A single taxpayer with modified adjusted gross income of $28,000 makes a salary reduction contribution to her employer”s 401(k) plan of $3,000. Her retirement Saver”s Credit is: a. Correct. Because her MAGI is not more than $28,750, her credit is $3,000 × 10%, or $300. b. Incorrect. If her MAGI had been more than $17,250 but not more than $18,750, her credit would have been […]

Which of the following miscellaneous itemized deductions is entered directly on Schedule A? a. Correct. Tax preparation fees for a taxpayer”s personal income tax return do not have to be entered on any other form or schedule before being entered on Schedule A. b. Incorrect. Form 4684 must be used first to figure the loss from a theft of a taxpayer”s personal computer before entering […]

Marcia, a U.S. citizen who works in a foreign country, earned a salary of $110,000 in 2012 and has no other income. She files her return excluding $95,000 under the foreign earned income exclusion. She files her return using the single filing status and claims one personal exemption. What is the marginal tax rate on her taxable income? a. Incorrect. Marcia has some taxable income […]

Which of the following jobs away from home is a temporary assignment for the entire time the taxpayer is at the job? a. Correct. A temporary assignment must be one that is expected to last one year or less and in fact ends within this period. b. Incorrect. Even though the job is expected to last no more than one year, it is not temporary […]

A taxpayer itemizes deductions. The starting point for figuring AMT is: a. Incorrect. While gross income naturally factors into the computation of AMT, it is not the starting point. b. Incorrect. Adjusted gross income is the starting point for a taxpayer who claims the standard deduction. c. Correct. Adjusted gross income less itemized deductions is the starting point for a taxpayer who itemizes deductions. d. […]

An employee gives a customer a gift of two tickets to a Broadway show costing $200. The employee does not accompany the customer. What is the maximum deduction? a. Incorrect. $4 is the dollar limit on small items that are exempt from the usual business gift dollar limit. b. Incorrect. The dollar limit on business gifts of $25 need not be used here to claim […]

The inclusion amount for leased cars used for business is: a. Correct. The inclusion amount is a limit placed on the lease deduction for “luxury cars.” b. Incorrect. Although the effect of the inclusion amount is to increase the taxpayer”s taxable income, it does so by limiting the deduction. The inclusion amount is not itself added back to income. c. Incorrect. There is no dollar […]

A taxpayer whose EIC was previously disallowed due to reckless disregard is barred from claiming the credit for: a. Incorrect. One year is not the full period in which the EIC cannot be claimed following a reduction or disallowance due to recklessness. b. Correct. The EIC cannot be claimed for two years if the credit was previously reduced or disallowed due to reckless or intentional […]

Which form must be filed with the return following a disallowance or reduction of EIC for any reason other than a math or clerical error? a. Incorrect. Worksheet A is used to figure income for taxpayers who are employees. b. Incorrect. Worksheet B is used to figure income for taxpayers with self-employment income. c. Correct. Form 8862 must be used following a reduction or disallowance […]

The maximum amount of the child and dependent care credit for a taxpayer with two qualifying children is: a. Incorrect. $1,050 is the maximum credit amount for a taxpayer with one qualifying person ($3,000 × 35%). b. Correct. $2,100 is the maximum credit amount for a taxpayer with two or more qualifying persons ($6,000 × 35%). c. Incorrect. $3,000 is the maximum amount of work-related […]