HRB FINAL EXAM Questions with Correctly
Answers Graded A Plus
What is the Difference between earned income and unearned income? - CORRECT ANSWER
✔✔ -Earned income is received for services performed. Examples are wages commissions, tips
and generally farming and other business income . Taxable income other than that received for
services performed. Unearned Income includes money received ro the investment of money or
other property, such as interest, dividends, and royalties. It also includes pensions alimony,
unemployment compensation and other income that is not earned
If an employee thinks their Form W2 is incorrect, what should they do? - CORRECT ANSWER
✔✔ -Employee should discuss with employer who issued the document and request a W2C. If
no help from employer, notify IRS. Tax prepaper can then file a substitute.
What information do you need to know to determine whether a taxpayer is required to file a
return? - CORRECT ANSWER ✔✔ -Gross income, filing status, age and if they are a dependent
For tax purposes, when is a person's marital status determined? - CORRECT ANSWER ✔✔ -On
the last day of the tax year
Where on the tax form can you find the regular standard deduction amounts? - CORRECT
ANSWER ✔✔ -Line 22 on 1040A, In the left margin at the top of the page 2 of forms 1040 and
1040A. Look at actual form to look for line
How much is added to the standard deduction if the taxpayer (or spouse is age 65 or older, or
blind? - CORRECT ANSWER ✔✔ -$1550 if unmarried, $1250 if married
What is the personal exemption amount for 2016? - CORRECT ANSWER ✔✔ -$4,050
,What two amounts are combined to make up the gross income filing requirments for most
taxpayers? - CORRECT ANSWER ✔✔ -The standard deduction and the personal exemption
amounts
Under what circumstances might a taxpayer be required to file a return even though they do not
meet the gross income filing requirements? - CORRECT ANSWER ✔✔ -1. Has net employment
of $400 or more net self employment 2. You had unemployment income you owe medicare
Advantage MSA, receive HAS, Archer, MSA 3. Reeived an Advanced Premium Tax credit even
if they didn't otherwise have a filing requirment for the year *Tips, HSA, SE $400, PTC
What is the difference between injured spouse allocation and innocent spouse relief? -
CORRECT ANSWER ✔✔ -The difference between injured spouse and innocent spouse is
significant in the eyes of the IRS. Both release you from an income tax liability arising from a
"married filing jointly" return but different outcomes. Innocent spouse filed a joint return byt was
unaware that their spouse deliberately under reported tax liability. Injured spouse seeks to protect
his or her share of the refund in case it gets seized or offset due to the other spouse's debts or
unpaid obligations
CHAPTER 3: DEPENDENT EXEMPTIONS AND SUPPORT - CORRECT ANSWER ✔✔ -
What four requirements must be met for an individual to be claimed as a dependent - CORRECT
ANSWER ✔✔ -Must pass the dependent test, joint return test, citizenship, qualifying child or
relative
What are the five tests for a qualifying child? - CORRECT ANSWER ✔✔ -1. Relationship 2.
Age 3. Residency 4. Support 5. Joint Return
,How can a married individual meet the joint return test to remain a qualifying child? -
CORRECT ANSWER ✔✔ -They can meet this test by not filing a joint return with their spouse
or they can file a joint return with their spouse if they are filing only to claim a refund on any
taxes withheld
How can you determine who paid more than half of a person's support? - CORRECT ANSWER
✔✔ -Total support is determined and reduced by the funds received by and for the person from
all sources other than the taxpaer. The remaining support is considered to be provided by the
taxpayer. Other sources might include government support Worksheet for Determining Support
What happens if an individual is a qualifying child of more than one taxpayer? - CORRECT
ANSWER ✔✔ -Generally, the custodial parent is the one in which the child spent the most
nights
What happens when more than one taxpayer claims the same qualifying child? - CORRECT
ANSWER ✔✔ -Tie Breaker Rules apply : 1. The parent, if only one of the persons is the childs
parent 2. The parent with whom the child lived the longest during the tax 3. The parents with the
highest AGI if no parent can claim the child as a qualifying child
What four tests must be met for an individual to be considered a qualifying relative? -
CORRECT ANSWER ✔✔ -1. Not be a qualifying child, the person cannot be the taxpayers
qualifying child or the qualifying child of another taxpayer 2. Relationship: Child, brother, sister,
step sister, step brother, step father , step mother, in-laws 3. Gross Income: gross income must be
less than $4050 4. Support: Taxpayer must provide more than half the support
, How can the gross income for a qualifying relative test be satisfied? - CORRECT ANSWER ✔✔
-Gross income must be less than $4050 (Do not include tax exempt income)
What is the purpose of Form 2120 Multiple Support Declaration? - CORRECT ANSWER ✔✔ -
You only need 2120 multiple support declaration if you are claiming someone other than a
qualifying child as a dependent and there are two or more people including yourself who provide
support for the dependent
How much is the child tax credit worth? - CORRECT ANSWER ✔✔ -$1,000
What additional requirements must be met for a taxpayer to be eligible to claim the Child Tax
Credit for the qualifying child? - CORRECT ANSWER ✔✔ -1. Taxpayer 2. Child must be
under17 at the end of the year 3. Qualifying child must be claimed on tax payer returns 4.
