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Exam 13: Tax Credits and Payment Procedures

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Question 31

Multiple Choice

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

A) Form W-2.
B) Form W-3.
C) Form W-4.
D) Form 941.

E) A) and B)
F) A) and C)

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Question 32

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

A) True
B) False

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Question 33

Multiple Choice

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The components of the general business credit include all of the following except:

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

Cardinal Company incurs $800,000 during the year to construct a facility that will be used exclusively for the care of its employees' pre-school age children during normal working hours. Assuming Cardinal claims the credit for employer-provided child care this year, its basis in the newly constructed facility is $640,000.

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

In 2018, 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:

In 2017, Juan and Juanita incur $9,800 in legal and adoption fees directly related to the adoption of an infant son born in a nearby state. Over the next year, they incur another $4,500 of adoption expenses. The adoption becomes final in 2018. Which of the following choices properly reflects the amounts and years in which the adoption expenses credit is available. $\begin{array}{llcc}2017&2018\\a. \$ 9,800 & \$ 4,500 \\b. \text { None }& \$ 13,810 \\c. \text {None}& \$ 14,300 \\d. \$ 9,800& \$ 4,010 \\\end{array}$

Cheryl is single, has one child age 6) , and files as head of household during 2018. Her salary for the year is $19,500. She qualifies for an earned income credit of the following amount.

The maximum credit for child and dependent care expenses is $2,100 if only one spouse is employed and the other spouse is a full-time student.

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 incurs a recognized long-term capital gain of $1,000 from the sale of a stock investment. She must pay a self-employment tax on:

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

Several years ago, Sarah purchased a certified historic structure for $150,000 that was 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.

Some or all) of the tax credit for rehabilitation expenditures will have to be recaptured if the rehabilitated property is disposed of prematurely or if it ceases to be qualifying property.

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.

Roger is considering making a $6,000 investment in a venture that its promoter promises will generate immediate tax benefits for him. Roger, who does not anticipate itemizing his deductions, is in the 30% marginal income tax bracket. If the investment is of a type that produces a tax credit of 40% of the amount of the expenditure, by how much will Roger's tax liability decline because of the investment?

During the year, Green, Inc., incurs the following research expenditures: Inthouse wages, supplies, computer time $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\$ 60,000$ Paid to Blue Foundation for research $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ 30,000 Green's qualifying research expenditures for the year are:

Pat generated self-employment income in 2018 of $76,000. The self-employment tax is:

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

BlueCo incurs $900,000 during the year to construct a facility that will be used exclusively for the care of its employees' pre-school age children during normal working hours. The credit for employer-provided child care available to BlueCo this year is $225,000.