Question

19. Jillian is a self-employed resident of California. She had a net profit of $225,000 for the tax year. Based on her high-income level, what percentage of additional self-employment tax will she be required to pay on her California state return?

    a) 0% b) 1.45% c) 7.65% d) 0.9%

20. Federal law requires the use of MACRS for most tangible depreciable property placed in service after 1986. California does not always conform to federal tax law. Which one of the following statements regarding depreciation is incorrect?

    1. a) California does not conform to the federal small aircraft recovery method.

    2. b) California does not conform to federal tax law regarding the depreciation of energy-

       efficient systems in commercial buildings.

    3. c) California conforms to the federal special MACRS treatment allowed for water utility

       property.

    4. d) California does not conform to the federal accelerated recovery period for depreciation of

       smart meters and smart grid systems.

21. California law provides several kinds of credits for business. Some credits are expired and only the credit carryovers may be allowed until the credit has been fully exhausted. Which of the following credits has not expired?

    1. a) Credit for Employer-Paid Child Care Center and Services

    2. b) Research Credit

    3. c) Farmworker Housing Credit

    4. d) Rice Straw Credit

24. Jeff, a small business owner, hired an independent contractor friend from Utah to help restore the roof of his business property. Jeff paid his friend $3,200 during the tax year for his services. Is Jeff required to withhold California state tax from payments to his friend and, if so, how much?

    1. a) Yes; $119

    2. b) Yes; $224

    3. c) No; they have a personal relationship rather than a business relationship.

    4. d) No; his friend is responsible for making estimated tax payments.

25. Herman is calculating his sales and use tax return. He is in a district that has a 0.75% tax rate. He is also subject to a local tax of 1%. His sales totaled $105,000. The statewide tax rate is 7.25%. What is the correct amount of total sales tax will Herman owe?

    a) $ 787.50 b) $1,837.50 c) $7,612.50 d) $9,450.00

26. If Thomas uses the ACRS depreciation method on his California return and MACRS is used on his federal returns, which of the following statements is true?

    1. a) It will take the same amount of time to depreciate an item on the federal return as on the state return.

    2. b) It will take longer to depreciate an item on the state return than on the federal return.

    3. c) It will take a shorter period to depreciate an item on the state return than on the federal

       return.

    4. d) The item will depreciate at a slower rate on the federal return than on the state return.

Answer 1

1)

For an employed person, taxes are 6.2% for social security and 1.45% for Medicare tax.

For a self-employed person, taxes are 12.4% for social security and 2.9% for Medicare tax.

The social security tax stops for the year if the income is higher than $128,400 and however medicare tax does not stop.

Thus the self-employed person with income higher than the $128,400 will pay an additional tax of 1.45%.

Since the income is $225,000 which is higher than the $128,400, therefore, the additional tax will be 1.45%.

Thus option (b) is correct.