Tax Associate HRB
Which of the following may qualify as earned income for a taxpayer claiming the Earned Income Tax Credit (EITC)? Certain disability retirement benefits. Child support. Social security benefits. Unemployment benefits
Certain disability retirement benefits.
Kevin (54) has not yet reached the minimum retirement age established by his employer. However, he suffers from a debilitating illness and retired on disability in 2021. While he was working, his employer paid for his disability policy with pre-tax dollars. How are Kevin's disability pension benefits reported on his tax return? Kevin's disability pension benefits are neither taxable nor reportable. He should include this in the amount reported for wages, salaries, tips, etc. on line 1 of his Form 1040. He should report this as additional other income on line 8z of Schedule 1, Additional Income and Adjustments to Income. He should report this as taxable pension income on line 5b of his Form 1040.
He should include this in the amount reported for wages, salaries, tips, etc. on line 1 of his Form 1040.
A taxpayer may exclude which of the following from their gross income? An allocation of income from a business structured as a partnership, based on the taxpayer's percentage of ownership. Dividend income from a mutual fund investment. Gain from the sale of rental property. Life insurance, if paid by reason of death of the insured.
Life insurance, if paid by reason of death of the insured.
Which taxpayer(s) will be required to file a 2021 federal income tax return? None of the individuals are blind. Carl (66) has gross income of $13,750. He is single and has no dependents. Cassidy (34) has gross income of $18,550. She will file as head of household with one dependent. Maddie (27) and Calder (25) are married and have gross income of $24,900. They lived together all year and wish to file a joint return. Noel (66) and Deborah (63) have gross income of $26,950. They wish to file a joint return.
Noel (66) and Deborah (63) have gross income of $26,950. They wish to file a joint return.
Review the following scenario, and then choose the response that accurately completes the last sentence.Michael (33) and Davoya (29) married in April 2021. Isaac (6), Davoya's child from a previous marriage, came to live with them on July 5, 2021. Prior to moving in with Michael and Davoya, Isaac was supported by and lived with his father. Neither Davoya nor Isaac's father have ever signed Form 8332, Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent. Michael and Davoya are: Eligible to claim a personal exemption for Isaac. Eligible to claim Isaac as a qualifying relative. Eligible to claim Isaac as a qualifying child. Not eligible to claim Isaac as a dependent for the purpose of any tax benefit.
Not eligible to claim Isaac as a dependent for the purpose of any tax benefit.
Choose the response that correctly completes the following sentence describing the tax treatment and reporting requirements for municipal bond interest.Interest income from this type of investment is: Federally taxable and must be reported on Form 1040. Nontaxable and does not have to be reported. Not federally taxable but must be reported on Form 1040. Not federally taxable and only reportable on Form 1040 when the amount received exceeds $1,500.
Not federally taxable but must be reported on Form 1040.
Choose the response that correctly completes the following sentence describing the tax treatment and reporting requirements for interest income from U.S. Treasury obligations, such as Treasury bills, notes, and bonds.Interest income from this type of investment is: Federally taxable and must be reported on Form 1040. Nontaxable and does not have to be reported on Form 1040. Not federally taxable but should be reported on Form 1040. Not federally taxable and is only reportable on Form 1040 when the amount received exceeds $1,500.
Not federally taxable but should be reported on Form 1040.
In 2021, Nora (28) lived with her daughter, Avery (4), her brother, Jack (19), and her fiancée, Luke (30) for the entire year. Nora's adjusted gross income is $32,850, Jack's gross income is $5,000, Luke's gross income is $4,500, and Avery has no income. None of the individuals in the household were students during the year. Neither Jack, nor Luke, nor Avery provided over 50% of their own support. Nora qualifies for and files as head of household in 2021. How many qualifying dependents can Nora claim on her return? One. Two. Three. Four.
One
During the year, Faye purchased a building for her business, Faye's Fabulous Frocks. The cost of the building, not including the land value, will be deducted: The first year it is acquired. The year after it is acquired. Over a period of years, rather than all at once. When it is no longer used in business.
