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Chapter 07 Individual Income Tax Computation and Tax Credits

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Question;Chapter 07;Individual Income Tax Computation and Tax Credits;True / False Questions;1. Both the;width (or range) of the tax brackets (the amount of income taxed at a;particular rate) in the tax rate schedules and the range of the tax rates in;the tax rate schedules (the difference between the lowest tax rate and the;highest tax rate) vary by filing status.;True False;2. The tax;rate schedules are set up to tax lower levels of income at higher tax rates;than higher levels of income.;True False;3. Tax rate;schedules are provided for use by (relatively) higher income taxpayers while;the tax tables are provided for use by (relatively) lower income taxpayers.;True False;4. If a;married couple has one primary breadwinner, filing a joint return will likely;result in a marriage penalty.;True False;5. If both;spouses of a married couple earn roughly equivalent wages, the couple is likely;to pay a marriage penalty due to the nature of the tax rate schedules.;True False;6. A;marriage penalty occurs when a couple pays more taxes by filing a joint tax;return than they would have paid had they filed married filing separate;returns.;True False;7. All;capital gains are taxed at preferential rates.;True False;8. Long-term;capital gains, dividends, and taxable interest income are all taxed at;preferential rates.;True False;9. Generally;income from an active trade or business is subject to the 3.8% Net Investment;Income tax.;True False;10. In certain;circumstances a child with very little income may have their income taxed at;the parents' marginal tax rate.;True False;11. The kiddie;tax does not apply to children over 24 years old at the end of the tax year.;True False;12. The;alternative minimum tax system requires taxpayers to apply an alternative tax;rate on the regular income tax base to determine the amount of the alternative;minimum tax.;True False;13. Regular;taxable income is the starting point for determining the alternative minimum;tax.;True False;14. The;alternative minimum tax is the AMT base multiplied by the AMT rate.;True False;15. Long-term;capital gains are taxed at the stated AMT rate for purposes of the alternative;minimum tax.;True False;16. Taxpayers;are not allowed to deduct personal or dependency exemptions for alternative;minimum tax purposes.;True False;17. For;alternative minimum tax purposes, taxpayers are required to add back the;regular tax standard deduction amount for their filing status whether or not;they itemized deductions for regular tax purposes.;True False;18. For;alternative minimum tax purposes, taxpayers are allowed to deduct state income;taxes but are not allowed to deduct charitable contributions.;True False;19. The AMT;exemption amount is phased-out for high income taxpayers.;True False;20. All else;equal, a reduction in regular income tax rates would require more taxpayers to;pay the alternative minimum tax.;True False;21. Due to the;alternative minimum tax rate structure, timing tax planning strategies are not;effective under the alternative minimum tax system.;True False;22. Employees;must pay both Social Security tax and Medicare tax on all of their wages no;matter the amount of their wages.;True False;23. For;married couples, the Social Security wage base limitation applies separately to;each spouse.;True False;24. For;married couples, the Medicare tax is based on the couple's combined wages.;True False;25. Alton;reported net income from his sole proprietorship of $90,000. To determine his;self employment tax, he would multiply $90,000 by the self-employment tax rate.;True False;26. Employee;status is always better than independent contractor status for a taxpayer;because the employee is responsible for paying the employee portion of the FICA;taxes.;True False;27. Self-employed;taxpayers are allowed to deduct the full amount of the self-employment taxes;they pay.;True False;28. Employees;are not allowed to deduct FICA taxes they pay.;True False;29. Employees;are allowed to deduct a portion of the FICA taxes they pay.;True False;30. Katlyn;reported $300 of net income from her sole proprietorship. She is not required;to pay self-employment tax.;True False;31. All else;equal, taxpayers are more likely to be classified as employees rather than;independent contractors if they are allowed to determine their own working;hours and work without frequent oversight.;True False;32. Tax;credits reduce a taxpayer's taxable income dollar for dollar.;True False;33. The child;tax credit is subject to phase-out based