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Exam 13: Tax Credits and Payment Procedures

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Question 1

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

A) True
B) False

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Question 2

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Which of the following issues does not need resolution in an employer's effort to comply with employment tax payment requirements?

A) Ascertaining which employees and wages are covered by employment taxes and are subject to withholding for income taxes.
B) Arriving at the amount to be paid and/or withheld.
C) Reporting and paying employment taxes and income taxes withheld to the IRS on a timely basis through the use of proper forms.
D) Each of the above issues needs to be resolved.
E) None of the above is relevant to the employer.

F) A) and E)
G) A) and D)

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Question 3

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The earned income credit is available only if the taxpayer has at least one qualifying child in the household.

Juan refuses to give the bank where he maintains a savings account his Social Security number. Juan is subject to backup withholding for the interest earned on the savings account.

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

In January 2017, Tammy acquired an office building in downtown Syracuse, New York for $400,000. The building was constructed in 1932. Of the $400,000 cost, $40,000 was allocated to the land. Tammy immediately placed the building into service, but she quickly realized that substantial renovation would be required to keep and attract new tenants. The renovations, costing $600,000, were of the type that qualifies for the rehabilitation credit. The improvements were completed in October 2017. a.Compute Tammy's rehabilitation tax credit for the year of acquisition. b.Determine the cost recovery deduction for 2017. c.What is the basis in the property at the end of its first year of use by Tammy?

Which of the following correctly reflects current rules regarding estimated tax payments for individuals?

The purpose of the tax credit for rehabilitation expenditures is to encourage the relocation of businesses from older, economically distressed areas (i.e., inner city) to newer locations.

An employer calculates the amount of income tax withheld from salary or wages based on the information an employee provides on the following form:

Which of the following correctly describes the tax credit for rehabilitation expenditures?

A taxpayer's earned income credit is dependent on the number of his or her qualifying children.

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

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.

Several years ago, Tom purchased a structure for $300,000 that was placed in service in 1929. Three and one-half years ago he incurred qualifying rehabilitation expenditures of $600,000. In the current year, Tom sold the property in a taxable transaction. Calculate the amount of the recapture of the tax credit for rehabilitation expenditures.

Discuss the treatment of unused general business credits.

The maximum child tax credit under current law is $1,500 per qualifying child.

Harry and Wilma are married and file a joint income tax return. On their tax return, they report $44,000 of adjusted gross income ($20,000 salary earned by Harry and $24,000 salary earned by Wilma) and claim two exemptions for their dependent children. During the year, they pay the following amounts to care for their 4-year old son and 6-year old daughter while they work. ​ Harry and Wilma may claim a credit for child and dependent care expenses of:

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

An employee with outside income may be able to avoid the penalty for underpayment of estimated tax by having his employer increase income tax withholdings.

Cheryl is single, has one child (age 6) , and files as head of household during 2016. Her salary for the year is $19,500. She qualifies for an earned income credit of the following amount.