Assignment
1.Checks to pay your Federal taxes should be made payable to:
A. "IRS"
B. "U.S. Treasury"
C. "Cash"
D. "Joe the IRS Agent's Illegal Retirement Plan"
2.Fred is a full-time investor who calculates that his estimated tax liability after withholdings by his broker will be $950 in 2015. In the previous year (2014), his AGI was $125,000 and his tax liability after withholdings was $900. His estimated tax payments for 2015 must be equal to one of the following:
A. He can pay 90% of the tax on the current year return.
B. He can pay 100% of the tax on the prior year return.
C. He can pay 90% of the tax on the current year return determined by placing taxable income on an annualized basis for each quarter.
D. He does not have to pay estimated taxes in 2015.
E. Options A, B, and C are all correct.
3. Rob employs a women to clean his house every few weeks. He pays her a total $2,000 during the current year. What is the proper tax treatment of the FICA and Medicare tax for the cleaning lady?
A. None of the $2,000 is subject to FICA or Medicare tax.
B. The $2,000 is subject to the Medicare tax but not the FICA tax.
C. $500 is subject to the FICA and Medicare tax.
D. The entire $2,000 is subject to the FICA and Medicare tax.
4. Sam's 2014 tax liability was $8,000. He estimates his annual tax liability in 2015 to be $10,000 (earned evenly through the year). He has no taxes withheld because he is self-employed. How much is Sam's first quarter payment for 2015? Show your math or no credit, even if it is correct.
This calculation is for income taxes ONLY. Assume Sam wants his payment to be as small as possible but still enough to avoid penalties and his AGI is under $150,000 in all years.
5.The purpose of the estimated taxes option of making tax payments that are (1) based on a quarterly annualized income calculation AND (2) are at least 90% of the current year tax liability is to enable taxpayers with seasonal/uneven income sources to pay their taxes as the income is actually earned.
True
False
6. To avoid underpayment penalties, the required annual payments ("the safe harbor") for estimated taxes in 2015 should be:
A. 100% of the current year liability
B. 100% of the prior year liability
C. 110% of the prior year liability (if your prior year AGI is over $150,000).
D. Options B & C
E. Options A, B, and C.
7. Which of the following employees would not be exempt from the FICA and Medicare taxes on wages paid for household work?
A. The taxpayer's 20-year old sister
B. The taxpayer's wife
C. The taxpayer's 16-year-old daughter
D. The 14-year-old babysitter from down the street
8. Which of the following is not subject to self-employment tax?
A. Net earnings of the owner of a shoe store.
B. Net earnings of a self-employed lawyer
C. Distributive share of earnings of a partnership
D. Gain on the sale of real estate held for investment
E. Net earnings of the owner of a dry cleaner
9 Which of the following statements is NOT true?
A Net earnings from self-employment of $750 or less are not subject to self-employment tax.
B Self-employed persons who also earn wages at a regular job as an employee may subtract their employee wages from the maximum base amount used for calculating the social security portion of self-employment taxes.
C There is no limit to the amount of wages and self-employed earnings that are subject to Medicare tax.
D The maximum earnings base for the social security portion of the Self-Employment tax is usually adjusted each year for inflation.
E All of the above are correct.
10. Emily is a self-employed attorney during 2015 and she has no other work. Assuming that Emily's net profits from her practice are $50,000, calculate the total amount of her self-employment tax liability for 2015. Show your math or zero points will be given --- even if your answer is correct.