R2: Tax Computations and Credits

Question 1

Nonrefundable tax credits

Answer 1

• Retirement savings contribution credit

- Child and dependent tax credit

Question 2

Treatment of foreign income taxes paid

Answer 2

Credited against taxes due OR itemized deduction

Question 3

Refundable tax credits

Answer 3

• EITC
• Excess social security
• Child tax credit

Question 4

Estimated payments

Answer 4

• Liability in excess of $1,000

Lesser of:

• 90% of current tax return for the current year OR
• 100% of prior year’s liability paid in four installments

$150,000 AGI and above:
Lesser of:
- 90% of current tax return for the current year OR
- 110% of the prior year’s liability in four equal installments

Question 5

Child Tax Credit

Answer 5

• $400,000 AGI limit for married couples

- $2,000 per child

Question 6

An employee who has had Social Security tax withheld in an amount greater than the maximum for a particular year may claim

Answer 6

The excess as a credit against income tax, if that excess resulted from correct withholding by two or more employers

Question 7

Tax overpayments

Answer 7

• Current year estimated tax payments
• Federal tax withheld
• Extension payment

Question 8

Refundable portion of child tax credit

Answer 8

Maximum tax credit
(Tax liability)
=
Remaining credit

Take the lesser of:

1. Excess credit over liability (above)
2. Earned income less 2,500 x 15%
3. 1,400 per qualifying child

Question 9

Nonrefundable credits that cannot be carried forward

Answer 9

Child and dependent care
Lifetime learning credit
Saver’s credit
Credit for elderly and disable

Question 10

Family tax credit and American opportunity tax credit

Answer 10

partially refundable, cannot be carried forward

Question 11

Credits that can be carried forward

Answer 11

Adoption credit - 5 years
Foreign credit - 10 years
General business credit - carryback 1 year and forward 20 years