xam
~~~~~~~~~~~&&&&&&&&############################@@Tax
Review!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~&&&&&&&&############################@@@@@@@@@@@@@@@@22/2026//2027
Tax Preparer Final Exam ReviewTax Preparer Final Exam Review!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~&&&&&&&&##########################
Preparer Final Exam ReviewTax Preparer Final Exam Review!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~
What income reporting form should an independent contractor sometimes receive from the person who paid him for his
services?
Form 1099-MISC (15.6)
Schedule C, Line F asks for the accounting method used in the business.
What is the difference between the cash method and the accrual method of accounting?
• Under the accrual method, total sales and total charges for services are included in income even though payment may
be received in another tax year.
• Under the cash method, only income actually received or expenses actually paid during the year are included. (15.5)
What does it mean if a proprietor "materially participates" in the business?
He is active in running the business in a substantial way on a day-to-day basis. (15.5)
Why is it important to know whether or not the proprietor materially participates?
If the proprietor does not materially participate, any loss from the business is a passive loss and generally may be
currently deducted only against passive income. (15.6)
What are returns and allowances?
• Amounts that were refunded to customers who returned merchandise for refund or partial refund.
• These amounts are subtracted from gross receipts. (15.6)
xam
~~~~~~~~~~~&&&&&&&&############################@@Tax
Review!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~&&&&&&&&############################@@@@@@@@@@@@@@@@22/2026//2027
Tax Preparer Final Exam ReviewTax Preparer Final Exam Review!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~&&&&&&&&##########################
Preparer Final Exam ReviewTax Preparer Final Exam Review!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~
,xam
~~~~~~~~~~~&&&&&&&&############################@@Tax
Review!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~&&&&&&&&############################@@@@@@@@@@@@@@@@22/2026//2027
Tax Preparer Final Exam ReviewTax Preparer Final Exam Review!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~&&&&&&&&##########################
Preparer Final Exam ReviewTax Preparer Final Exam Review!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~
How is cost of goods sold determined?
Beginning inventory plus purchases, plus labor, supplies, depreciation, etc. attributable to product manufacture or
preparation for sale, minus ending inventory. (15.7)
If the client has contract labor, what should you remind the client that they should do?
• Provide a Form 1099-MISC to any independent contractor who worked and earned $600 or more. (15.9)
What is the purpose of self-employment tax?
To pay social security and medicare taxes. (15.14)
What amounts does a proprietor have "at risk"?
Amounts invested in the business plus any business debts for which the proprietor is personally liable. (15.16)
What difference does it make if the proprietor is "at risk" or not?
Only amounts at risk may be used to determine the actual loss on Schedule C. (15.16)
xam
~~~~~~~~~~~&&&&&&&&############################@@Tax
Review!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~&&&&&&&&############################@@@@@@@@@@@@@@@@22/2026//2027
Tax Preparer Final Exam ReviewTax Preparer Final Exam Review!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~&&&&&&&&##########################
Preparer Final Exam ReviewTax Preparer Final Exam Review!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~
,xam
~~~~~~~~~~~&&&&&&&&############################@@Tax
Review!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~&&&&&&&&############################@@@@@@@@@@@@@@@@22/2026//2027
Tax Preparer Final Exam ReviewTax Preparer Final Exam Review!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~&&&&&&&&##########################
Preparer Final Exam ReviewTax Preparer Final Exam Review!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~
How does a Tax Professional meet due diligence requirements?
• Tax Professionals fulfill due diligence requirements by making every effort to prepare accurate and complete returns.
• Tax Professionals must have knowledge of tax law, and apply a reasonability check to the information provided by their
clients. (26.1)
What is a thorough interview?
A thorough interview consists of asking general information questions, then asking additional questions whenever
information is incomplete or seems inaccurate or inconsistent. (26.2)
What is a conflict of interest?
A conflict of interest is when one's situation might benefit at the expense of another's situation. (26.3)
What actions can resolve a conflict of interest?
A conflict of interest is resolved when it is acknowledged, disclosed to all parties, and the parties have consented to
waiving the conflict. (26.3)
xam
~~~~~~~~~~~&&&&&&&&############################@@Tax
Review!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~&&&&&&&&############################@@@@@@@@@@@@@@@@22/2026//2027
Tax Preparer Final Exam ReviewTax Preparer Final Exam Review!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~&&&&&&&&##########################
Preparer Final Exam ReviewTax Preparer Final Exam Review!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~
~~~~~~~~~~~&&&&&&&&############################@@Tax
Review!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~&&&&&&&&############################@@@@@@@@@@@@@@@@22/2026//2027
Tax Preparer Final Exam ReviewTax Preparer Final Exam Review!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~&&&&&&&&##########################
Preparer Final Exam ReviewTax Preparer Final Exam Review!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~
What income reporting form should an independent contractor sometimes receive from the person who paid him for his
services?
