5) Dawn Smith\'s adjusted gross income on her Year 1 tax return was $100,000. Th

Question

5) Dawn Smith's adjusted gross income on her Year 1 tax return was $100,000. The amount covered a 12-month period. For the Year 2 tax year, the minimum payments required from Smith to avoid the penalty for the underpayment of estimated tax is:

a. 90% of the current tax on the return for the current year in four equal installments or 100% of the prior year’s tax liability paid in four equal installments

b. 90% of the current tax on the return for the current year in four equal installments or 110% of the prior year’s tax liability paid in four equal installments

c. 110% of the prior year’s tax liability paid in four equal installments only

d. 100% of the prior year’s tax liability paid in four equal installments only

6) How may taxes paid by an individual to a foreign country be treated?

a. As an itemized deduction subject to the 2% of AGI floor

b. As an adjustment to gross income

c. As a non-deductible expense

d. As a credit against federal income taxes due

7) Which of the following statements about the child and dependent care credit is correct?

a. The child must be under the age of 18 years

b. The maximum credit is $600

c. The child must be a direct descendant of the taxpayer

d. The credit is non-refundable

Explanation / Answer

5. Penalty can be avoided if Dawn smith pays 90% of the current tax on the return for the current year in four equal installments or 100% of the prior year’s tax liability paid in four equal installments

6.Tax paid by an individual to a foreign country would be treated as a credit against federal income taxes due

7. The child must be under the age of 18 years to avail child and dependant care credit

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