Over a period of years, rather than all at once.
A tax preparer's high ethical standards protect taxpayers by: Guaranteeing their returns will not be questioned by the IRS. Promising they will be free from IRS penalties. Protecting the tax preparer, not the taxpayer. Providing them with an accurate return, including all tax benefits to which they are entitled.
Providing them with an accurate return, including all tax benefits to which they are entitled.
Sandra and Christopher were married 18 years ago. They had one child, Noah (13). Noah has no income, and he has never provided more than half of his own support. Christopher passed away in 2020, and Sandra has not remarried. Sandra and Noah lived together all year long; no one else lived with them. Sandra paid all the expenses of maintaining their home. What is Sandra's most beneficial filing status for 2021? Single. Married filing jointly. Head of household. Qualifying widow(er).
Qualifying widow(er).
Which of the following tax benefits may reduce an individual's tax liability below zero? Adjustments to income. Nonrefundable tax credits Refundable tax credits. Standard or itemized deductions.
Refundable tax credits.
Taxpayers who receive more than $1,500 in taxable interest income during the year must file: Schedule B. Form 1099-DIV. Form 1099-INT. The Qualified Dividends and Capital Gain Tax Worksheet.
Schedule B.
Which taxpayer is potentially eligible to receive the Child Tax Credit? In each scenario, the child mentioned is the taxpayer's only dependent or potential dependent, and the taxpayer provided more than half the child's support. Ana has a daughter, Isabella, who was 8 years old at the end of 2021. Isabella lived in Mexico for all of 2021 and is not a U.S. citizen, U.S. national, or U.S. resident alien. Mariana has a niece, Victoria, who was 10 years old at the end of 2021. Victoria is not a citizen of the United States. Victoria does have an Individual Taxpayer Identification Number (ITIN), and she lived in Mexico for all of 2021. Simon has a nephew, Tristan, who is a resident alien. Tristan was 16 years old at the end of 2021. Tristan lived with Simon all year. Tristan obtained a social security number valid for employment before the due date of the return. William has a son, Oliver, who was 18 years old at the end
Simon has a nephew, Tristan, who is a resident alien. Tristan was 16 years old at the end of 2021. Tristan lived with Simon all year.
Taylor and Lucy were divorced on September 24, 2021. Neither has any dependents. Neither has remarried. The correct filing status they should each use is: Single. Married filing jointly. Married filing separately. Head of household.
Single
Section 7525 privileged communication applies to: Corporate tax matters. Criminal tax matters. State tax law. Tax advice.
Tax Advice
Choose the response that correctly completes the last sentence describing the tax treatment of disability benefits paid under the Social Security Disability Insurance (SSDI) program. Taxpayers who receive this income generally must have worked for a certain period of time and paid social security taxes on their earnings while they were working. This type of disability income is: Never taxable. Taxable and reportable as pension income regardless of the taxpayer's age. Taxable and reportable as additional other income on line 8z of Schedule 1, Additional Income and Adjustments to Income. Taxed in the same manner as other social security benefits.
Taxed in the same manner as other social security benefits
Taxpayers whose only unearned income consists of qualified dividends and capital gain distributions reported to them on Form 1099-DIV generally compute the amount of tax on their income using: Form 8949, Sales and Other Dispositions of Capital Assets. The Qualified Dividends and Capital Gain Tax Worksheet. The Schedule D Tax Worksheet. The 2021 Tax Rate Schedules.
The Qualified Dividends and Capital Gain Tax Worksheet.
An amended return must generally be filed within: Three years of the filing date of the return being amended or within two years of the date the tax was paid, whichever is later. Five years of the filing date of the return being amended or within two years of the date the tax was paid, whichever is later. Seven years of the filing date of the return being amended or within two years of the date the tax was paid, whichever is later. Ten years of the filing date of the return being amended or within two years of the date the tax was paid, whichever is later.
Three years of the filing date of the return being amended or within two years of the date the tax was paid, whichever is later.