Form 1099-MISC (15.6)
Schedule C, Line F asks for the accounting method used in the business.
What is the difference between the cash method and the accrual method of accounting?
• Under the accrual method, total sales and total charges for services are included in income even though payment may
be received in another tax year.
• Under the cash method, only income actually received or expenses actually paid during the year are included. (15.5)
What does it mean if a proprietor "materially participates" in the business?
He is active in running the business in a substantial way on a day-to-day basis. (15.5)
Why is it important to know whether or not the proprietor materially participates?
If the proprietor does not materially participate, any loss from the business is a passive loss and generally may be
currently deducted only against passive income. (15.6)
What are returns and allowances?
• Amounts that were refunded to customers who returned merchandise for refund or partial refund.
• These amounts are subtracted from gross receipts. (15.6)
xam
~~~~~~~~~~~&&&&&&&&############################@@Tax
Review!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~&&&&&&&&############################@@@@@@@@@@@@@@@@22/2026//2027
Tax Preparer Final Exam ReviewTax Preparer Final Exam Review!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~&&&&&&&&##########################
Preparer Final Exam ReviewTax Preparer Final Exam Review!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~
,xam
~~~~~~~~~~~&&&&&&&&############################@@Tax
Review!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~&&&&&&&&############################@@@@@@@@@@@@@@@@22/2026//2027
Tax Preparer Final Exam ReviewTax Preparer Final Exam Review!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~&&&&&&&&##########################
Preparer Final Exam ReviewTax Preparer Final Exam Review!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~
How is cost of goods sold determined?
Beginning inventory plus purchases, plus labor, supplies, depreciation, etc. attributable to product manufacture or
preparation for sale, minus ending inventory. (15.7)
If the client has contract labor, what should you remind the client that they should do?
• Provide a Form 1099-MISC to any independent contractor who worked and earned $600 or more. (15.9)
What is the purpose of self-employment tax?
To pay social security and medicare taxes. (15.14)
What amounts does a proprietor have "at risk"?
Amounts invested in the business plus any business debts for which the proprietor is personally liable. (15.16)
What difference does it make if the proprietor is "at risk" or not?
Only amounts at risk may be used to determine the actual loss on Schedule C. (15.16)
xam
~~~~~~~~~~~&&&&&&&&############################@@Tax
Review!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~&&&&&&&&############################@@@@@@@@@@@@@@@@22/2026//2027
Tax Preparer Final Exam ReviewTax Preparer Final Exam Review!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~&&&&&&&&##########################
Preparer Final Exam ReviewTax Preparer Final Exam Review!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~
,xam
~~~~~~~~~~~&&&&&&&&############################@@Tax
Review!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~&&&&&&&&############################@@@@@@@@@@@@@@@@22/2026//2027
Tax Preparer Final Exam ReviewTax Preparer Final Exam Review!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~&&&&&&&&##########################
Preparer Final Exam ReviewTax Preparer Final Exam Review!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~
How does a Tax Professional meet due diligence requirements?
• Tax Professionals fulfill due diligence requirements by making every effort to prepare accurate and complete returns.
• Tax Professionals must have knowledge of tax law, and apply a reasonability check to the information provided by their
clients. (26.1)
What is a thorough interview?
A thorough interview consists of asking general information questions, then asking additional questions whenever
information is incomplete or seems inaccurate or inconsistent. (26.2)
What is a conflict of interest?
A conflict of interest is when one's situation might benefit at the expense of another's situation. (26.3)
What actions can resolve a conflict of interest?
A conflict of interest is resolved when it is acknowledged, disclosed to all parties, and the parties have consented to
waiving the conflict. (26.3)
xam
~~~~~~~~~~~&&&&&&&&############################@@Tax
Review!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~&&&&&&&&############################@@@@@@@@@@@@@@@@22/2026//2027
Tax Preparer Final Exam ReviewTax Preparer Final Exam Review!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~&&&&&&&&##########################
Preparer Final Exam ReviewTax Preparer Final Exam Review!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~