on the taxpayer's AGI.;True False;34. Parents;may claim a child tax credit for a dependent child who is 22 years of age at;the end of the year if the child is a full-time student.;True False;35. Parents;may claim a child and dependent care credit for expenses incurred in providing;for their dependents while the parents work as long as the children are over;age 14 and under age 20 at year end.;True False;36. John and;Sally pay Janet (Sally's older sister) to watch John and Sally's child Dexter;during the day. Janet cares for Dexter in her home. John and Sally may claim a;child and dependent care credit based on the amount they pay Janet to care for;Dexter.;True False;37. The child;and dependent care credit entitles qualifying taxpayers to a credit equal to;the full amount of qualified expenses.;True False;38. The;American opportunity credit is available only for those students who are in;their first or second year of postsecondary education.;True False;39. The;lifetime learning credit can be used toward the cost of any course of;instruction to acquire or improve a taxpayer's job skills, no matter the age of;the taxpayer.;True False;40. The;American opportunity credit and lifetime learning credit are available to all;taxpayers regardless of their income level.;True False;41. The earned;income credit is sometimes referred to as a negative income tax.;True False;42. To qualify;for the earned income credit, the taxpayer must have a qualified dependent.;True False;43. An;80-year-old taxpayer with earned income and no dependent children could qualify;for the earned income credit.;True False;44. Business;credits are generally refundable credits.;True False;45. Taxpayers;are generally allowed to carry back and/or carry forward unused business;credits.;True False;46. When;applying credits against a taxpayer's gross tax liability, nonrefundable personal;credits are applied first, then business credits, and finally refundable;personal credits.;True False;47. An;individual could pay 100% of her tax liability by the due date of her tax;return and still be subject to underpayment tax penalties.;True False;48. Depending;on the year, the original (unextended) due date for an individual's tax return;may be after April 15.;True False;49. Depending;on the year, the original (unextended) due date for an individual's tax return;may be before April 15.;True False;50. Individuals;may file for and receive a six-month extension of time to file their tax return;and pay their taxes without penalty.;True False;51. The late;payment penalty is based on the amount of tax owed and the number of days that;the tax is not paid. The maximum amount of the penalty is unlimited.;True False;Multiple Choice Questions;52. Which of;the following is not a taxpayer filing status for purposes of determining the;appropriate tax rate schedule?;A. Head of;Household;B. Qualifying;Widow or Widower;C. Married;Filing Separately;D. Single;E. All of;these are taxpayer filing statuses;53. The;taxable income levels in the married filing jointly tax rate schedule are;those in the married filing separately schedule.;A. the same;as;B. double;C. half the;amount of;D. None of;these;54. Linda is a;qualifying widow in 2014. In 2014, she reported $75,000 of taxable income (all;ordinary). What is her gross tax liability using the tax rate schedules?;A. $10,463;B. $14,606;C. $14,679;D. $13,163;55. Miley, a;single taxpayer, plans on reporting $27,900 of taxable income this year (all of;her income is from a part-time job). She is considering applying for a second;part-time job that would give her an additional $10,000 of taxable income. By;how much will the income from the second job increase her tax liability (use;the tax rate schedules)?;A. $1,000;B. $1,500;C. $1,600;D. $2,500;56. Tamra and;Jacob are married and they file a joint tax return. Tamra received nearly five;times the salary that Jacob received. Which of the following statements is;true?;A. Tamra and;Jacob likely pay no tax marriage penalty nor receive a tax marriage benefit.;B. Tamra and;Jacob likely pay a tax marriage penalty.;C. Tamra and;Jacob likely receive a tax marriage benefit.;D. Tamra and;Jacob likely will pay a tax marriage penalty and receive a tax marriage;benefit.;57. Stephanie;and Mitch are married and they file a joint tax return. Mitch received a;slightly higher salary than Stephanie did during the year. Which of the;following statements is true?;A. Stephanie;and Mitch likely pay no tax marriage penalty nor receive a tax marriage;benefit.;B. Stephanie;and Mitch likely pay a tax marriage penalty.;C. Stephanie;and Mitch likely receive a tax marriage benefit.;D. Stephanie;and Mitch likely