- Scott is 15 years old and qualifies as a dependent on his parents’ tax return.
In current year, he earned $2,500 from a part-time job and received $800 of dividend income.
What is Scott’s federal taxable income?
a.
$3,300
b.
$2,500
c.
$450
d.
$0
C
- Shannon is 16 years old and is a qualified dependent of her mother. Shannon earns $1,500 as
a counselor at a church summer camp and receives $2,500 of interest on a savings account
established by her grandparents. Shannon’s federal taxable income for the current year is:
a.
$ – 0 –
b.
$1,500
c.
$2,150
d.
$2,500
e.
$3,100
C
- Brian is 18, a full-time student, and a dependent on his parent’s return.
His income consists of interest of $1,300, and $2,500 from being a lifeguard.
His parent’s taxable income is $72,000.
What is Brian’s federal income tax liability for the current year?
a.
$ -0-
b.
$95
c.
$130
d.
$250
e.
$295
B
- Linda is a qualifying widow in 2014. In 2014, she reported $75,000 of taxable
income (all ordinary). What is her gross tax liability using the tax rate schedules?
a.
$10,463
b.
$15,035
c.
$14,875
d.
$13,518
e.
Other
A
- Jamie is single. In 2014, she reported $100,000 of taxable income, including a
long-term capital gain of $5,000. What is her gross tax liability (use the tax rate schedules)?
a.
$23,117
b.
$21,617
c.
$20,526
d.
$15,000
e.
Other
C
- Angelena files as a head of household. In 2014, she reported $50,000 of taxable income,
including a $10,000 qualified dividend.
What is her gross tax liability, rounded to the nearest whole dollar amount (use the tax rate schedules)?
a.
$5,393
b.
$5,442
c.
$7,500
d.
$7,268
e.
Other
B
- The Olympians have three children. The kiddie tax applies to unearned income
received by which of the following children?
a.
Poseidon is a 20-year-old full-time student who does not support himself
A
b.
Demeter, a 23-year-old full-time student who supports herself with a job at a grocery store
c.
Zeus is 20 years old and not a student
d.
None of the above.
Because Poseidon is under the age of 24, a full time student, and does not support himself, his income is subject to the kiddie tax.
- Assuming the kiddie tax applies, what amount of a child’s income is subject to the kiddie tax?
a.
All of it
b.
All of the unearned income
C
c.
The net unearned income
d.
Taxable income less the standard deduction
The kiddie tax base is the child’s net unearned income. Net unearned income is the lesser of (1) the child’s gross unearned income minus $2,000 or (2) the child’s taxable income (the child is not taxed on more than her taxable income).
- During 2014, Montoya (age 15) received $2,200 from a corporate bond.
He also received $600 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?
a.
$0
b.
$2,200
c.
$2,800
d.
$1,800
e.
Other
D
$2,800 interest income minus $1,000 standard deduction for person claimed as a dependent on another’s tax return.
- During 2014, Jasmine (age 12) received $2,400 from a corporate bond. She also received $600 from a savings account established for her by her parents. Jasmine lives with her parents and she is their dependent. Assuming her parents’ marginal tax rate is 28%, what is Jasmine’s gross tax liability?
a.
$0
b.
$95
c.
$308
d.
$380
e.
Other
D
Jasmine’s taxable income is $2,000 ($3,000 minus $1,000 standard deduction). Her net unearned income is $1,000 ($3,000 gross unearned income minus $2,000). This is taxed at 28% ($280 tax).
The remaining $1,000 of her taxable income ($2,000 minus 1,000 taxed at parents’ rate) is taxed at 10% ($100 tax). Total tax is $380 ($280 + 100).
- Hestia (age 17) is claimed as a dependent by her parents, Rhea and Chronus.
In 2014, Hestia received $1,000 of interest income from a bond that she owns.
In addition, she has earned income of $200.
What is her taxable income for 2010?
a.
$0
b.
$200
c.
$700
d.
$1,200
e.
Other
B
Gross income of $1,200 less the greater of (1) $1,000 or (2) $550 ($200 earned income + $350) is $200.
- Montague (age 15) is claimed as a dependent by his parents Matt and Mary.
In 2014, Montague received $5,000 of qualified dividends and he received $800 from a part time job.
What is his taxable income for 2014?
a.
$100
b.
$3,900
c.
$4,650
d.
$4,850
e.
Other
C
Gross income of $5,800 less the greater of (1) $1,000 or (2) $1,150 ($800 earned income + $350) is $4,650.
