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Exam 12: Tax Credits and Payments

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Question 41

True/False

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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) True
B) False

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Question 42

Multiple Choice

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Pat generated self-employment income in 2019 of $76,000. The self-employment tax is:

A) $0.
B) $5,369.23.
C) $10,738.46.
D) $11,628.00.

E) A) and D)
F) All of the above

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Question 43

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

Julia is 30 years old, unmarried with a nine year-old daughter, and has earnings during 2019 of $19,700. Does she qualify for the earned income credit? If so, calculate the amount of credit that is available to her.

In March 2019, Gray Corporation hired two individuals, both of whom were certified as long-term recipients of family assistance benefits. Each employee was paid $11,000 during 2019. Gray's work opportunity tax credit amounts for 2019 is:

Expenses that are reimbursed by a taxpayer's employer under a dependent care assistance program also can qualify for the credit for child and dependent care expenses.

The disabled access credit is computed at the rate of 50% of all access expenditures incurred by the taxpayer during the year.

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

Certain high-income individuals are subject to three additional Medicare taxes on wages, unearned income, and tax credits claimed.

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?

Golden Corporation is an eligible small business for purposes of the disabled access credit. During the year, Golden makes the following expenditures on a structure originally placed in service in 1988: $\begin{array}{ll}\text { Removal of architectural barriers } & \$ 8,500 \\\text { Acquired equipment for disabled persons } & \underline{6,250} \\&\$ 14,750\end{array}$ In addition, Golden expended $8,000 on a building originally placed in service in the current year to ensure easy accessibility by disabled individuals. Calculate the amount of the disabled access credit available to Golden.

Ahmad is considering making a $10,000 investment in a venture whose promoter promises will generate immediate tax benefits for him. Ahmad, who normally itemizes his deductions, is in the 32% marginal tax bracket. If the investment is of a type where the taxpayer may claim either a tax credit of 25% of the amount of the expenditure or an itemized deduction for the amount of the investment, what treatment is likely most beneficial to Ahmad, and by how much will Ahmad's tax liability decline because of the investment?

The base amount for the Social Security portion (old age, survivors, and disability insurance) is different from that for the Medicare portion of FICA.

Only self-employed individuals are required to make estimated tax payments.

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

The child tax credit is based on the number of the taxpayer's qualifying children under age 17.

During the year, Green, Inc., incurs the following research expenditure. $\begin{array}{llr} \text { In-house wages, supplies, computer time } &\$60,000\\ \text {Paid to Blue Foundation for research } &30,000\\\end{array}$ Green's qualifying research expenditures for the year are:

A LIFO method is applied to general business credit carryovers, carrybacks, and utilization of credits earned during a particular year.

The work opportunity tax credit is available only for wages paid to qualifying individuals during their first year of employment.

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