Why would a taxpayer need to file Form 1040-X, Amended U.S. Individual Income Tax Return? To correct errors and omissions on the original return that result in a change to the original tax liability, refund, or balance due. To report original information before the end of the tax year when a return has not been filed previously. To report information from a corrected income document before the original return has been filed. To report original information when the due date for the return has passed, and the return has not been previously filed.
To correct errors and omissions on the original return that result in a change to the original tax liability, refund, or balance due.
Marina (33) will use the single filing status. She itemized deductions in 2020. She plans to itemize for 2021. For her plan to itemize deductions to be the most beneficial, her itemized deductions should exceed a threshold amount of: $12,400 $12,550 $13,900 $18,800
$12,550
What amount of work-related child care expenses should a married couple with two dependent children under age 13 use to calculate their Child and Dependent Care Credit? They both work full-time, and they spent $13,950 for child care during the year. Their adjusted gross income is $120,000. They did not receive any employer dependent care benefits. $0 $3,000 $8,000 $13,950
$13,950
Troy and Clare began and finalized the adoption of a U.S. child with special needs in 2021. Their total adoption expenses were $4,100. Their modified adjusted gross income was $208,000. What is the maximum amount they may claim for the Adoption Credit? $0 $2,050 $4,100 $14,440
$14,400
Brittany (30) will use the head of household filing status for 2021. Her modified adjusted gross income is $45,000. During the year, she made a $1,500 contribution to her employer's 401(k) plan. She is not a student, and she has never taken a distribution from any retirement plan. The maximum amount Brittany may receive for the retirement savings contributions credit (Saver's Credit) is: $0 $150 $300 $1,500
$150
What is the 2021 gross income filing requirement for a married couple, filing jointly, where neither is blind, but one is age 65, and the other is age 60? They lived together all year. $25,100 $26,450 $26,800 $27,800
$26,450
Choose the response that correctly completes the following sentence about the filing requirement for a dependent taxpayer. A single dependent who is not blind and is under age 65 has a 2021 filing requirement if their gross income is more than the greater of $1,100 or their earned income (up to $12,200) plus: $50 $200 $250 $350
$350
Sam and Carlie, a married couple who will file jointly, are both teachers. In 2021, Sam had receipts totaling $330 in unreimbursed, qualifying expenses for his classroom. Carlie also had unreimbursed expenses for COVID-19 protective items, such as face masks and hand sanitizer, that she purchased during the year in an attempt to stop the spread of COVID-19 in her classroom. Her receipts totaled $295. What is the maximum amount of educator expenses the couple may deduct on their joint return? $250 $330 $500 $625
$500
Marcus (42) will use the single filing status for 2021. His only income during the year consisted of $10,550 in wages and $8,000 in unemployment benefits. What is the maximum amount he can contribute to a traditional IRA for 2021? $0 $6,000 $7,000 $10,550
$6,000
Natalie, a single mother who will use the head of household filing status, has three children, Austin (7), Xavier (10), and Skylar (18). Natalie's adjusted gross income is $65,000, and her 2021 tax liability is $5,263. All three children, including Skylar, who is a full-time student, have valid social security numbers, are U.S. citizens, and are her qualifying child dependents.Natalie did not receive any advance Child Tax Credit payments during the year. Neither Natalie nor the children's father have ever signed Form 8332, Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent. What amount is Natalie able to claim for the total of her Child Tax Credit and credit for other dependents when she files her 2021 return? $5,263 $6,000 $6,500 $9,000
$6,500
Zach and Caitlyn are married and will file a joint tax return. For 2021, their modified adjusted gross income was $112,000. Caitlyn has a bachelor's degree in journalism, but she wants to pursue a different line of work. She is currently attending a community college to earn her associate degree in nursing. She paid $3,000 for the fall semester. Zach is not a student. What amount can the couple claim for the lifetime learning credit? $0 $200 $400 $600
$600