will pay a tax marriage penalty and receive a tax marriage;benefit.;58. Harrison;received a qualified dividend. Without knowing any additional facts, which of;the following statements is true regarding the rate at which the dividend will;be taxed to Harrison?;A. The;dividend will be taxed at a 15% tax rate.;B. The;dividend will be taxed at a 20% tax rate.;C. The;entire dividend will be taxed at either 15% or the entire dividend will be;taxed at 20% depending on Harrison's marginal ordinary income tax rate.;D. None of;these.;59. Jamie is;single. In 2014, she reported $100,000 of taxable income, including a long-term;capital gain of $5,000. What is her gross tax liability, rounded to the nearest;whole dollar amount (use the tax rate schedules)?;A. $22,576;B. $21,176;C. $20,526;D. $15,000;60. Angelena;files as a head of household. In 2014, she reported $50,000 of taxable income;including a $10,000 qualified dividend. What is her gross tax liability;rounded to the nearest whole dollar amount (use the tax rate schedules)?;A. $5,353;B. $5,443;C. $7,500;D. $6,913;61. Allen;Green is a single taxpayer with an AGI (and modified AGI) of $210,000, which;includes $170,000 of salary, $25,000 of interest income, $10,000 of dividends;and $5,000 of long-term capital gains. What is Allen's Net Investment Income;tax liability this year, rounded to the nearest whole dollar amount?;A. $2,465;B. $1,520;C. $570;D. $380;62. Which of;the following is not a barrier to income shifting among family members?;A. The;assignment of income doctrine;B. Net;unearned income for children 18 and younger taxed at parents' marginal tax;rates;C. Elimination;of preferential tax rates (on dividends and long-term capital gains) for;dependents;D. Two of;these;63. The;Olympians have three children. The kiddie tax applies to unearned income;received by which of the following children?;A. Poseidon;is a 20-year-old full-time student who does not support himself;B. Demeter;a 23-year-old full-time student who supports herself with a job at a grocery;store;C. Zeus is;20 years old and not a student;D. Two of;these.;E. None of;these.;64. Assuming;the kiddie tax applies, what amount of a child's income is subject to the;kiddie tax?;A. All of it;B. All of;the unearned income;C. The net;unearned income;D. Taxable;income less the standard deduction;65. During;2014, Montoya (age 15) received $2,200 from a corporate bond. He also received;$600 from a savings account established for him by his parents. Montoya lives;with his parents and he is their dependent. What is Montoya's taxable income?;A. $0;B. $2,200;C. $2,800;D. $1,800;66. During;2014, Jasmine (age 12) received $2,400 from a corporate bond. She also received;$600 from a savings account established for her by her parents. Jasmine lives;with her parents and she is their dependent. Assuming her parents' marginal tax;rate is 28%, what is Jasmine's gross tax liability?;A. $0;B. $100;C. $280;D. $380;67. Hestia;(age 17) is claimed as a dependent by her parents, Rhea and Chronus. In 2014;Hestia received $1,000 of interest income from a corporate bond that she owns.;In addition, she has earned income of $200. What is her taxable income for;2014?;A. $0;B. $200;C. $650;D. $1,200;68. Montague;(age 15) is claimed as a dependent by his parents Matt and Mary. In 2014;Montague received $5,000 of qualified dividends and he received $800 from a;part time job. What is his taxable income for 2014?;A. $0;B. $3,800;C. $4,650;D. $4,800;69. Hester;(age 17) is claimed as a dependent by his parents, Charlton and Abigail. In;2014, Hester received $10,000 of qualified dividends and he received $6,000;from a part time job. What is his taxable income for 2014?;A. $16,000;B. $15,000;C. $9,800;D. $9,650;70. The;alternative minimum tax base is typically ______ the regular income tax base.;A. smaller;than;B. about the;same as;C. larger;than;D. exactly;the same as;71. The;computation of the alternative minimum tax base begins with regular taxable;income. Which of the following is not part of the formula for computing the;alternative minimum tax base?;A. Subtract;personal exemptions;B. Add the;standard deduction amount if used for regular tax;C. Subtract;the AMT exemption amount (if any);D. Add back;tax exempt interest from a private activity bond not issued in 2009 or 2010.;72. In 2014;Maia (who files as a head of household) reported regular taxable income of;$115,000. She itemized her deductions, deducting $8,000 in charitable;contributions and $3,000 in state income taxes. She claimed exemptions for;herself and her son, Hermes, ($3,900 each). What is Maia's alternative minimum;taxable income?;A. $118,000;B. $126,000;C. $133,900;D. $125,900;73. Which