- Hester (age 17) is claimed as a dependent by his parents, Charlton and Abigail.
In 2014, Hester received $10,000 of qualified dividends and he received $6,000 from a part time job.
What is his taxable income for 2014?
a.
$16,000
b.
$15,050
c.
$9,800
d.
$9,700
e.
Other
C
Gross income of $16,000 less the greater of (1) $1,000 or (2) $6,200 ($6,000 earned income + $350—not to exceed the basic standard deduction amount of $6,200) is $9800.
LO 2
Compute a taxpayer’s alternative minimum tax liability and describe the tax
characteristics of taxpayers most likely to owe the alternative minimum tax.
- Which of the following items is not added back to regular taxable income
in computing alternative minimum taxable income?
a.
Interest expense on mortgage for acquisition debty.
A
b.
Real property taxes.
c.
Tax exempt interest from a private activity bond issued in 2007.
d.
Miscellaneous itemized deductions in excess of the 2% floor.
Interest expense on a home mortgage is deductible for AMT and so is not added back to regular taxable income. Home equity interest is added back if proceeds from the loan are not used to acquire or substantially improve the home.
- Persephone has a regular tax liability of $12,475 and a tentative minimum tax of $11,500.
Given just this information, what is her alternative minimum tax liability for the year?
a.
$0
b.
$11,500
c.
$975
d.
$12,475
e.
Other
A
Because Persephone’s regular tax liability exceeds the tentative minimum tax, she does not owe any alternative minimum tax.
- Harmony reports a regular tax liability of $15,000 and tentative minimum tax of $17,000.
Given just this information, what is her alternative minimum tax liability for the year?
a.
$0
b.
$2,000
c.
$15,000
d.
$17,000
e.
Other
B
Because Harmony’s tentative minimum tax exceeds her regular tax,
the $2,000 difference is her alternative minimum tax liability for the year.
- In 2014, Maia (who files as a head of household) reported regular taxable income of $115,000.
She itemized her deductions, deducting $5,000 in charitable contributions and $3,000 in state income taxes. She claimed exemptions for herself and her son, Hermes, ($3,950 each).
What is Maia’s alternative minimum taxable income?
a.
$118,000
b.
$115,000
c.
$118,700
d.
$125,900
e.
Other
D
$125,900 = $115,000 + $3,000 + $3,950 + $3,950.
LO 3
Calculate a taxpayer’s employment and self-employment taxes payable and
explain tax considerations relating to whether a taxpayer is considered to be an
employee or a self-employed independent contractor.
- Asteria earned a $25,500 salary as an employee in 2014. How much should her employer
have withheld from her paycheck for FICA taxes (rounded to the nearest whole dollar amount)?
a.
$370
b.
$1,071
c.
$1,951
d.
$3,392
e.
Other
C
$25,500 x (.062 + .0145).
- Baker earned $120,000 of salary as an employee in 2014. How much should his employer
have withheld from his paycheck for FICA taxes (rounded to the nearest whole dollar amount)?
a.
$1,595
b.
$8,170
c.
$8,994
d.
$6,215
e.
Other
C
- Hera had FICA taxes withheld on the $120,000 salary she received as an employee in 2014.
Her husband, Zeus, made $70,000 as an employee at a Greek Gyro stand. How much must
Zeus have withheld for FICA taxes for 2014, assuming he files a joint return with Hera?
a.
$0
b.
$1,015
c.
$5,355
d.
$3,955
e.
Other
C
The cap on Social Security taxes applies to each individual taxpayer. Thus, the fact that Hera has already exceeded the cap does not affect the FICA taxes owed by Zeus. ($70,000 * .0765).
- Which of the following statements regarding FICA taxes is true?
a.
Low income employees are not required to pay FICA taxes.
B
b.
An employee who has two different employers during the year may be
entitled to a tax credit for overpaid FICA taxes
c.
The maximum amount of Medicare taxes an employee is required to pay is
capped each year but the maximum amount of Social Security taxes is not.
d.
The wage base limit for FICA taxes depends on the taxpayer’s filing status.
The cap on Social Security taxes applies to the taxpayer even if the taxpayer had more than
one employer. Employers withhold on the salary they individually pay so in the aggregate
if the taxpayer earns more than the Social Security wage base limit via multiple jobs,
there may be more withheld than the taxpayer is required to pay.
- Which of the following suggests that a working taxpayer is an independent contractor
rather than an employee?
a.
Works for more than one firm
E
b.