Frank (48) and Suzanne (51) are married, and they will file a joint return for 2021. During the year, Frank earned $94,000 in wages; Suzanne earned $4,500 from a part-time job. They had no other income. What is the maximum amount the couple may contribute to Suzanne's traditional IRA? $0 $4,500 $6,000 $7,000
$7,000
The maximum amount a 75-year-old taxpayer with $10,000 in wages can contribute to a traditional IRA for 2021 is: $0 $6,000 $7,000 $10,000
$7,000
Ashley (34) will use the head of household filing status. She has one dependent child, Brayden (4). During the year, Ashley spent $8,500 for Brayden's childcare. Ashley's income during the year totaled $68,000, all from wages. She did not receive any dependent care benefits from her employer. What is the maximum amount of work-related expenses that Ashley may use to calculate her Child and Dependent Care Credit? $0 $3,000 $8,000 $8,500
$8,000
Damion, a single dad who will use the head of household filing status, has three children, Dominic (5), Julian (9), and Elijah (16). Damion's adjusted gross income is $72,000, and his 2021 tax liability is $6,103. All three children have valid social security numbers, are U.S. citizens, and are his qualifying child dependents.Damion did not receive any advance Child Tax Credit payments during the year. Neither Damion nor the children's mother have ever signed Form 8332, Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent. What amount is Damion able to claim for the total of his Child Tax Credit and credit for other dependents when he files his 2021 return? $6,103 $6,000 $9,000 $9,600
$9,600
A self-employed taxpayer may be eligible to deduct amounts paid for medical insurance for themselves and for their families. To claim this deduction, a qualifying taxpayer should: Claim a nonrefundable tax credit based on the cost of the insurance. Deduct the cost as a business expense on Schedule C, Profit or Loss from Business. Only deduct the amounts paid on Schedule A if they itemize their deductions. Report the health insurance costs, up to the amount of net business income, as an adjustment to income on Schedule 1, Additional Income and Adjustments to Income.
--
Anthony (30) will use the single filing status for 2021. His only income for the year was from wages. In early 2022, he received the following Form W-2 from his employer. He comes to you to have his taxes prepared, and he tells you he would like to contribute to a traditional IRA for 2021, but only if he is eligible to deduct the amount. He has no other adjustments to income. What is the largest amount Anthony can contribute and deduct if he makes the IRA contribution before the filing deadline? $0 $5,000 $6,000 $7,000
--
Choose the response that completes the following sentence. A cash distribution from a qualified retirement account in which the taxpayer ONLY made pre-tax contributions: Is always fully taxable. Is never taxable. Is only taxable at the state and local level. May be partially taxable
--
Sebastion (24) will use the single filing status. His only income during the year consisted of $20,000, which was his net profit from a lawn mowing business. What is Sebastion's self-employment tax?
--
In 2020, Henry and Eva paid $2,500 of qualified domestic adoption expenses. The adoption did not become final until 2021, and they paid an additional $3,200 in qualified expenses that year. The child they adopted did not have any special needs. Their modified adjusted gross income was $165,000. What is the maximum amount they may be eligible to claim for the Adoption Credit on their 2021 return? $2,500 $3,200 $5,700 $14,440
-- $5,700
Failure to meet the due diligence requirements when determining eligibility for the Child Tax Credit/Advanced Child Tax Credit/Other Dependent Credit, Earned Income Tax Credit, American Opportunity Tax Credit, and head of household filing status for a return filed in 2022 (for the 2021 tax year), could result in a penalty of: $50, per return, assessed towards the taxpayer. $500, per return, assessed towards the tax preparer. $530, per return, assessed towards the taxpayer. $545, for each item on each return, assessed towards the tax preparer
-- $545, for each item on each return, assessed towards the tax preparer.
Which of the following is included in an individual taxpayer's federal gross income? Certain income from the discharge of indebtedness. Disaster relief payments. A federal income tax refund. Interest on state and local municipal bonds.
-- Interest on state and local municipal bonds
Which of the following expense items should be included when determining whether a taxpayer who wishes to file as head of household paid more than half the cost of keeping up their home? Education. Medical expenses. Real estate taxes. Rental value of the home owned by the taxpayer.
