7. Which of the following statements concerning tax credits is true? None of the
ID: 2730895 • Letter: 7
Question
7.Which of the following statements concerning tax credits is true?
None of these is a true statement.
Tax credits are generally more beneficial than tax deductions.
The tax benefit a taxpayer receives from a credit depends on the taxpayer's marginal tax rate.
Refundable tax credits are limited to a taxpayer's gross tax liability.
9.Harrison received a qualified dividend. Without knowing any additional facts, which of the following statements is true regarding the rate at which the dividend will be taxed to Harrison?
The entire dividend will be taxed at either 15% or the entire dividend will be taxed at 20% depending on Harrison's marginal ordinary income tax rate.
The dividend will be taxed at a 15% tax rate.
None of these.
The dividend will be taxed at a 20% tax rate.
10. What happens if the taxpayer owes an underpayment penalty, but does not compute it on Form 2210?
The IRS will compute and assess the penalty
The taxpayer is immediately sent to the Tax Court
Nothing, unless the taxpayer is audited
The penalty is increased by five percentage points
11.During 2015, Montoya (age 15) received $2,200 from a corporate bond. He also received $600 interest from a savings account established for him by his parents. Montoya lives with his parents and he is their dependent. What is Montoya's taxable income?
$2,200
$2,800
$0
$1,750
13. Why would a taxpayer file a tax return if not required to do so?
in order to claim the standard deduction
to claim a refund of taxes paid
to remain in favor with the IRS
all taxpayers are required to file returns
15. What is the underpayment penalty rate that taxpayers pay when they underpay their estimated taxes?
Federal short-term interest rate plus three percentage points.
Zero. The government does not pay interest on overpayments.
Federal long-term interest rate plus six percentage points.
Federal short-term interest rate.
16. if an employer withholds taxes from an employee, in general, when are these taxes treated as paid to the IRS?
As withheld
As the employee requests on his/her W-4 form
On April 15
Evenly throughout the year
19. The computation of the alternative minimum tax base begins with regular taxable income. Which of the following is not part of the formula for computing the alternative minimum tax base?
Add back tax exempt interest from a private activity bond not issued in 2009 or 2010
Subtract the AMT exemption amount (if any)
Subtract personal exemptions
Add the standard deduction amount if used for regular tax
20. Which of the following suggests that a working taxpayer is an independent contractor rather than an employee?
May realize a loss from business activities.
Works for more than one firm.
Sets own working hours.
All of these suggest independent contractor status.
Works somewhere other than on employer premises
Explanation / Answer
7).
Yes it is true the fact that tax credits are generally more beneficial than tax deductions because tax credits are the direct reduction in taxes.
Yes it also true that the tax benefit a tax payer receives from a credit depends on the marginal tax rate.
9).
Since Harrison received a qualified dividend without knowing the tax rates, therefore the entire dividend will be taxed at either 15% or 20% depending on the Harrison marginal ordinary income tax rate.
10).
If a taxpayer owns and underpayment penalty but does not compute it on from 2210, the IRS will compute and access the penalty.
13).
A tax payer would file an income tax return because all the tax payers are required to do so.
15).
The penalty rate is the federal short term interest rate when they underpay their estimated taxes.
19).
Add the standard deduction amount if used for the irregular tax.
20).
A working taxpayer is an independent contractor rather than employee because he may realize loss from business activities.
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