TAX MODULE 1 PRACTICE EXAM QUESTIONS
WITH CORRECT ANSWERS 2026
What must a taxpayer do in order to apply for an automatic extension of time to file his return? -
CORRECT ANSWER -File Form 4868 on or before the due date of the return
Which of the following is NOT an example of qualified educator expenses? - CORRECT
ANSWER -School lunches
For which of the following can a taxpayer take a IRA Deduction - CORRECT ANSWER -
Traditional IRA
The penalty for excess contributions to an IRA is: - CORRECT ANSWER -6% per year on the
excess amount for as long as the excess remains in the account
Which of the following is considered a capital asset? - CORRECT ANSWER -Jewelry
Miriam received a Form 1099-R with distribution code 7. How should Miriam treat this
distribution on her tax return? - CORRECT ANSWER -The distribution is a normal distribution
and is not subject to a penalty
Which of the following is NOT a type of taxable interest? - CORRECT ANSWER -Interest
earned from a Roth IRA
Shelly's husband, Keith, died on February 25, 2017, leaving Shelly with a three-year old son. If
she does not remarry, what would her filing status be in 2022 if she still has her son living with
her? - CORRECT ANSWER -Head of Household
Which of the following rental property expenditures can NOT be deducted fully in the year paid?
- CORRECT ANSWER -Adding a deck
, Which of the following would NOT be considered a qualified employee plan? - CORRECT
ANSWER -A savings plan
The basis for inherited property is determined by: - CORRECT ANSWER -Fair market value at
the date of death
Nontaxable distributions are reported to the taxpayer using what IRS document? - CORRECT
ANSWER -Form 1099-DIV, Box 3
Self-employed individuals are allowed to make contributions to a SEP in 2022 of as much as
25% of their net self-employment income, up to an annual maximum of: - CORRECT ANSWER
-61,000
Diane recently retired on disability. Before she retired, Diane's employer paid 75% of her
insurance premiums, none of which was included in her gross income. Last year, Diane received
$1,500 per month for 12 months of disability coverage. How much of her disability payments
should be reported to the IRS as income? - CORRECT ANSWER -13,500
Dividends from common or preferred stock are considered: - CORRECT ANSWER -Taxable as
ordinary income
A real estate professional for tax purposes is someone that . . . - CORRECT ANSWER -none of
the above
Social Security tax is withheld for an employee (for 2022) at a rate of: - CORRECT ANSWER -
0.062
Stephen opened a checking account for $1,500 because the bank was offering new customers a
free savings bond valued at $50. What amount is taxable income to Stephen? - CORRECT
ANSWER -50
WITH CORRECT ANSWERS 2026
What must a taxpayer do in order to apply for an automatic extension of time to file his return? -
CORRECT ANSWER -File Form 4868 on or before the due date of the return
Which of the following is NOT an example of qualified educator expenses? - CORRECT
ANSWER -School lunches
For which of the following can a taxpayer take a IRA Deduction - CORRECT ANSWER -
Traditional IRA
The penalty for excess contributions to an IRA is: - CORRECT ANSWER -6% per year on the
excess amount for as long as the excess remains in the account
Which of the following is considered a capital asset? - CORRECT ANSWER -Jewelry
Miriam received a Form 1099-R with distribution code 7. How should Miriam treat this
distribution on her tax return? - CORRECT ANSWER -The distribution is a normal distribution
and is not subject to a penalty
Which of the following is NOT a type of taxable interest? - CORRECT ANSWER -Interest
earned from a Roth IRA
Shelly's husband, Keith, died on February 25, 2017, leaving Shelly with a three-year old son. If
she does not remarry, what would her filing status be in 2022 if she still has her son living with
her? - CORRECT ANSWER -Head of Household
Which of the following rental property expenditures can NOT be deducted fully in the year paid?
- CORRECT ANSWER -Adding a deck
, Which of the following would NOT be considered a qualified employee plan? - CORRECT
ANSWER -A savings plan
The basis for inherited property is determined by: - CORRECT ANSWER -Fair market value at
the date of death
Nontaxable distributions are reported to the taxpayer using what IRS document? - CORRECT
ANSWER -Form 1099-DIV, Box 3
Self-employed individuals are allowed to make contributions to a SEP in 2022 of as much as
25% of their net self-employment income, up to an annual maximum of: - CORRECT ANSWER
-61,000
Diane recently retired on disability. Before she retired, Diane's employer paid 75% of her
insurance premiums, none of which was included in her gross income. Last year, Diane received
$1,500 per month for 12 months of disability coverage. How much of her disability payments
should be reported to the IRS as income? - CORRECT ANSWER -13,500
Dividends from common or preferred stock are considered: - CORRECT ANSWER -Taxable as
ordinary income
A real estate professional for tax purposes is someone that . . . - CORRECT ANSWER -none of
the above
Social Security tax is withheld for an employee (for 2022) at a rate of: - CORRECT ANSWER -
0.062
Stephen opened a checking account for $1,500 because the bank was offering new customers a
free savings bond valued at $50. What amount is taxable income to Stephen? - CORRECT
ANSWER -50
