount by which AGI exceeds the base amount of $13,000.

$11,000 (AGI) - $13,000 = -$2,000

Since AGI is less than the base amount, the credit is zero. However, the credit is also limited to the amount of nontaxable Social Security benefits received. Therefore, the maximum credit they can take is $375 (15% of $2,000).

Question 18

Which of the following statements is true with regard to child and dependent care expense credit?

Accepted Answer

The answer of Which of the following statements is true...

Question 19

Dane is a single father with two dependent children,Elle,age 7 and Eva,age 5.He has AGI of $61,000 and paid $6,100 to a qualified day care center for the two children.What amount of child and dependent care credit can Dane receive this year?

Accepted Answer

The answer of Dane is a single father with two...

Question 20

Kim paid the following expenses during November 2014 for her son Joshua's spring 2015 expenses,which begins in January 2015:  In addition,Kim's sister paid $800 for college fees on behalf of Joshua directly to the college.Joshua is claimed as Kim's dependent on her tax return.How much of the paid expenses qualify for purposes of the education credit deduction for Kim in 2014?

Accepted Answer

The expenses paid by Kim total $14,800 ($6,000 for tuition and fees + $4,000 for room and board + $4,800 for books and supplies). Since Joshua is claimed as Kim's dependent on her tax return, she can claim the education credit deduction for these expenses. The $800 paid directly by Kim's sister to the college cannot be claimed as an education credit deduction by Kim.

Quiz 9: Tax Credits