May realize a loss from business activities
c.
Sets own working hours
d.
Works somewhere other than on employer premises
e.
All of the above suggest independent contractor status
All factors suggest the worker is an independent contractor.
- Which of the following statements best describes the deductions independent contractors
may claim for valid business expenses?
a.
for AGI deductions
A
b.
from AGI deductions not subject to the two percent of AGI floor
c.
from AGI deductions subject to a two percent of AGI floor
d.
for AGI deductions limited to income from the business activities
Independent contractors deduct expenses as for AGI calculations, unlike employees, whose from AGI deductions for employee expenses are subject to a two-percent floor.
- Which of the following best describes the manner in which self-employed taxpayers
may deduct self-employment taxes?
a.
Deduct one-half from AGI.
b.
Deduct entire amount from AGI.
C
c.
Deduct one-half for AGI.
d.
Deduct entire amount for AGI.
e.
No deduction.
This is a for AGI deduction as it is considered a cost of doing business. One-half is deductible.
- For taxpayers who receive both salary as an employee and self-employment income as an
independent contractor in the same year, which of the following statements regarding
FICA and self-employment taxes is most accurate?
a.
The Social Security limit applies to the salary but not to the self- employment income.
C
b.
The Social Security limit applies to the self-employment income but not to the salary.
c.
Salary is first applied against the Social Security limit and then self-employment income is applied against the Social Security limit.
d.
Self-employment income is first applied against the Social Security limit and then salary is applied against the Social Security limit.
Salary is applied against the limit first. This is taxpayer favorable because the self-employment income is taxed at a higher rate and not as much of the income will be subject to the Social Security tax than would have been if self-employment income was applied first.
- Which of the following statements concerning differences between employees
and independent contractors is most accurate?
a.
Employees and independent contractors deduct business expenses as
B
miscellaneous itemized deductions.
b.
While employees are typically eligible for nontaxable fringe benefits from
employers, independent contractors are not.
c.
Employers are required to withhold either FICA or self employment taxes from
compensation paid to employees and compensation paid to independent contractors.
d.
Employers typically withhold federal income taxes from compensation paid to
employees and to independent contractors.
Non-employees are ineligible for nontaxable fringe benefits.
LO 4
Describe the different general types of tax credits, identify specific tax credits,
and compute a taxpayer’s allowable child tax credit, child and dependent care credit,
American opportunity credit, lifetime learning credit, and earned income credit.
- Deana and Joseph are married and have two children ages 17 and 15. Their adjusted gross
income for the current year is $100,000. What amount can they claim for the child tax credit?
a.
$ – 0 –
b.
$ 600
c.
$1,000
d.
$1,200
e.
$2,000
C
- Maurice and Lana are married and have two children ages 12 and 10. Their adjusted gross
income for the current year is $120,000. What amount can they claim for the child tax credit?
a.
$ 500
b.
$ 800
c.
$1,000
d.
$1,500
e.
$2,000
D
- Susan files as head of household and has three dependent children ages 12, 14, and 16.
Her AGI is $85,000. How much can Susan claim for the child tax credit for the current year?
a.
$3,000
b.
$2,750
c.
$2,500
d.
$0
e.
Other Amount
C
- Jerry has two dependent children, Greg and Mandy, who are attending an accredited college
in the current year. Greg is a graduate student (5th year of college) who had $7,000 for tuition and fees. Mandy, a freshman with no prior postsecondary education, had tuition expenses of $4,000.
Jerry meets all the income and filing status requirements for the education credits. There is no tax-free assistance to pay these expenses. Jerry’s adjusted gross income equals $50,000.
What is the maximum credit that Jerry may claim on his federal income tax return for the current year?
a.
$2,200 Lifetime Learning Credit.
D
b.
$3,000 AOTC (Hope) Credit.
c.
$1,650 AOTC (Hope) Credit & $2,000 Lifetime Learning Credit
d.
$2,500 AOTC (Hope) Credit & $1,400 Lifetime Learning Credit
- Ruth had wages of $34,000 and her husband John’s wages were $27,000.
They have three children ages 3, 6 and 9. They paid a total of $8,000 to Creative Child Care School, Inc.
Assuming a 20% credit rate, what will be their child and dependent care credit?
a.
$960
b.
$1,200
c.
$1,600
d.
$6,000
e.
Other
B
- Floyd is a single parent with an 11-year-old daughter. Floyd’s adjusted gross income is $27,000,
and he pays $2,100 in qualified child-care expenses. Floyd can claim a child-care credit of:
a.
