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Exam 13: Tax Credits and Payment Procedures

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Question 31

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The ceiling amounts and percentages for 2014 for the two portions of the self-employment tax are: Social Security portion Medicare portion

A) $113,700;12.4% Unlimited;2.9%
B) $113,700;15.3% Unlimited;2.9%
C) $117,000;12.4% Unlimited;2.9%
D) $117,000;2.9% Unlimited;13.3%
E) None of these.

F) B) and E)
G) C) and D)

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Question 32

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

A) True
B) False

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Question 33

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

In describing FICA taxes,which (if any) of the following statements is incorrect?

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.

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.

A small employer incurs $1,500 for consulting fees related to establishing a qualified retirement plan for its 75 employees.As a result,the employer may claim the credit for small employer pension plan startup costs for $750.

Rex and Dena are married and have two children,Michelle (age 7) and Nancy (age 5) .During 2014,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:

On October 2,2014,Ross quits his job with Blue Corporation.If requested by Ross,Blue Corporation must furnish a Form W-2 to Ross within 45 days after the date of the request or the final wage payment,whichever is later.

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.

During the year,Purple Corporation (a U.S.Corporation) has U.S.-source income of $1,800,000 and foreign income of $600,000.The foreign-source income generates foreign income taxes of $150,000.The U.S.income tax before the foreign tax credit is $816,000.Purple Corporation's foreign tax credit is:

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 2014,and Arethia is beginning her senior year at Northeast University during Fall 2014 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 2014.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 2014 is:

George and Jill are husband and wife,ages 67 and 65 respectively.During the year,they receive Social Security benefits of $4,000 and have adjusted gross income of $11,000.Assuming they file a joint return,their tax credit for the elderly,before considering any possible limitation due to their tax liability,is:

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

During 2014,Barry (who is single and has no children) earned a salary of $13,000.He is age 30.His earned income credit for the year is:

Several years ago,Sarah purchased a structure for $150,000 that was originally placed in service in 1929.In the current year,she incurred qualifying rehabilitation expenditures of $200,000.The amount of the tax credit for rehabilitation expenditures,and the amount by which the building's basis for cost recovery would increase as a result of the rehabilitation expenditures are the following amounts:

During the current year,Eleanor earns $120,000 in wages as an employee of an accounting firm.She also earns $13,000 in gross income from an outside consulting service she operates.Deductible expenses paid in connection with the consulting service amount to $3,000.Eleanor also has a recognized long-term capital gain of $1,000 from the sale of a stock investment.She must pay a self-employment tax on:

Which,if any,of the following correctly describes the earned income credit?

Even though an item of income is not subject to income tax withholding by a taxpayer's employer,it may be subject to the income tax.

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