-- Real Estate Taxes
Aurora Martinez (31) is filing as a single taxpayer. Aurora was the beneficiary of one of her great-grandmother's traditional IRAs. She passed away during the year, and Aurora took a $3,000 total distribution from the account. She then used the money to pay down her credit card debt.Aurora did not qualify for any COVID-19 or other exceptions for IRA distributions. As far as she knows, all of her great-grandmother's contributions to the account were deductible.Aurora's only other income during the year was $58,000 in wages. She will claim the standard deduction. Aurora received the following Form 1099-R reporting the IRA distribution. The form shows a code "4" in box 7, indicating that the distribution is due to death. When Aurora files her 2021 return, how much of the distribution must she include in her total income? $0 $300 $2,700 $3,000
--$3,000
What is the penalty a tax preparer would face who reduces a client's tax liability by recklessly and intentionally disregarding tax laws? The preparer charged $500 for the tax preparation. $250 $500 $5,000 $5,500
--$5,000
Edwin (61) will use the single filing status for 2021. His only income during the year consisted of $10,750 in wages. What is the maximum amount he can contribute to a traditional IRA for 2021? $0 $6,000 $7,000 $10,750
--$7,000
Circular 230 authorizes an individual to sign, as the preparer, at tax return that:
----attest --$5,000 --nonfrivolous --$250
Jasmine provided Benjamin, her tax preparer, with detailed check registers to compute her expenses. Benjamin, however, knowingly overstated the expenses on Jasmin's return. After adjustments by the examiner, the tax liability increased significantly. Benjamin charged $1,000 for the tax preparation. Because Benjamin willfully disregarded information provided in the check registers, Benjamin is subject to a penalty in which amount?
----attest --$5,000 --nonfrivolous --$250
The third due diligence requirement is the knowledge requirement. To meet the knowledge requirement, the paid tax preparer must?
----attest --$5,000 --nonfrivolous --$250
All these are due diligence requirements for paid tax preparers who prepare returns claiming the American Opportunity Tax Credit (AOTC) except:
----transcripts --request --aotc --$2,500
The maximum amount a taxpayer may claim for the lifetime learning credit is?
----transcripts --request --aotc --$2,500
Which tax benefit for education is partially refundable?
----transcripts --request --aotc --$2,500
Choose the response that accurately completes the following sentence. Gross receipts, reported as income in Part 1 of Schedule C, Profit or Loss from Business, may include: An amount recovered from a bad debt. Amounts reported to the taxpayer on Form 1099-NEC, Nonemployee Compensation. Income reported to the taxpayer on Form W-2, Wage and Tax Statement. Proceeds from a loan.
--Amounts reported to the taxpayer on Form 1099-NEC, Nonemployee Compensation.
Each of these students is required to file a 2021 federal tax return. Which student is potentially eligible to receive the lifetime learning credit?
--Braxton
Review the following scenarios, then choose the response that describes a taxpayer who will be allowed to claim a direct deduction even though they will claim the standard deduction on their 2021 tax return. None of the taxpayers have any other deductions to claim on Schedule A, Itemized Deductions, and each will use the single filing status. Alice contributed $50 to a GoFundMe that will benefit a child in her granddaughter's classroom by paying medical bills. She made the contribution on May 12, 2021. Candace contributed $250 to her local Cancer Society (a qualifying charitable organization) on November 16, 2021. Maria made a real estate property tax payment of $2,050 on December 10, 2021. Sonya paid $5,980 in dental work on April 16, 2021. She charged the expense to her credit card.
--Candace contributed $250 to her local Cancer Society (a qualifying charitable organization) on November 16, 2021.