$ 420
b.
$ 441
c.
$ 609
d.
$ 735
e.
$2,100
C
- Juan and Wanda are married and file a joint return. They each earn a salary of $50,000 ($100,000 total). They do not have deductions for Adjusted Gross Income.
They fully support and claim exemptions for two children, Bud (age 3) and Sarah (age 22).
They pay child care expenses of $5,000 for Bud for the entire year, so that both Juan and Wanda can work full-time. Sarah is a full-time student throughout the year in graduate school Big Private University.
Juan and Wanda pay all of the cost of supporting Sarah, including tuition and other expenses qualifying for the life-time learning credit of $22,000.
How much child credit may Juan and Wanda claim for the year?
a.
$2,000
b.
$1,000
c.
$500
d.
$400
e.
Other
B
- Continue the previous question for Juan and Wanda.
How much credit may Juan and Wanda claim for the year for child and dependent care expenses?
a.
$5,000
b.
$3,000
c.
$1,000
d.
$600
e.
Other
D
- Continue the previous question for Juan and Wanda.
How much credit may Juan and Wanda claim for the tuition expenses?
a.
$1,000
b.
$2,000
c.
$3,000
d.
$10,000
e.
$22,000
B
- Which of the following statements concerning tax credits is true?
a.
The tax benefit a taxpayer receives from a credit depends on the taxpayer’s marginal tax rate.
C
b.
Refundable tax credits are limited to a taxpayer’s gross tax liability.
c.
Tax credits are generally more beneficial than tax deductions.
d.
None of the above is a true statement.
Credits reduce taxes payable dollar for dollar while deductions reduce taxes payable
at the marginal tax rate.
- Which of the following is not one of the general tax credit categories?
a.
Nonrefundable personal
b.
Refundable personal
D
c.
Business
d.
Refundable business
Business credits are nonrefundable.
- Which of the following statements regarding the child tax credit is false?
a.
The child for whom the credit is claimed must be under the age of 15 at the end of the year.
A
b.
The credit is subject to phase-out based on the taxpayer’s AGI.
c.
The full credit for a child who qualifies is $1,000.
d.
The child for whom the credit is claimed must meet the definition of a qualifying child.
The child must be under age 17 at the end of the year.
Ray and Ann are married filing jointly in 2014. Their AGI was $123,440.
They have 6 children for whom they may claim the child tax credit.
What amount of child tax credit may they claim on their 2014 tax return?
a.
$5,300
b.
$6,000
c.
$12,000
d.
$4,000
e.
Other
A
- The amount of expenditures eligible for the child and dependent care credit is the least of three amounts. Which of the following is not one of those amounts?
a.
The total amount of child and dependent care expenditures for the year
C
b.
$3,000 for one qualifying person or $6,000 for two or more qualifying persons
c.
The dependent’s earned income for the year
d.
The taxpayer’s earned income for the year
The reason there is a tax credit is because the taxpayer is taking care of someone who cannot take care of him/herself, thus C does not make sense.
- Which of the following statements regarding the child and dependent care credit is false?
a.
Taxpayers may claim a credit for only a portion of qualifying dependent care expenditures.
B
b.
If a taxpayer’s income is too high, she will be ineligible to claim any child and dependent care credit.
c.
A single taxpayer must have earned income to claim any child and dependent care credit.
d.
A taxpayer is not eligible to claim the dependent care credit if a dependent relative provides the care.
The dependent care credit is not fully phased out no matter the taxpayer’s income level.
- Trudy is Jocelyn’s friend. Trudy looks after Jocelyn’s four-year-old son during the day so Jocelyn can go to work. During the year, Jocelyn paid Trudy $4,000 to care for her son. Jocelyn’s AGI was $30,000.
What is the amount of Jocelyn’s child and dependent care credit?
a.
$0
b.
$810
c.
$1,080
d.
$3,000
e.
Other
B
The maximum expenditure for one child is $3,000. The applicable percentage is 27%. So, the allowable credit is $810 ($3,000 x 27%).
- Kaelyn’s mother, Judy, looks after Kaelyn’s four-year-old twins so Kaelyn can go to work (she drops off and picks up the twins from Judy’s home everyday). Since Judy is a relative, Kaelyn made sure, for tax purposes, to pay her mother the going rate for child care ($6,300 for the year). Kaelyn’s AGI was $36,000?
What is the amount of Kaelyn’s child and dependent care credit?
a.
$1,440
b.
