M3-Tax Computation and Credits Flashcards
Payment of _____% of the tax on the return for the current year avoids the penalty for underpayment of estimated tax.
90%
Payment of the lesser of this or the “payment of 110% of the prior year’s tax liability when the taxpayer’s AGI from the prior year exceeds $150,000” will provide “safe harbor” to the taxpayer.
Generally payment of _____% of the prior year’s tax liability avoids the penalty for underpayment of estimated tax when the taxpayer’s AGI from the prior year exceeds $_______.
110%
$150,000
Payment of the lesser of this or the “Payment of 90% of the tax on the return for the current year” will provide “safe harbor” to the taxpayer.
In computing the amount of estimated payments due, an individual taxpayer may choose between the annualized method (90% of current year’s tax), or the prior year method (100% of last year’s tax) unless the taxpayer’s AGI exceeds $150,000 then they must use 110% of last year’s tax. (true or false)
true
Provided the taxes due after withholding are not over $1,000, there is no penalty for underpayment of estimated taxes. (true or false)
true
A taxpayer may claim a credit against federal income taxes due for foreign income taxes paid to a foreign country or a US possession. (true or false)
True
There is a limitation on the amount of the credit an individual can obtain. In lieu of this credit, an individual might find it better to deduct the taxes as an itemized deduction (NOT subject to the 2% floor) instead.
The adoption fees would be qualifying expenses for the tax credit. Medical expenses (do or do not) apply?
Do not
The child and dependent care credit (is or is not) nonrefundable?
IS Nonrefundable
The only refundable credits are the child tax credit (which is a different credit with a similar name), the earned income credit, withholding taxes, portions of the Hope scholarship credit, and excess Social Security Taxes paid. The child and dependent care credit is a “personal” tax credit.
The child must be under age 13 to be a qualifying child and for there to be a credit.
The maximum child and dependent care credit is 35% of eligible expenses, with a phase out for AGI over $15,000. There is no pure limit.
The maximum eligible for 1 dependent, though, is $3,000.Then it is further limited because it is limited to the lowest earned income of either spouse. In our example that would be mary’s $2,500. Due to their combined income level, of $62,500 they are in the 20% credit range. The credit is 20% of $2,500, or $500.
The credit decreases by 1 percent for each $2,000 (or fraction) of AGI over $15,000, but not below 20%.
The Child care credit at the minimum rate of 20% for individuals with AGI of more than $43,000 is $600.
An employee who has had social security tax withheld in an amount greater than the maximum for a particular year, may claim the excess as a credit against income tax, if that excess resulted from correct withholding by two or more employers. (true or false)
true
