Question 1

Expenses that are reimbursed by a taxpayer's employer under a dependent care assistance program can also qualify for the credit for child and dependent care expenses.

Accepted Answer

The answer of Expenses that are reimbursed by a taxpayer's...

Question 2

John owns and operates a real estate agency as a sole proprietor.On a full-time basis,he employs his 17-year old daughter as a receptionist and his 22-year old son as a bookkeeper.Both children are subject to FICA withholding.

Accepted Answer

The answer of John owns and operates a real estate...

Question 3

The maximum credit for child and dependent care expenses is $2,100 if only one spouse is employed and the other spouse is a full-time student.

Accepted Answer

According to IRS guidelines, if one spouse is a full-time student and the other spouse is employed, the maximum credit for child and dependent care expenses is $2,100.

Question 4

The American Opportunity credit is available per eligible student,while the lifetime learning credit is calculated per taxpayer.

Accepted Answer

The American Opportunity credit is available per eligible student, meaning that each student can claim the credit for themselves, while the lifetime learning credit is calculated per taxpayer, meaning that the taxpayer can claim the credit for multiple students.

Question 5

Both education tax credits are available for qualified tuition expenses,and in certain instances,also may be available for room and board.

Accepted Answer

Education tax credits like the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC) are available for qualified tuition and related expenses, but they do not cover room and board.

Question 6

Qualifying tuition expenses paid from the proceeds of a tax-exempt scholarship do not give rise to an education tax credit.

Accepted Answer

The IRS states that qualified education expenses paid with tax-free educational assistance (such as a scholarship) cannot be used to claim an education tax credit such as the American Opportunity Credit or Lifetime Learning Credit.

Question 7

If an employee holds two jobs during the year,an overwithholding of FICA tax will result.

Accepted Answer

The answer of If an employee holds two jobs during...

Question 8

Ahmad is considering making a $10,000 investment in a venture which its promoter promises will generate immediate tax benefits for him.Ahmad,who normally itemizes his deductions,is in the 28% marginal tax bracket.If the investment is of a type where the taxpayer may claim either a tax credit of 25% of the amount of the expenditure or an itemized deduction for the amount of the investment,what treatment normally would be most beneficial to Ahmad and by how much will Ahmad's tax liability decline because of the investment?

Accepted Answer

The answer of Ahmad is considering making a $10,000 investment...

Question 9

For the current year,the base amount for the Social Security portion (old age,survivors,and disability insurance) is different from that for the Medicare portion of FICA.

Accepted Answer

The base amount for Social Security and Medicare portions of FICA are different for the current year.

Question 10

Child and dependent care expenses include amounts paid for general household services.

Accepted Answer

Child and dependent care expenses can include amounts paid for household services if those services are necessary for the well-being and protection of the qualifying individual, allowing the taxpayer to work or look for work.

Question 11

The education tax credits (i.e. ,the American Opportunity credit and the lifetime learning credit) are available to help defray the cost of higher education regardless of the income level of the taxpayer.

Accepted Answer

The availability and amount of the education tax credits are limited based on the taxpayer's income level. The American Opportunity credit has phase-out limits and the Lifetime Learning credit is gradually reduced as income levels increase.

Question 12

Certain high-income individuals are subject to three additional Medicare taxes-on wages,unearned income,and tax credits claimed.

Accepted Answer

High-income individuals are subject to an additional Medicare tax on wages and unearned income, but not on tax credits claimed. The additional taxes are specifically a 0.9% Medicare tax on wages exceeding certain thresholds and a 3.8% Net Investment Income Tax (NIIT) on unearned income for high earners.

Question 13

Child care payments to a relative are not eligible for the credit for child and dependent care expenses if the relative is a child (under age 19) of the taxpayer.

Accepted Answer

According to IRS guidelines, payments to a relative are not eligible for the credit for child and dependent care expenses if the relative is a child (under age 19) of the taxpayer.

Question 14

Roger is considering making a $6,000 investment in a venture that its promoter promises will generate immediate tax benefits for him.Roger,who does not anticipate itemizing his deductions,is in the 30% marginal income tax bracket.If the investment is of a type that produces a tax credit of 40% of the amount of the expenditure,by how much will Roger's tax liability decline because of the investment?

Accepted Answer

The tax credit is 40% of the investment, which is $2,400 ($6,000 x 0.40). This means that Roger's tax liability will decline by $2,400. Since he is in the 30% marginal tax bracket, this is the amount by which his tax liability will decrease. Therefore, the correct answer is D, $2,400.

Question 15

Only self-employed individuals are required to make estimated tax payments.

Accepted Answer

Both self-employed individuals and individuals with other types of income (such as investment income) may be required to make estimated tax payments. It depends on their overall tax situation and the amount of tax withheld throughout the year.

Question 16

The calculation of FICA and the self-employment tax both involve two components: the Social Security portion and the Medicare portion,each portion of which is imposed on the same base amounts.

Accepted Answer

The answer of The calculation of FICA and the self-employment...

Question 17

A taxpayer may qualify for the credit for child and dependent care expenses if the taxpayer's dependent is under age 17.

Accepted Answer

The answer of A taxpayer may qualify for the credit...

Question 18

An expatriate who works in a country with an income tax rate higher than the U.S.rate probably will find the foreign earned income exclusion preferable to the foreign tax credit.

Accepted Answer

The answer of An expatriate who works in a country...

Question 19

For purposes of computing the credit for child and dependent care expenses,the qualifying employment-related expenses are limited to an individual's actual or deemed earned income.

Accepted Answer

The qualifying employment-related expenses for the credit for child and dependent care expenses are limited to an individual's actual or deemed earned income, as stated in the IRS guidelines. Therefore, the statement is true.

Question 20

The additional Medicare taxes assessed on high-income individuals carry differing tax rates depending on the tax base.

Accepted Answer

The additional Medicare taxes assessed on high-income individuals have different tax rates depending on the tax base. For wages and self-employment income, the additional tax rate is 0.9%. For investment income, the additional tax rate is 3.8%.

Quiz 12: Tax Credits and Payments