tax exam final 2

12966 Words Apr 27th, 2015 52 Pages
CHAPTER 4
David and Lilly Fernandez have determined their tax liability on their joint tax return to be $1,740. They have made prepayments of $1,100 and also have a child tax credit of $1,000. What is the amount of their tax refund or taxes due?

(1)Total tax$1,740
(2)Child tax credit1,000
(3)Prepayments1,100
Tax refund $(360) Explanation:
David and Lilly will receive a tax refund of $360 calculated as follows: Tax refund = $1,740 − $1,100 − $1,000 = −$360

Prepayments are fully refundable when payments exceed the taxes after credits because the refundable amount is essentially an overpayment of taxes.

2.
Jasper and Crewella Dahvill were married in year 0. They filed joint tax returns in years 1 and 2. In year 3, their
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b.

Married filing jointly with two personal exemptions and one dependency exemption for Steve. Steve meets the test to be Geneva and her husband’s qualifying child as follows: Test
Steve
Relationship
Yes, Steve is the taxpayers’ son. Age
Yes, under age 24 and a full-time student (and younger than parents). Residence
Yes, temporary absences away at school count as time in the parents’ home Support
Yes, even though the Steve earned $13,100, he did not use any of that money to provide for his support. Steve’s parents provided more than half (all, in fact) of his support for the year. A qualifying child is not subject to the gross income test.

c.

Head of household with two exemptions. Hamish is not a qualifying widower because he does not maintain a household for a dependent child. However, he does qualify for head of household because he is not married and he pays more than half the cost of maintaining a separate household that is the principal place of abode for his father, and his father also qualifies as his dependent (as a qualifying relative) as follows: Because Reggie is considered to be Hamish’s qualifying relative (and a qualifying person for purposes of the head of household filing status), Hamish may also claim a dependency exemption for Reggie. Test
Reggie

Relationship
Yes, Reggie is Hamish’s father. Age
Not applicable to qualifying relative Residence
Not applicable to qualifying
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