Due diligence requires paid preparers to satisfy four tests when a return claims Earned Income Credit (EIC), Child Tax Credit (CTC), Additional Child Tax Credit (ACTC), Credit for Other Dependents (ODC), and head of household (HOH) filing status. What are the four tests? Complete Schedule 8812 (Form 1040), Credits for Qualifying Children and Other Dependents, submit all worksheets used to compute any of these four credits, ask questions, and take notes. Complete and submit Form 8867, Paid Preparer's Due Diligence Checklist, complete and keep all worksheets used to compute any of these four credits, satisfy the knowledge requirement, and satisfy the documentation requirement. Does this make sense, reasonable basis, substantial authority, nonfrivolous position. Knowledge, prepare, review, and file the tax return.
--Complete and submit Form 8867, Paid Preparer's Due Diligence Checklist, complete and keep all worksheets used to compute any of these four credits, satisfy the knowledge requirement, and satisfy the documentation requirement.
Josh, one of your clients, gives you information that seems inconsistent. What do you do? File his return because you don't want to lose a client. File the return only after you have asked Josh questions to clarify what he has said and you believe you now have a full understanding. Refuse to file the return and refer them to someone else in your office. Refuse to file the return until you have time to investigate what Josh has told you.
--File the return only after you have asked Josh questions to clarify what he has said and you believe you now have a full understanding.
Melvin timely filed his 2020 tax return on March 1, 2021. He was entitled to a $300 refund, which he received a few weeks later. Melvin later determined that he had failed to claim a refundable education credit for which he was eligible. The credit would have given him an even larger refund for that year.The latest Melvin can file an amended return to correct his originally filed 2020 return and claim the refundable credit is: March 1, 2023. The 2023 tax filing deadline (generally April 15). March 1, 2024. The 2024 tax filing deadline (generally April 15).
--March 1, 2024.
Which of the following is a deductible medical expense? Funeral, burial, or cremation expenses. Medicare Part B premiums withheld from the taxpayer's social security benefits. Premiums paid for an insurance policy covering loss of life, limb, or sight. Swimming lessons recommended by a doctor to improve the taxpayer's general health.
--Medicare Part B premiums withheld from the taxpayer's social security benefits.
All of the following scenarios describe a person who may be the qualifying child of a taxpayer claiming the Earned Income Tax Credit (EITC) EXCEPT: Brynn (16), a full-time high school student. The taxpayer is her 22-year-old sister. Maeve (23), a full-time student. The taxpayer is her 68-year-old grandmother. Noah (24), a full-time student. The taxpayer is his 22-year-old brother. Yasmine (33), who is totally and permanently disabled. The taxpayer is her 30-year-old brother.
--Noah (24), a full-time student. The taxpayer is his 22-year-old brother.
A taxpayer who takes a distribution from a traditional IRA in which they previously made nondeductible contributions must: Report the entire amount as a taxable distribution on Form 1040. Use Form 8606, Nondeductible IRAs, to compute the taxable portion of their distribution. Use the general rule to compute the taxable portion of their distribution. Use the Simplified Method to compute the taxable portion of their distribution.
--Report the entire amount as a taxable distribution on Form 1040.
All of the following are reported on Schedule C, Profit or Loss from Business, EXCEPT: Cost of goods sold. Gross receipts. Information on the taxpayer's vehicle. Self-employment tax.
--Self-employment tax
Grace discovered an error on her 2020 tax return; she was eligible for the Other Dependent Credit but neglected to claim it. She would have received a larger refund if she had claimed the credit. Grace requested an extension that year, and she did not file the original return until September 1, 2021. The latest Grace can amend her 2020 return and claim the credit is: The 2023 tax filing deadline (generally April 15). September 1, 2023. The 2024 tax filing deadline (generally April 15). September 1, 2024.
--September 1, 2024.
Aaron received a state income tax refund in 2021 for state taxes he overpaid in 2020. He was able to reduce his 2020 federal tax liability by itemizing and claiming a deduction for state and local income taxes paid that year. When Aaron files his 2021 return, he may need to report all or part of the state tax refund he received in 2021 as: A negative deduction. A recaptured credit. A refundable credit. Taxable additional income.
--Taxable additional income.