of;the following items is not added back to regular taxable income in computing;alternative minimum taxable income?;A. Home;mortgage interest expense;B. Real;property taxes;C. Tax;exempt interest from a private activity bond issued in 2007;D. Miscellaneous;itemized deductions in excess of the 2% floor;74. Which of;the following statements regarding the AMT exemption amounts is not true?;A. The;amount of the exemption depends on the taxpayer's filing status.;B. The;exemption amount is completely phased-out for high income taxpayers.;C. Taxpayers;must choose whether they will claim the exemption or itemize deductions.;D. None of;these statements is false (All of these statements are true).;75. Persephone;has a regular tax liability of $12,475 and a tentative minimum tax of $11,500.;Given just this information, what is her alternative minimum tax liability for;the year?;A. $0;B. $11,500;C. $975;D. $12,475;76. Harmony;reports a regular tax liability of $15,000 and tentative minimum tax of;$17,000. Given just this information, what is her alternative minimum tax;liability for the year?;A. $0;B. $2,000;C. $15,000;D. $17,000;77. Which of;the following statements accurately describes the alternative minimum tax;rate(s)?;A. The top;AMT marginal rate is higher than the top regular tax marginal tax rate.;B. The AMT;rates represent a progressive tax rate structure.;C. The AMT;rate is the same rate for all taxpayers.;D. None of;these.;78. Which of;the following is not typical of taxpayers who are most likely affected by the;AMT?;A. Have many;dependents;B. Pay high;state income tax;C. Pay high;property taxes;D. Have;relatively low capital gains;79. Which of;the following could explain why large number of taxpayers are subject to (or;could become subject to) AMT?;A. Regular;tax rates have decreased since the AMT was enacted;B. The AMT;exemption amount is indexed to increase with inflation;C. Property;values are decreasing;D. The;personal and dependency exemption amounts are not increasing as fast as the AMT;exemption is decreasing;80. Asteria;earned a $25,500 salary as an employee in 2014. How much should her employer;have withheld from her paycheck for FICA taxes (rounded to the nearest whole;dollar amount)?;A. $370;B. $1,581;C. $1,951;D. $3,902;81. Baker;earned $225,000 of salary as an employee in 2014. How much should his employer;have withheld from his paycheck for FICA taxes (rounded to the nearest whole;dollar amount)?;A. $10,742;B. $10,517;C. $7,254;D. $17,213;82. Hera;earned $175,000 salary in 2014. Her husband, Zeus, earned $100,000 salary in;2014. Hera and Zeus file a joint tax return. How much FICA taxes will they owe;in 2014?;A. $21,263;B. $17,667;C. $13,454;D. $4,213;83. Which of;the following statements regarding FICA taxes is true?;A. Low;income employees are not required to pay FICA taxes.;B. An;employee who has two different employers during the year may be entitled to a;tax credit for overpaid FICA taxes.;C. The;maximum amount of Medicare taxes an employee is required to pay is capped each;year but the maximum amount of Social Security taxes is not.;D. The wage;base limit for Social Security taxes depends on the taxpayer's filing status.;84. Which of the;following suggests that a working taxpayer is an independent contractor rather;than an employee?;A. Works for;more than one firm;B. May;realize a loss from business activities;C. Sets own;working hours;D. Works;somewhere other than on employer premises;E. All of;these suggest independent contractor status;85. Which of;the following statements best describes the deductions independent contractors;may claim for valid business expenses?;A. for AGI;deductions;B. from AGI;deductions not subject to the two percent of AGI floor;C. from AGI;deductions subject to a two percent of AGI floor;D. for AGI;deductions limited to income from the business activities;86. The wage;base for which of the following taxes is capped?;A. Federal;income;B. Social;Security;C. Medicare;D. Alternative;minimum;87. Which of;the following statements regarding the self-employment tax is most accurate?;A. The;self-employment tax base is generally the taxpayer's net income from self-employment;(usually net income from Schedule C).;B. Taxpayers;who report less than $600 of net income from self-employment (usually net;income from Schedule C) are not required to pay self employment taxes.;C. The;self-employment tax base is net earnings from self employment which is less;than net income from self-employment.;D. The;Social Security tax limit does not apply to self-employment taxes.;88. Which of;the following best describes the manner in which self-employed taxpayers may;deduct