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Exam 14: The Individual Tax Formula

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Question 31

True/False

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The earned income credit offsets the burden of the federal payroll tax on low-income families and encourages individuals to seek employment rather than to depend on welfare.

A) True
B) False

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Question 32

Multiple Choice

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Mr. and Mrs. King's regular tax liability on their joint return was $479,580. Which of the following statements is true?

A) A. If the Kings' tentative minimum tax is $462,220, their total tax liability is $462,220.
B) B. If the Kings' tentative minimum tax is $462,220, their total tax liability is $479,580.
C) C. If the Kings' tentative minimum tax is $492,350; their total tax liability is $492,350.
D) Both B and C are true.

E) A) and D)
F) All of the above

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Question 33

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Mr. and Mrs. Toliver's AGI on their jointly filed return is $339,000. Regardless of the number of their children, the Tolivers are not eligible for a child credit.

Jennifer and Jamar are married and live in a home with their 13-year-old dependent son, Oscar. This year, they had the following tax information. $\begin{array}{llr} \text { Jamar's salary} &\$60,000\\ \text { Jennifer's Qualified Business Income from sole } &95,000\\ \text { proprietorship} &\\ \text { Dividend income} &2,800\\ \text {Deduction for self-employment tax } &6,712\\ \text { Itemized deductions } &19,200\\\end{array}$ Compute adjusted gross income (AGI) and taxable income.

Which of the following statements regarding filing status is false?

Mr. and Mrs. Anderson file a joint return. They provide more than 50% of the financial support for their two children, Dana, age 26, and John, age 17. Both children live in the Andersons' home. Dana earned $7,100 from a part-time job, while John earned no income this year. Which of the following statements is true?

Ms. Dolan, a divorced individual, invited her elderly uncle, Martin, to move into her home in January of this year. Martin's only income item was $2,390 of taxable interest on a savings account. Ms. Dolan provides over 90% of her uncle's financial support. What is Ms. Dolan's filing status for the year?

Mr. and Mrs. Dell, ages 29 and 26, file a joint return and have no dependents for the year. Here is their relevant information: Standard Deduction Table. $\begin{array}{llr} \text { Salaries } &\$163,000\\ \text { Dividend income } &1,900\\ \text { Above-the-line deductions} &6,200\\ \text { Itemized deductions } &26,200\\\end{array}$ Compute their adjusted gross income (AGI) and taxable income.

An individual who files his own tax return but is claimed as a dependent on another individual's return is not allowed any standard deduction.

Mr. and Mrs. Kain reported $80,000 AGI on their joint return. The couple has four dependent children: Beatrice, age 19; Bruce, age 16; Angie, age 11, and Arnold, age 8. Compute the Kains' child tax credit.

Mr. Lenz died on May 4, 2019. His widow, Mrs. Lenz, maintains a home for her three children, ages 4, 6, and 11. Mrs. Lenz must file as a head of household in 2020.

Ms. Dorley's regular tax liability on her Form 1040 is $451,890. Which of the following statements is true?

A taxpayer with a non-child dependent may be eligible for the full $2,000 child tax credit provided the taxpayer's AGI does not exceed the phase-out thresholds.

Ms. Lewis maintains a household which is the principal place of residence for Kathy. Ms. Lewis provides more than 50% of Kathy's financial support. Assuming Kathy is not disabled, in which of the following cases can Ms. Lewis claim Kathy as a qualifying child?

Benjamin, who files as a single taxpayer, has $359,900 taxable income in 2020. Compute his regular tax liability.

Mr. and Mrs. Eller's AGI last year was $287,300, and their total tax was $70,268. The couple's safe-harbor estimate of current year tax is $77,295.

Tamara and Todd Goble, ages 66 and 60, file a joint return. Todd is legally blind. Compute their standard deduction.

Because a QBI deduction affects AGI, it may impact the ability to claim a deduction for unreimbursed medical expenses.

Melissa, age 16, is claimed as a dependent on her parents' tax return. This year, Melissa earned $2,000 from babysitting and $1,280 interest income from a savings account. Compute Melissa's standard deduction.

Mrs. Starling worked for Abbot Inc. from January 1 through September 19. Her salary from Abbot for this period totaled $150,000. Mrs. Starling worked for JJT Inc. from October 1 through December 31. Her salary from JJT for this period totaled $38,000. JJT is not required to withhold Social Security tax from Mrs. Starling's salary because Abbot Inc. already withheld the maximum tax for the year.