Question

5.   Individuals are subject to income tax and self-employment tax liability only. Businesses may be subject to income tax, AMT, NIIT, and the Additional Medicare Surtax liability. (True/False)

6.   Interest from treasury bonds is subject to federal tax, but is exempt from all state and local income taxes. (True/False)

7.   In addition to income tax and self-employment tax, Taxpayers may be subject to:

a.   the Alternative Minimum Tax.
b.   the Net Investment Income Tax.
c.   the Additional Medicare Surtax.
d.   all of the above.

8.   All of the following are examples of “above-the-line” deductions that are subtracted from gross income, EXCEPT:

a.   contributions to health savings accounts
b.   charitable contributions
c.   qualified tuition and fees
d.   IRA contributions

9. Deductions are better than credits for most taxpayers. (True/False)

10. Filing status has little or no effect on the taxpayer’s tax liability. (True/False)

Answer 1

5. Given statement is TRUE as individual are subject to only income tax and self employment tax liability where as companies are text for income tax as well as alternative minimum tax and other taxes is specified.

6. This given statement is FALSE as interest is also exempt. Interest from treasury bonds is not subject to tax.

7. All of the above statement are true because taxpayer may be subject to all of the specified taxes listed above like alternative minimum tax and additional medical surtax.

Correct answer is option (d) all of the above

8. IRA contribution is not above the line deduction so so it is not subtracted from gross income.

Correct answer is option (d) IRA contribution.

9. Given statement is TRUE as many text where prefer direction in place of credit because it will help them with lesser amount of tax.

10. This is a FALSE statement as it has effect on taxpayers liability.