self-employment taxes?;A. Deduct;employer portion from AGI.;B. Deduct;entire amount from AGI.;C. Deduct;employer portion for AGI.;D. Deduct;entire amount for AGI.;E. No;deduction;89. For;taxpayers who receive both salary as an employee and self-employment income as;an independent contractor in the same year, which of the following statements;regarding FICA and self-employment taxes is most accurate?;A. The;Social Security limit applies to the salary but not to the self-employment;income.;B. The;Social Security limit applies to the self-employment income but not to the;salary.;C. Salary is;first applied against the Social Security limit and then self-employment income;is applied against the Social Security limit.;D. Self-employment;income is first applied against the Social Security limit and then salary is;applied against the Social Security limit.;90. Which of;the following statements concerning differences between employees and;independent contractors is most accurate?;A. Employees;and independent contractors deduct business expenses as miscellaneous itemized;deductions.;B. While;employees are typically eligible for nontaxable fringe benefits from employers;independent contractors are not.;C. Employers;are required to withhold either FICA or self employment taxes from compensation;paid to employees and compensation paid to independent contractors.;D. Employers;typically withhold federal income taxes from compensation paid to employees and;to independent contractors.;91. Which of;the following statements concerning tax credits is true?;A. The tax;benefit a taxpayer receives from a credit depends on the taxpayer's marginal;tax rate.;B. Refundable;tax credits are limited to a taxpayer's gross tax liability.;C. Tax;credits are generally more beneficial than tax deductions.;D. None of;these is a true statement.;92. Which of;the following is not one of the general tax credit categories?;A. Nonrefundable;personal;B. Refundable;personal;C. Business;D. Refundable;business;93. Which of;the following statements regarding the child tax credit is false?;A. The child;for whom the credit is claimed must be under the age of 15 at the end of the;year;B. The;credit is subject to phase-out based on the taxpayer's AGI;C. The full;credit for a child who qualifies is $1,000;D. The child;for whom the credit is claimed must meet the definition of a qualifying child;94. Quantitatively;what is the relationship between the AGI phase-out thresholds for the child tax;credit?;A. Head of;household/Single = Married Filing Separately = Married Filing Jointly;B. Head of;household/Single Married Filing Separately < Married Filing Jointly;95. Rhianna;and Jay are married filing jointly in 2014. They have six children for whom;they may claim the child tax credit. Their AGI was $123,440. What amount of;child tax credit may they claim on their 2014 tax return?;A. $5,300;B. $6,000;C. $12,000;D. $4,000;96. The amount;of expenditures eligible for the child and dependent care credit is the least;of three amounts. Which of the following is not one of those amounts?;A. The total;amount of child and dependent care expenditures for the year;B. $3,000 for;one qualifying person or $6,000 for two or more qualifying persons;C. The;dependent's earned income for the year;D. The;taxpayer's earned income for the year;97. Which of;the following statements regarding the child and dependent care credit is false?;A. Taxpayers;may claim a credit for only a portion of qualifying dependent care;expenditures.;B. If a;taxpayer's income is too high, she will be ineligible to claim any child and;dependent care credit.;C. A single;taxpayer must have earned income to claim any child and dependent care credit.;D. A;taxpayer is not eligible to claim the dependent care credit if any dependent;relative provides the care.;98. Trudy is;Jocelyn's friend. Trudy looks after Jocelyn's four-year-old son during the day;so Jocelyn can go to work. During the year, Jocelyn paid Trudy $4,000 to care;for her son. What is the amount of Jocelyn's child and dependent care credit if;her AGI for the year was $30,000?;A. $0;B. $810;C. $1,080;D. $3,000;99. Kaelyn's;mother, Judy, looks after Kaelyn's four-year-old twins so Kaelyn can go to work;(she drops off and picks up the twins from Judy's home every day). Since Judy;is a relative, Kaelyn made sure, for tax purposes, to pay her mother the going;rate for child care ($6,300 for the year). What is the amount of Kaelyn's child;and dependent care credit if her AGI for the year was $36,000?;A. $1,440;B. $2,100;C. $6,000;D. $0;100. Which of;the following statements regarding the child and dependent care credit is true?;A. A married;couple