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Exam 13: Tax Credits and Payment Procedures

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Question 1

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Steve records a tentative general business credit of $110,000 for the current year.His net regular tax liability before t general business credit is $125,000, and his tentative minimum tax is $100,000.Compute Steve's allowable general business credit for the year.

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\(\begin{array}{llcc} \text { Net income tax} &&\$125,000*\\ \text { Less: } & \text { The greater of: } \\ &\\ & \text {- \$ 100,000 (tentative minimum tax) or } &\underline{(100,000)}\\ & \text { - \$ 25,000[25 \% ×(\$ 125,000-\$ 25,000)] } &\\ \text { Amount of general business credit allowed} &&\underline{\underline{\$25,000}}\\ \end{array}\) *Net income tax \(= \$ 125,000\) (regular tax liability) \(+ \$ 0\) [alternative minimum tax ( \(\$ 100,000\) tentative minimum \(\operatorname { tax } - \$ 125,000\) regular tax liability)] - \(\$ 0\) (nonrefundable credits).

Question 2

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Employers are encouraged by the work opportunity tax credit to hire individuals who have been long-term recipients of family assistance welfare benefits.

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B) False

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Question 3

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Qualified research and experimentation expenditures are not only eligible for the 20% tax credit but also can be expensed in the year incurred.

In 2019, George and Martha are married and file a joint tax return claiming their two children, ages 10 and 8 as dependents.Assuming their AGI is $119,650, George and Martha's child tax credit is:

If the cost of a building constructed and placed into service by an eligible small business in the current year includes the cost of a wheelchair ramp, which qualifies for the disabled access credit.

In the renovation of its building, Green Company incurs $9,000 of expenditures that qualify for the disabled access credit.The disabled access credit is:

Realizing that providing for a comfortable retirement is up to them, Jim and Julie commit to making regular contributions to their IRAs, beginning this year.Consequently, each makes a $2,000 contribution to his or her traditional IRA.If their AGI is $35,000 on their joint return, what is the amount of their "saver's credit" for certain retirement plan contributions?

Describe the withholding requirements to be followed by employers.

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.

Harry and Wei 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 Wei) and report two dependent children.During the year, they pay the following amounts to care for their four-year old son and six-year old daughter while they work. $\begin{array} { l r } \text { ABC Day Care Center } & \$ 3,200 \\\text { Blue Ridge Housekeeping Services } & 2,000 \\\text { Mindy Mason (Harry's mother) } & 1,000\end{array}$ Harry and Wei may claim a credit for child and dependent care expenses of:

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 $82,700 from her full-time job.Compute the self-employment taxes due for 2019.

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.

The credit for child and dependent care expenses is an example of a refundable credit.

Qualifying tuition expenses paid from the proceeds of a tax-exempt scholarship do not give rise to an education tax credit.

Which of the following best describes the treatment applicable to unused business credits?

The tax benefits resulting from tax credits and tax deductions are affected by the tax rate bracket of the taxpayer.

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

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.

Cheryl is single, has one child (age six) , and files as head of household during 2019.Her salary for the year is $19,500.She qualifies for an earned income credit of the following amount.

Kevin and Shuang have two children, ages 8 and 14.They spend $6,200 per year on eligible employment related expenses for the care of their children after school.Kevin earned a salary of $20,000 and Shuang earned a salary of $18,000.What is the amount of the couple's credit for child and dependent care expenses?