Tax Credits and Deductions

Chapter 9

42) Tim and Martha paid $7,900 in qualified employment-related expenses for their three young children who live with them in their household. Martha received $1,800 of dependent care assistance from her employer, which was properly excluded from gross income. The couple had $57,000 of AGI earned equally. What amount of child and dependent care credit can they claim on their Form 1040? How would your answer differ (if at all) if the couple has AGI of $36,000 that was earned entirely by Tim?

49) In December 2013, Jeremy and Celeste paid the following amounts for their daughter, Alyssa, to attend the University of Colorado during 2013-2014. Alyssa was in her first year of college and attended full-time.

Tuition and fees (for fall semester 2013) $1,950

Tuition and fees (for spring semester 2014) 1,000

Books 600

Room and Board 1,200

The spring semester at the University of Colorado begins in January. In addition to the above, Alyssa's Uncle Devin sent $800 for her tuition directly to the university. Jeremy and Celeste have modified AGI of $165,000. What is the amount of qualifying expenses for the purposes of the American opportunity tax credit (AOTC) in 2013? What is the amount of the AOTC that Jeremy and Celeste can claim based on their AGI?

Chapter 10

49) Allison is paid $975 per week. What is the amount of federal income tax withheld from Allison's paycheck under the following conditions? Use the percentage method table in the Appendix to this chapter.

A) Allison is single and claims two withholding allowances.

B) Allison is married and claims two withholding allowances.

C) Allison is single and claims no withholding allowance.

57) Lauprechta Inc. Company has the following employees on payroll:

Semimonthly Payroll Withholding Allowances Marital Status

Naila $4,800 3 Married

Wilfred $7,250 4 Married

Stephanie $2,800 1 Single

Tanya $3,600 2 Single

Complete the table for taxes to be withheld for each pay period.

Employee Federal Social Security Medicare Total Taxes

Withholding Tax Tax Tax Withheld




Chapter 11

49) Will, who is single and age 50, is employed as a full-time tax accountant at a local manufacturing company where he earns $73,000 per year. He participates in a pension plan through his employer. Will also operates a small tax practice in his spare time during tax season and has net Schedule C income of $8,000. He is interested in establishing and contributing to other retirement plans. What options are available to Will?

52) Ken is a self-employed architect in a small firm with four employees: himself, his office assistant, and two drafters, all of whom have worked for Ken full-time for the last four years. The office assistant earns $30,000 per year and each drafter earns $40,000. Ken's net earnings from self-emplyment (after deducting all expenses and one-half of self-employment taxes) are $310,000. Ken is considering whether to establish a SEP plan and has a few questions:

A) Is he eligible to establish a SEP Plan?

B) Is he required to cover his employees under the plan? Why or why not?

C) If his employees must be covered, what is the maximum amount that can be contributed on their behalf?

D) If the employees are not covered, what is the maximum amount Ken can contribute for himself?

E) If Ken is requied to contribute for his employees and chooses to contribute the maximum amount, what is the maximum amount Ken can contribute for himself? (Hint: Calculate the employee amounts first.) Ignore any changes in Ken's self-employment tax.
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