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Exam 13: Tax Credits and Payment Procedures

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Question 31

Multiple Choice

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Pat generated self-employment income in 2017 of $76,000. The self-employment tax is:

A) $0.
B) $5,369.23.
C) $10,738.46.
D) $11,628.00.

E) None of the above
F) A) and B)

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Question 32

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A taxpayer who meets the age requirement and receives no Social Security benefits will be entitled to the full tax credit for the elderly.

A) True
B) False

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Question 33

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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.

Which of the following statements is true regarding the education tax credits?

How does the FICA tax compare to the self-employment tax? How are these two taxes similar and how do they differ?

An employer's tax deduction for wages is affected by the work opportunity tax credit.

Because current U.S. corporate income tax rates are higher than many foreign corporate income tax rates only infrequently will the credit's, the overall limitation yield a lower foreign tax credit than the amount of foreign taxes actually paid.

Jack and Jill are married, have three children, and have earnings during 2017 of $28,500. Do they qualify for the earned income credit? If so, calculate the amount of credit that is available to them.

Jermaine and Kesha are married, file a joint tax return, have AGI of $82,500, and have two children. Devona is beginning her freshman year at State University during Fall 2017, and Arethia is beginning her senior year at Northeast University during Fall 2017 after having completed her junior year during the spring of that year. Both Devona and Arethia are claimed as dependents on their parents' tax return. ​ Devona's qualifying tuition expenses and fees total $4,000 for the fall semester, while Arethia's qualifying tuition expenses and fees total $6,200 for each semester during 2017. Full payment is made for the tuition and related expenses for both children during each semester. The American Opportunity credit available to Jermaine and Kesha for 2017 is:

A taxpayer who qualifies for the low-income housing credit claims the credit over a 20-year period.

In May 2013, Cindy incurred qualifying rehabilitation expenditures of $500,000 on a certified historic structure and properly claimed the tax credit for rehabilitation expenditures. In March 2017, she sold the building at a loss. Calculate the rehabilitation expenditures credit recapture that she must report in 2017.

Explain the purpose of the disabled access credit and describe the general characteristics of its computation.

The tax benefit received from a tax credit is never affected by the tax rate of the taxpayer.

Black Company paid wages of $180,000, of which $40,000 was qualified wages for the work opportunity tax credit under the general rules. Black Company's deduction for wages for the year is:

The disabled access credit was enacted to encourage small businesses to make their businesses more accessible to disabled individuals.

Susan generated $55,000 of net earnings from the conduct of a tax preparation business that she operated during the tax-filing season. She also received wages of $77,000 from her full-time job. Compute the self-employment taxes due for 2017.

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.

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?

Rex and Dena are married and have two children, Michelle (age 7) and Nancy (age 5) . During 2017, Rex earned a salary of $24,500, received interest income of $300, and filed a joint income tax return with Dena. Dena had $0 gross income. Their earned income credit for the year is:

In May 2017, Blue Corporation hired Camilla, Jolene, and Tyrone, all of whom are certified as long-term family assistance recipients. Each employee is paid $12,000 during 2017. a.Compute Blue Corporation's work opportunity tax credits for 2016 and 2017. b.Assume Blue Corporation pays total wages of $500,000 to its employees during 2017. How much may Blue Corporation claim as a wage deduction for 2017 if the work opportunity tax credit is claimed?