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9 Cards in this Set
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88. If a taxpayer is filing as a sole proprietor, he or she generally will have to make estimated tax payments if he orshe expects to owe tax of what amount or more when filing the return? A. $1,000B. $2,000C. $3,000D. $4,000 |
A. $1,000 Estimated tax liability exists when individuals will owe at least $1,000 in tax, after subtracting withholding and creditsand withholding and credits will be less than the smaller of: 90% of the tax to be shown on this year's tax return. 100% of the tax shown on last year's return (110% if AGI is over $150,000).
If the taxpayer is filing as a sole proprietor, partner, S corporation shareholder, and/or a self-employed individual, heor she generally will have to make estimated tax payments if he or she expects to owe tax of $1,000 or more whenfiling the return. If the taxpayer is filing as a corporation he or she generally has to make estimated tax payments forthe corporation if he or she expects it to owe tax of $500 or more when filing its return. |
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89. No late payment penalty will be imposed if the tax paid through withholding, estimated tax payments or anypayment accompanying Form 4868 is at least what percentage of the total tax due? A. 60% B. 75% C. 80% D. 90% |
D. 90% The taxpayer is considered to have reasonable cause for the period covered by this automatic extension if at least 90%of the actual tax liability is paid before the regular due date of the return through withholding, estimated tax payments, orpayments made with Form 4868. |
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90. To figure whether she should pay estimated tax for 2014, Jane determines her expected adjusted gross income(AGI) for 2014 will be $82,800. Her AGI for 2013 was $73,700. Her total tax on her 2013 return (Form 1040, line61) was $9,001. Using the 2014 Estimated Tax Worksheet she figures her total 2014 estimated tax to be$11,015. Her tax expected to be withheld in 2014 is $10,000. She will file as head of household and expects norefundable credits in 2014. All of the following are true regarding Jane’s estimated taxes except: A.She expects to owe at least $1,000 for 2014 after subtracting her withholding from her expected totaltax B. She expects her income tax withholding to be at least 90% of the tax to be shown on her 2014 return C.Jane does not need to pay estimated tax D. Jane will need to pay estimated tax |
D. Jane will need to pay estimated tax She expects her income tax withholding ($10,000) to be at least 90% of the tax to be shown on her 2014 return($11,015 × 90% = $9,913.50). Jane does not need to pay estimated tax. |
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91. The taxpayer will owe a penalty for any 2014 payment period for which his or her estimated tax payment plus hisor her withholding for the period and overpayments for previous periods was less than what percent of his or her2013 tax? A. 20%B. 21%C. 22.5%D. 25% |
D. 25% The taxpayer will owe a penalty for any 2014 payment period for which his or her estimated tax payment plus his orher withholding for the period and overpayments for previous periods was less than the smaller of: 22.5% of his or her 2014 tax. 25% of his or her 2013 tax. (The taxpayer’s 2013 tax return must cover a 12-month period). |
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92. Using the short method in Part III of Form 2210, Alvaro determines his total underpayment for 2014 was $2,000.If he meets all other conditions and the entire amount was paid on or after April 15, 2015, what is the amount ofhis underpayment penalty? A. $0B. $40C. $45D. $52 |
B. $40 From Part III of Form 2210, to determine the penalty the taxpayer multiplies his or her total underpayment (from line)14 by .01995. In this case, $2,000 x .01995 = $40 |
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93. If the taxpayer thinks he or she owes the estimated tax penalty, but does not want to figure it when he or shefiles the tax return, the taxpayer may not have to. Generally, the IRS will figure the penalty for him or her andsend a bill. The taxpayer only needs to figure his or her penalty in which of the following situations? A. The taxpayer is requesting a waiver of part, but not all, of the penalty B. The taxpayer is using the annualized income installment method to figure the penalty C. The taxpayer is treating the Federal income tax withheld from his or her income as paid on the dates actually withheld D. All of the above |
D. All of the above The taxpayer only needs to figure his or her penalty in the following three situations: The taxpayer is requesting a waiver of part, but not all, of the penalty. The taxpayer is using the annualized income installment method to figure the penalty. The taxpayer is treating the Federal income tax withheld from his or her income as paid on the dates actually withheld. |
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94. Ray, who is single and 22 years old, was unemployed for a few months during 2013. He earned $6,700 in wagesbefore he was laid off, and he received $1,400 in unemployment compensation afterwards. He had no otherincome. Even though he had gross income of $8,100, he did not have to pay income tax because his grossincome was less than the filing requirement for a single person under age 65. He filed a return only to have hiswithheld income tax refunded to him. In 2014, Ray began regular work as an independent contractor and earned$28,000. Ray made no estimated tax payments in 2014 and he did owe tax at the end of the year. What amountdoes Ray owe for the underpayment penalty in 2014? A. $0B. $555C. $558D. $630 |
A. $0 The taxpayer does not owe a penalty if the total tax shown on his or her return minus the amount he or she paidthrough withholding (including excess Social Security and tier 1 railroad retirement (RRTA) tax withholding) is lessthan $1,000. Also, the taxpayer does not owe a penalty if he or she had no tax liability last year and he or she was aU.S. citizen or resident for the whole year. For this rule to apply, the taxpayer’s tax year must have included all 12months of the year. The taxpayer had no tax liability for 2013 if his or her total tax was zero or he or she was notrequired to file an income tax return. Ray does not owe the underpayment penalty for 2014 because he had no tax liability in 2013. |
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95. As a wage earner, the taxpayer pays Federal income tax by having it withheld from his or her pay during theyear. The withholding is based on the number of allowances he or she claims when filing Form W-4 -Employee's Withholding Allowance Certificate, with an employer. All of the following are true regarding thecompletion of Form W-4 except: A.A taxpayer can claim any number of allowances B.If the taxpayer has not changed jobs, he or she generally does not have to give his or her employer a new Form W-4 each year C. The taxpayer should try to have his or her withholding match his or her actual tax liability D. If an employer cannot withhold enough additional tax from the taxpayer’s wages, he or she may need to make estimated tax payments |
A. A taxpayer can claim any number of allowances An employed taxpayer must complete a Form W-4 - Employee's Withholding Allowance Certificate. Form W-4 tellsan employer the marital status, the number of withholding allowances, and any additional amount to use when theemployer deducts Federal income tax from the employee's pay. The taxpayer must specify a filing status and anumber of withholding allowances on Form W-4. He or she cannot specify only a dollar amount of withholding. Also,a taxpayer can claim only the number of allowances to which he or she entitled. |
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96. Meg Green works in a store and earns $46,000 a year. Her husband, John, works full-time in manufacturing andearns $68,000 a year. In 2014, they will also have $184 in taxable interest and $1,000 of other taxable income.They expect to file a joint income tax return. Meg and John complete Worksheets 1, 4, and 7 of Form W-4. Line5 of Worksheet 7 shows that they will owe an additional $4,459 after subtracting their withholding for the year.All of the following are true regarding their new Form W-4 except: A.They can divide the $4,459 any way they want B. They can enter an additional amount on either of their Forms W-4 C. They can divide the additional amount between them D. They must apply the additional withholding amount to Meg’s taxable income |
D. They must apply the additional withholding amount to Meg’s taxable income A taxpayer is more likely to need to increase his or her withholding if he or she has more than one job or if he or sheis married filing jointly and his or her spouse also works. If this is the case, the taxpayer can increase his or herwithholding for one or more of the jobs. He or she can apply the amount on Worksheet 1-7, line 5, to only one job ordivide it between the jobs any way he or she wishes. In this case, they can divide the $4,459 any way they want.They can enter an additional amount on either of their Forms W-4, or divide it between them. |
