ACC 3410 Chapter 8 True/False

If both spouses of a married couple earn roughly equivalent high levels of wages, the couple is likely to pay a marriage penalty due to the nature of the tax rate schedules.

True

Long-term capital gains, dividends, and taxable interest income are all taxed at preferential rates.

False

The alternative minimum tax system requires taxpayers to apply an alternative tax rate on the regular income tax base to determine the amount of the alternative minimum tax.

False

All else equal, a reduction in regular income tax rates would require more taxpayers to pay the alternative minimum tax.

True

Employees must pay both Social Security tax and Medicare tax on the full amount of their wages no matter the amount of their wages.

False

Alton reported net income from his sole proprietorship of $90,000. To determine his self-employment tax, he would multiply $90,000 by the selfemployment tax rate.

False

Self-employed taxpayers are allowed to deduct the full amount of the selfemployment taxes they pay.

False

Employees are allowed to deduct a portion of the FICA taxes they pay.

False

Tax credits reduce a taxpayer's taxable income dollar for dollar

False

The earned income credit is sometimes referred to as a negative income tax.

True

Business credits are generally refundable credits.

False

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

An individual could pay 100 percent of her tax liability by the due date of her tax return and still be subject to underpayment tax penalties.

True

Depending on the calendar for a given year, the original (unextended) due date for an individual's tax return may be after April 15.

True

Individuals may file for and receive a six-month extension of time to file their tax return and pay their taxes without penalty.

False

When an employer withholds taxes from an employee, in general, those taxes are treated as paid to the IRS evenly throughout the year.

True