must file jointly to claim the credit.;B. A;taxpayer may claim a credit for dependent care expenses for a dependent who is;14 years old or older but only if the dependent lives in the taxpayer's home;for the entire year.;C. All else;equal, a taxpayer making qualifying expenditures for three children may claim;more dependent care credit than a taxpayer making (the same amount of);qualifying expenditures for two children.;D. None of;these statements is true.;101. Which of;the following is not true of the American opportunity credit?;A. A;taxpayer with multiple eligible dependents can claim a credit for each;dependent's qualifying expenses;B. The;credit is available for students during their first four years of postsecondary;education only;C. It is;phased out based on the taxpayer's AGI;D. A;taxpayer may not claim a credit unless the taxpayer pays a dependent's;qualifying educational expenses;102. Which of;the following is not true of the lifetime learning credit?;A. It is a;nonrefundable credit.;B. The;credit can be claimed by taxpayers who have graduated from college and are;taking professional training courses to improve their job skills.;C. A;taxpayer with multiple dependents can claim a credit for each dependent's;qualifying expenses.;D. The;credit is subject to phase out based on the taxpayer's AGI.;103. Which of;the following is not a true statement about the American opportunity credit;(AOC) and lifetime learning credits?;A. A;taxpayer may not report both an AOC and a lifetime learning credit on the same;tax return;B. Certain;educational expenses qualify for both credits but taxpayers must claim one;credit or the other for the expenditures (the taxpayer cannot claim both;credits for the same expenditures);C. Taxpayers;may choose to either (1) deduct qualifying education expenses of an individual;as for AGI deductions or claim educational credits for the individual's;expenses (but not both);D. The AGI;phase-out threshold for phasing out the AOC is higher than the AGI phase-out;threshold for the lifetime learning credit.;104. Which of;the following statements regarding the earned income credit is true?;A. It is a;nonrefundable credit;B. It is;possible that a taxpayer with more earned income may receive more credit than a;taxpayer with less earned income;C. A;70-year-old taxpayer with no dependents can qualify for the credit in certain;circumstances;D. A;taxpayer whose only source of income is interest from corporate bonds is;eligible for the credit;105. Which of;the following does not affect the amount of the earned income credit?;A. Filing;status;B. Amount of;credit taken in previous years;C. Number of;qualifying children;D. Taxpayer's;AGI;106. Carolyn has;an AGI of $38,000 (all from earned income), two qualifying children, and is;filing as a head of household. What amount of earned income credit is she;entitled to?;A. $0;B. $1,212;C. $3,305;D. $4,248;E. $5,460;107. Which of;the following statements regarding credits is correct?;A. Business;expenses are generally refundable credits;B. Business;credits that are generated in one year but are not utilized in that year expire;C. Business;credits that are generated in one year but are not utilized in that year may be;carried forward to future years but not back to a prior year;D. Business;credits that are generated in one year but are not utilized in that year may be;carried back to the previous year and then forward to future years;108. If there is;not enough gross tax liability to use the foreign tax credit, __________.;A. it;expires unused;B. it is;carried back 2 years or forward 20 years;C. it is;carried back 3 years or forward 5 years;D. it is;carried back 1 year or forward 10 years;109. Which of;the following tax credits is fully refundable?;A. American;opportunity credit;B. Dependent;care credit;C. Earned;income credit;D. None of;these;110. How could;an individual obtain a business tax credit?;A. Through;self-employment activities;B. Through;flow-through from a partnership or S corporation;C. By;working overseas and obtaining a foreign tax credit;D. All of;these;111. Which of;the following represents the correct order in which credits are applied to;gross tax liability (from first to last)?;A. Nonrefundable;personal, business, refundable;B. Business;nonrefundable personal, refundable;C. Refundable;nonrefundable personal, business;D. Refundable;business, nonrefundable personal;112. Cassy;reports a gross tax liability of $1,000. She also claims $400 of nonrefundable;personal 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?;A. $1,000;taxes payable;B. $0 refund;or taxes payable;C. $700;refund;D. $300;refund;113. 