$2,100
c.
$6,000
d.
$0
e.
Other
A
Judy is not a dependent relative of Kaelyn, so the expenditures are qualified up to $6,000 (for two qualifying persons). The applicable percentage is 24%. Allowable credit is $1,440 ($6,000 x 24%).
- Which of the following statements regarding the child and dependent care credit is true?
a.
A married couple must file jointly to claim the credit.
A
b.
A taxpayer may claim a credit for dependent care expenses for a dependent who is 14 years old or older but only if the dependent lives in the taxpayer’s home for the entire year.
c.
All else equal, a taxpayer making qualifying expenditures for 3 children may claim more dependent care credit than a taxpayer making (the same amount of) qualifying expenditures for two children.
d.
None of the above statements is true.
Married taxpayers must file jointly and the credit is based on the income of the lesser-earning spouse.
- Which of the following is not true of the American opportunity credit?
a.
A taxpayer with multiple eligible dependents can claim a credit for each
D
dependent’s qualifying expenses
b.
The credit is available for students during their first four years of postsecondary education only
c.
It is phased out based on the taxpayer’s AGI
d.
A taxpayer may not claim a credit unless the taxpayer pays a dependent’s qualifying
educational expenses
The taxpayer may claim the credit if the dependent pays the expenses or a third party
pays the expenses on behalf of the dependent.
- Which of the following is not true of the lifetime learning credit?
a.
It is a nonrefundable credit.
C
b.
The credit can be claimed by taxpayers who have graduated from college and are taking professional training courses to improve their job skills.
c.
A taxpayer with multiple dependents can claim a credit for each dependent’s qualifying expenses.
d.
The credit is subject to phase out based on the taxpayer’s AGI.
The credit applies to the taxpayer and not to the number of the taxpayer’s dependents.
- Which of the following is not a true statement about the American opportunity credit (AOC) and lifetime learning credits?
a.
A taxpayer may not report both an AOC and a lifetime learning credit on the same tax return.
A
b.
Certain educational expenses qualify for both credits but taxpayers must claim one credit or the other for the expenditures (the taxpayer cannot claim both credits for the same expenditures).
c.
Taxpayers may choose to either (1) deduct qualifying education expenses of an individual as for AGI deductions or claim educational credits for the individual’s expenses (but not both).
d.
The AGI phase-out threshold for phasing out the AOC is higher than the
AGI phase-out threshold for the lifetime learning credit.
A taxpayer may claim both credits on the same tax return.
- Carolyn has an AGI of $38,000 (all from earned income), two qualifying children, and is filing as a head of household. What amount of earned income credit is she entitled to claim for 2014?
a.
$0
b.
$624
c.
$3,860
d.
$4,488
e.
$5,112
B
$5,112 maximum credit minus $4,488 phase-out [($38,000 – $16,690) x .2106] = $624.
- Which of the following tax credits is fully refundable?
a.
American opportunity credit
b.
Dependent care credit
C
c.
Earned income credit
d.
None of the above
Because it is refundable, the earned income credit is sometimes referred to as a negative income tax.
- Cassy reports a gross tax liability of $1,000. She also claims $400 of nonrefundable
personal credits, $700 of refundable personal credits, and $200 of business credits.
What is Cassy’s tax refund or tax liability due after applying the credits?
a.
$1,000 taxes payable
b.
$0 refund or taxes payable
D
c.
$700 refund
d.
$300 refund
$1,000 tax liability minus $400 nonrefundable personal credits minus $200 (business credit is nonrefundable) minus $700 refundable credit = ($300). (The last $700 is refundable.)
LO 5
Explain taxpayer filing and tax payment requirements and describe in general terms
how to compute a taxpayer’s underpayment, late filing, and late payment penalties.
- Mr. T is age 21, single, and cannot be claimed as a dependent by another taxpayer.
He does not have any self-employment income.
For the current year, he must file a federal income tax return if he had gross income of at least:
a.
$2,550
b.
$3,050
c.
$4,000
d.
$10,150
D
- Al is single, 65 years old, and has no dependents.
Al will not be required to file a tax return in for 2014 if:
I.
his gross income does not exceed $11,200.
II.
his only income is $18,000 of social security benefits.
a.
Only statement I is correct.
b.
Both statements are correct.
B
c.
Only statement II is correct.
d.
Neither statement is correct
- Sheryl’s AGI is $200,000. Her current tax liability is $52,068. Last year, her tax liability
was $48,722. She will not owe underpayment penalties if her total estimated tax payments are at
least which of the following (rounded) amounts (assume she makes the required payments each quarter)?
a.
