Answered: Which of the following best describes…

Which of the following best describes the actions Enzo must take to substantiate the taxpayer's eligibility for the credits?

Income Tax Fundamentals 2020

38th Edition

ISBN:9780357391129

Author:WHITTENBURG

Publisher:WHITTENBURG

Chapter7: Tax Credits

Section: Chapter Questions

Problem 6MCQ: For purposes of determining income eligibility for the premium tax credit, household AGI is AGI for...

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Question

Enzo is preparing a client's return. The taxpayer is claiming the Earned Income Credit (EIC), Child Tax Credit (CTC), Additional Child Tax Credit (ACTC), and the American Opportunity Tax Credit (AOTC). Which of the following best describes the actions Enzo must take to substantiate the taxpayer's eligibility for the credits?

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Step 1: Defining EIC, CTC, ACTC and AOTC

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For purposes of determining income eligibility for the premium tax credit, household AGI is AGI for the taxpayer and spouse AGI for the taxpayer, spouse, and any other household members required to file a tax return AGI for the taxpayer, spouse, and any other household members required to file a tax return plus any tax-exempt income AGI for the taxpayer, spouse, and any other household members required to file a tax return plus any tax-exempt income and untaxed Social Security benefits
Describe each of the various tax credits: Child Tax Credit, Earned Income Credit (EIC), Child and Dependent Care Credit, Premium Tax Credit, American Opportunity Credit, Lifetime Learning Credit, Foreign Tax Credit, and the Adoption Credit. For each of the tax credits listed above, are there limitations, such as those on filing status, ages of children, and income levels? Can they be used for the taxpayer, spouse, and/or dependents? Are there specific criteria used to determine if a taxpayer qualifies for the credit?
When determining earnings subject to SE tax, the taxpayer may want to use one of the optional methods whether if they have a small net profit or loss and which of the following conditions applies A. They are eligible to receive the Additional Child Tax Credit B. They can claim a Credit for Dependent or Child Care Expenses C. Taxpayer wants to receive a Credit for Social Security Benefit Coverage D. All of the above
Explain two income tax credits available to your client to reduce their income tax liability.
What is the maximum investment income a taxpayer is allowed to have and still be allowed to claim the earned income credit?$ Why is there an investment income limit in the tax law regarding the credit? The earned income credit is meant to assist
Choose the response that accurately completes the following sentence. A taxpayer claiming the Premium Tax Credit: May be claimed as a dependent on another person's return, as long as they are under age 27. May have employer-sponsored health care coverage. Will receive a refund if the amount of the credit is larger than the tax they owe. Must have purchased private coverage through a plan outside the Marketplace.
Choose the response that accurately completes the following sentence. A taxpayer claiming the Premium Tax Credit: May be claimed as a dependent on another person's return, as long as they are under age 27. May have employer-sponsored health care coverage. Must have purchased private coverage through a plan outside the Marketplace. Must be lawfully present in the United States.
In choosing between taking the standard deduction and itemizing deductions from AGI, what effect, if any, does each of the following have? The age of the taxpayer(s). The health (i.e., physical condition) of the taxpayer. Whether taxpayers rent or own their residence. Taxpayer’s filing status (e.g., single, married, filing jointly). Whether married taxpayers decide to file separate returns. The number of dependents the taxpayer can claim.
Work through the self-study problem in this section if you need to, but do not post your answer. Answer the following question: Why would a taxpayer want to misstate his or her income or claim ineligible persons as dependents when EITC is a factor on their return? What kinds of questions would you ask to make sure that the taxpayer is honestly reporting income and dependents?
When applying credits against a taxpayer's gross tax liability, nonrefundable personal credits are applied first, then business credits, and finally refundable personal credits. True or False
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