Choose the response that correctly describes a condition, or conditions, that must be met for property to be considered depreciable. The property must be an item that will eventually wear out, get used up, become obsolete, or otherwise lose its value. The taxpayer must place the property in service and dispose of it within the same year. The taxpayer must either rent or own the property and use it in their business or in an income-producing activity. The useful life of the property must not exceed one year.
--The property must be an item that will eventually wear out, get used up, become obsolete, or otherwise lose its value.
Generally a tax preparer must never provide a copy of a taxpayer's tax return to any other party. However, there are two exceptions allowing for limited disclosure. What are these exceptions? The co-habitation exception and the written consent exception. The related party exception and the shared child exception. The related party exception and the written consent exception. There are no exceptions, and tax preparers must never share tax return information under any circumstance.
--The related party exception and the written consent exception.
When is a tax preparer required to complete and submit Form 8867, Paid Preparer's Due Diligence Checklist? Only with amended returns that claim EIC, CTC/ACTC/ODC, AOTC, and head of household. Only with original returns that claim the EIC, CTC/ACTC/ODC, AOTC, and head of household. Tax preparers are required to complete and submit one Form 8867 for each credit claimed on the return and one if the head of household filing status is used. With every original and amended return that claims EIC, CTC/ACTC/ODC, AOTC, and the head of household filing status.
--With every original and amended return that claims EIC, CTC/ACTC/ODC, AOTC, and the head of household filing status.
What is the penalty a tax preparer would face who reduces a client's tax liability by recklessly and intentionally disregarding tax laws? The preparer charged $500 for the tax preparation.
--attest --$5,000 --nonfrivolous --$250
Choose the response that accurately completes the following sentence. The maximum amount that a taxpayer may claim for the American Opportunity Tax Credit (AOTC) is ______________ per student.
--transcripts --request --aotc --$2,500
Rylee will use the single filing status for 2021. She owns shares of stock, and during the year, she received dividends from this investment. In early 2022, she received the Form 1099-Div shown below. Rylee's only other income was from wages. Her taxable income for the year was $35,000. How much tax will she owe on the dividend income?
0
If a taxpayer claiming the American Opportunity Tax Credit (AOTC) has their tax liability reduced to zero, what is the maximum amount they may receive as a refundable credit? 20% of the credit, up to $500. 40% of the credit, up to $1,000. 100% of the first $1,000 of qualified education expenses. 100% of the first $4,000 of qualified education expenses.
40% of the credit, up to $1,000.
Nadine (62) took a $6,000 distribution from her Roth IRA. Twenty percent, or $1,200, is a distribution of earnings on her contributions. The remaining $4,800 is a distribution of her basis. Nadine established the account more than 20 years ago, when Roth IRAs first became available. How much of her distribution is taxable? $0 $1,200 $4,800 $6,000
?--$0
McKenna Michaels is a 30-year-old single taxpayer who changed jobs during the year. When she left her first job, she decided to take a total distribution from the 401(k) plan she had established with her former employer. This was not a COVID-19-related distribution, and she did not qualify for any hardship or disaster-related exceptions. She used the proceeds to make a down payment on a new car.McKenna's only other income was from wages, and her 2021 taxable income was $54,650, placing her in the 22% tax bracket. In early 2022, she received the following Form 1099-R reporting the distribution she took from her former employer's retirement plan. What amount, if any, will McKenna need to pay for the additional tax on early distributions? $0 $200 $1,000 $2,200
?--$1,000
Marlin and Teri are married and will file a joint return. They live in a state that does not impose a state sales tax. However, they did pay the following taxes in 2021: $4,800 state income tax withheld from earnings. $900 state balance due for 2020. $750 personal property taxes. $5,750 real estate taxes. How much are they eligible to deduct for taxes paid on Schedule A, Itemized Deductions? $10,000 $11,300 $11,450 $12,200
?--$11,300
Which of the following is a due diligence requirement for a paid preparer who files a federal return for a taxpayer claiming one or more refundable credits? Ask the taxpayer additional questions as needed to obtain relevant information. Document the questions asked and the taxpayer's response to each question. Audit all supporting documentation. Complete all worksheets used to calculate any federally refundable credit, then inform the taxpayer that they must file Form 8867, Paid Preparer's Due Diligence Checklist, after their return is submitted to the IRS. Maintain a copy of the completed Form 8867, Paid Preparer's Due Diligence Checklist, and any other documents relied on to complete the form or any of the accompanying worksheets, for at least five years after the due date of the return.