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 tax payments are at least which of the following (rounded) amounts;(assume she makes the required payments each quarter)?;A. $46,861;B. $48,722;C. $51,547;D. $53,594;114. If an;employer withholds taxes from an employee, in general, when are these taxes;treated as paid to the IRS?;A. As;withheld;B. As the;employee requests on his/her W-4 form;C. Evenly;throughout the year;D. On April;15;115. Which of;the following statements about estimated tax payments and underpayment;penalties is true for individual taxpayers?;A. Taxpayers;who have paid their full tax liability by the original tax return due date are;protected from underpayment penalties.;B. Taxpayers;who have paid their full tax liability by the extended tax return due date are;protected from underpayment penalties.;C. Taxpayers;who have uneven income streams can pay estimated tax quarterly in uneven;amounts and not be susceptible to underpayment penalties.;D. Taxpayers;who have paid their required amount of estimated tax, even though not on time;are protected from underpayment penalties.;116. Which of;the following statement(s) concerning estimated tax payments and underpayment;penalties for individuals is (are) true?;A. Whether;taxpayers are subject to underpayment penalties is determined on a quarterly;basis.;B. Due dates;for estimated tax payments for a given year are April 15, June 15, September 15;of that year and January 15 of the next year unless these dates fall on a;weekend or a holiday.;C. The;amount of penalty depends on the amount of the underpayment among other;factors.;D. All of;these statements are true.;117. What;happens if the taxpayer owes an underpayment penalty, but does not compute it;on Form 2210?;A. Nothing;unless the taxpayer is audited;B. The;taxpayer is immediately sent to the Tax Court;C. The IRS;will compute and assess the penalty;D. The;penalty is increased by five percentage points;118. Happy;Sleepy, Grumpy, and Doc all did not make adequate estimated payments. Which of;them will not owe underpayment penalties for 2014 given the following;information?;A. Happy;B. Sleepy;C. Grumpy;D. Doc;E. Two of;these;F. None of;these;119. Taxpayers;are not required to file a tax return unless their gross income passes a;certain threshold. This threshold is generally the ________.;A. applicable;standard deduction amount;B. personal;exemption amount;C. twice the;applicable standard deduction amount;D. applicable;standard deduction amount plus the personal exemption amount;120. Why would a;taxpayer file a tax return if not required to do so?;A. to remain;in favor with the IRS;B. to claim;a refund of taxes paid;C. all;taxpayers are required to file returns;D. in order;to claim the standard deduction;121. Looking at;the following partial calendar for April, when will individual tax returns be;due?;A. Friday;April 14;B. Saturday;April 15;C. Sunday;April 16;D. Monday;April 17;E. Tuesday;April 18;122. Which of;the following is not true of the extension to file an individual tax return?;A. It is;granted automatically by the IRS if requested;B. It must;be requested by the original due date of the return;C. It;extends the due date for the return and associated tax payments beyond the;original due date of the tax return;D. The;extension is for six months beyond the original due date;123. Which of;the following taxpayers (all age 40) are required to file a return?;A. Jenny and;Jim;B. Allen;C. Timmy;D. None of;these;124. What is the;underpayment penalty rate that taxpayers pay when they underpay their estimated;taxes?;A. Federal;short-term interest rate.;B. Federal;short-term interest rate plus three percentage points.;C. Federal;long-term interest rate plus six percentage points.;D. Zero. The;government does not pay interest on overpayments.;125. Which of;the following statements regarding late filing penalties is true?;A. If a;taxpayer fails to file a tax return, the late filing penalty will continue to;grow until the taxpayer files the tax return.;B. The;amount of the late filing penalty is the same for both fraudulent failure to;file and non fraudulent failure to file.;C. Taxpayers;who owe no tax as of the due date of their tax returns are not subject to late;filing penalties even if they file late.;D. None of;these.;126. Which of;the following statements regarding late filing penalties and/or late payment;penalties is true?;A. An;extension of time to file the tax return protects a taxpayer from late payment;penalties as long as the tax is paid by the extended due date of the return.;B. The;penalty rate for late filing pena

 

Paper#38056 | Written in 18-Jul-2015

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