$46,861
b.
$48,722
c.
$51,547
d.
$53,594
A
Because Sheryl’s AGI is over $150,000, her estimated payments must be either 90 percent of her current tax liability which is $46,861 or 110 percent of her previous year’s tax liability of $53,594.
- If an employer withholds taxes from an employee, in general, when are these taxes
treated as being paid to the IRS?
a.
As withheld
C
b.
As the employee requests on his/her W-4 form
c.
Evenly throughout the year
d.
On April 15
In general, even if the amount withheld changes throughout the year, the withholdings will be treated as evenly withheld throughout the year.
- Which of the following statements about estimated tax payments and underpayment penalties is true for individual taxpayers?
a.
Taxpayers who have paid their full tax liability by the original tax return
C
due date are protected from underpayment penalties.
b.
Taxpayers who have paid their full tax liability by the extended tax return due date
are protected from underpayment penalties.
c.
Taxpayers who have uneven income streams can pay estimated tax quarterly in
uneven amounts and not be susceptible to underpayment penalties.
d.
Taxpayers who have paid their required amount of estimated tax, even though
not on time, are protected from underpayment penalties.
Even if the stream of income changes throughout the year, quarterly estimated tax can be paid using rolling percentages of the estimated tax liability for the year.
- Which of the following statement(s) concerning estimated tax payments and
underpayment penalties for individuals is (are) true?
a.
Whether taxpayers are subject to underpayment penalties is determined on a quarterly basis.
D
b.
Due dates for estimated tax payments for a given year are April 15, June 15, September 15 of
that year and January 15 of the next year unless these dates fall on a weekend or a holiday.
c.
The amount of penalty depends on the amount of the underpayment among other factors.
- Happy, Sleepy, Grumpy, and Doc all did not make adequate estimated payments.
Which of them will not owe underpayment penalties for 2014 given the following information?
Tax liability 2014
Tax liability 2013
Tax Liability 2012
Happy
$2,200
$0
$500
Sleepy
$1,500
$500
$700
Grumpy
$1,200
$200
$0
Doc
$800
$1,100
$1,001
a.
Happy
b.
Sleepy
c.
Grumpy
d.
Doc
e.
Two of these
E
Happy will not have underpayment penalties because he did not owe taxes last year.
Doc will not have underpayment penalties because his tax liability is less than $1,000.
- Which of the following is not true of the extension to file an individual tax return?
a.
It is granted automatically by the IRS if requested
C
b.
It must be requested by the original due date of the return
c.
It extends the due date for the return and tax payments beyond the original due date of the tax return.
d.
The extension is for six months beyond the original due date
The extension is for filing the return—the taxes are still due on the original due date.
- What is the underpayment penalty rate that taxpayers pay when they underpay their estimated taxes?
a.
Federal short-term interest rate.
B
b.
Federal short-term interest rate plus three percentage points.
c.
Federal long-term interest rate.
d.
Zero. The government does not pay interest on overpayments.
The penalty rate is the federal short-term interest rate plus 3 percentage points.
- Billy filed 2014 tax return on June 5, 2014, without requesting an extension.
His total tax was $10,000.
He had no withholding tax and he made no estimated tax payments.
He paid $10,000 with return filed on June 5, 2014?
What is the total amount of his failure to file and failure to pay penalties?
a.
$500
b.
$550
c.
$1,000
d.
$1,100
e.
Other
C
- Which of the following statements regarding late filing penalties is true?
a.
If a taxpayer fails to file a tax return, the late filing penalty will
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continue to grow until the taxpayer files the tax return.
b.
The amount of the late filing penalty is the same for both fraudulent
failure to file and non-fraudulent failure to file.
c.
Taxpayers who owe no tax as of the due date of their tax returns are
not subject to late filing penalties even if they file late.
- Which of these statements regarding late filing penalties and/or late payment penalties is true?
a.
An extension of time to file the tax return protects a taxpayer from late payment
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penalties as long as the tax is paid by the extended due date of the return.
b.
The penalty rate for late filing penalties is less than the penalty rate for late payment penalties.
c.
If a taxpayer has not paid the full tax liability by the original due date of the return and the taxpayer has not filed a tax return by the due date of the return, the maximum late filing and late payment penalty will be no greater than the late filing penalty by itself.
d.
None of the above
The combined penalty cannot exceed 5% per month which is the amount of the late filing penalty.