?--Ask the taxpayer additional questions as needed to obtain relevant information. Document the questions asked and the taxpayer's response to each question.
Jaleah would like to claim her granddaughter, Jade, as her qualifying child so she can claim the Earned Income Tax Credit (EITC). However, Jade's mother, Lyn, is also eligible to claim Jade as her qualifying child for EITC purposes and would like to do so if she is able. As Jaleah's tax preparer, what information would you share with Jaleah? As long as Jaleah files before Lyn, she may claim EITC based on Jade, her qualifying child. Lyn holds a higher right and may claim EITC based on Jade because Lyn is Jade's parent. Jaleah may claim EITC based on Jade if her adjusted gross income was higher than Lyn's. Jaleah and Lyn may agree to each claim one-half of the EITC based on Jade, their qualifying child
?--Lyn holds a higher right and may claim EITC based on Jade because Lyn is Jade's parent.
Sarah (69) is a single taxpayer who received $18,500 in social security benefits during the year. Her only other income consisted of $10,000 in wages from a part-time job. How much, if any, of Sarah's social security benefits are taxable? 100%. 85%. 50%. None of her benefits are taxable.
?--None of her benefits are taxable
Which of the following items is included in federal gross income? A beneficiary's share of income from an interest in an estate or trust. Compensatory damages received for personal physical injuries sustained in a car accident. Life insurance proceeds paid due to the death of the insured. Welfare benefits.
A beneficiary's share of income from an interest in an estate or trust.
A taxpayer who claims the standard deduction rather than itemizing may still be eligible to reduce the amount of total income subject to tax when they report which of the following as an adjustment to income? Amounts paid for unreimbursed medical and dental expenses. A contribution to a health savings account. Investment advisory fees. Tuition and fees paid to a state university.
A contribution to a health savings account
Which of the following is depreciable property? Equipment placed in service and disposed of in the same year. A lawn mower used to mow the taxpayer's yard. A truck used by the taxpayer for both personal and business purposes. An unimproved piece of land used as a parking lot.
A truck used by the taxpayer for both personal and business purposes.
What is a paid tax preparer's correct response to a taxpayer who omitted items on an income tax return that was submitted in a previous year? Advise the taxpayer promptly of the fact of such omission and: Advise them of the consequences of not amending the previous year's return. Make an adjustment for the previous year's omission on the current-year return. Refer them to an office supervisor. Refuse to prepare the current-year return until the previous year's return is amended. Mark for follow up
Advise them of the consequences of not amending the previous year's return.
Which of the following is a factor that may determine whether a nondependent taxpayer is required to file a return? Age. Citizenship. Net worth. State of residency.
Age
Which of the following is taxable income? Alimony received in accordance with a divorce decree signed on or before December 31, 2018. No changes have been made to the agreement. Child support payments received in accordance with a divorce decree signed on or before December 31, 2018. No changes have been made to the agreement. A noncash property settlement paid by a former spouse. Payments made to maintain the taxpayer's primary residence, made by a former spouse who still owns the property. Mark for follow up
Alimony received in accordance with a divorce decree signed on or before December 31, 2018. No changes have been made to the agreement.
Which taxpayer(s) will be required to file a 2021 federal income tax return? None of the individuals are blind. Andrew (32) has gross income of $3,500. His filing status is married filing separately. Bill (68) has gross income of $13,950. He is single and has no dependents. Diego (35) has gross income of $24,100. He is a qualifying widower with one dependent. Jeff (65) and Sarah (63) are married and have gross income of $25,750. They lived together all year and wish to file a joint return.
Andrew (32) has gross income of $3,500. His filing status is married filing separately.
