Question

1.During the current year, Margie earned wage income of $300,000. If Margie is single, which of the following statements regarding her Medicare tax liability is true?

a.Margie will owe both the regular 1.45 percent Medicare tax and the additional .9 percent Medicare tax on her entire wage income.

b.Margie will owe the regular 1.45 percent Medicare tax on her entire wage income and the additional .9 percent Medicare tax only on her wage income in excess of $200,000.

c.Margie will owe the regular 1.45 percent Medicare tax on her entire wage income and the additional .9 percent Medicare tax only on her wage income in excess of $250,000.

d.Margie's employer is required to withhold both the regular Medicare tax but does not withhold the additional .9 percent Medicare tax.

2.Ruth Anne, a single taxpayer, reported $152,600 alternative minimum taxable income before any exemption on her 2016 Form 1040. Calculate Ruth Anne's AMT exemption.

a.$8,225

b.$45,675

c.$53,900

d.None of the above

3.Melissa, age 16, is claimed as a dependent on her parents' tax return. This year, Melissa earned $2,000 from babysitting and $1,280 interest income from a savings account. Compute Melissa's standard deduction.

a.$2,000

b.$2,350

c.$0

d.$1,050

Answer 1

Ans. 1 (b) Margie will owe the regular 1.45 percent Medicare tax on her entire wage income and the additional .9 percent Medicare tax only on her wage income in excess of $200,000.

Explanation : According to provisions of income tax act if you receive wages over $200000 a year your wmployer must withhold a .9% additiional Medicare tax.this will apply to the wages over $200000. Theemployee tax rate for medicare is 1.45%.

Ans.2 (c) $53,900

Explanation : The AMT exemption amount for tax year 2016 is $53,900

Ans. 3 (b) $ 2,350

Expalnation : Limit of Standard deduction

Greater of

$1050 or

Individual earned income for the year plus $350

individual earned income is salaries,wages,tips,professional fees and other compenstion received for personal services you performed. hence interest income shall nor considered in earned income.