Qualifying child must be US Citizen US National or resident of US
Is the Child Tax Credit refundable or nonrefundable - CORRECT ANSWER ✔✔ -CTC is
nonrefundable the The additional child tax credit is refundable
How much is the penalty if a paid prepaerer fails to meet the child tax credit due diligence
requirements - CORRECT ANSWER ✔✔ -$510 for each failure, for each credit on each return
Total Penalty max for return is $1530
What is the first due diligence requirement for the EITC, CTC,ACTC, AOTC and how does a
paid preparer meet this requirement? - CORRECT ANSWER ✔✔ -Complete and submit the
form 8867. 1. Complete the form thoroughly and conscientously read the form carefully 2.
submit the form on every claim for eitc, ctc/actc and aotc
Answers Graded A Plus
What is the Difference between earned income and unearned income? - CORRECT ANSWER
✔✔ -Earned income is received for services performed. Examples are wages commissions, tips
and generally farming and other business income . Taxable income other than that received for
services performed. Unearned Income includes money received ro the investment of money or
other property, such as interest, dividends, and royalties. It also includes pensions alimony,
unemployment compensation and other income that is not earned
If an employee thinks their Form W2 is incorrect, what should they do? - CORRECT ANSWER
✔✔ -Employee should discuss with employer who issued the document and request a W2C. If
no help from employer, notify IRS. Tax prepaper can then file a substitute.
What information do you need to know to determine whether a taxpayer is required to file a
return? - CORRECT ANSWER ✔✔ -Gross income, filing status, age and if they are a dependent
For tax purposes, when is a person's marital status determined? - CORRECT ANSWER ✔✔ -On
the last day of the tax year
Where on the tax form can you find the regular standard deduction amounts? - CORRECT
ANSWER ✔✔ -Line 22 on 1040A, In the left margin at the top of the page 2 of forms 1040 and
1040A. Look at actual form to look for line
How much is added to the standard deduction if the taxpayer (or spouse is age 65 or older, or
blind? - CORRECT ANSWER ✔✔ -$1550 if unmarried, $1250 if married
What is the personal exemption amount for 2016? - CORRECT ANSWER ✔✔ -$4,050
,What two amounts are combined to make up the gross income filing requirments for most
taxpayers? - CORRECT ANSWER ✔✔ -The standard deduction and the personal exemption
amounts
Under what circumstances might a taxpayer be required to file a return even though they do not
meet the gross income filing requirements? - CORRECT ANSWER ✔✔ -1. Has net employment
of $400 or more net self employment 2. You had unemployment income you owe medicare
Advantage MSA, receive HAS, Archer, MSA 3. Reeived an Advanced Premium Tax credit even
if they didn't otherwise have a filing requirment for the year *Tips, HSA, SE $400, PTC
What is the difference between injured spouse allocation and innocent spouse relief? -
CORRECT ANSWER ✔✔ -The difference between injured spouse and innocent spouse is
significant in the eyes of the IRS. Both release you from an income tax liability arising from a
"married filing jointly" return but different outcomes. Innocent spouse filed a joint return byt was
unaware that their spouse deliberately under reported tax liability. Injured spouse seeks to protect
his or her share of the refund in case it gets seized or offset due to the other spouse's debts or
unpaid obligations
CHAPTER 3: DEPENDENT EXEMPTIONS AND SUPPORT - CORRECT ANSWER ✔✔ -
What four requirements must be met for an individual to be claimed as a dependent - CORRECT
ANSWER ✔✔ -Must pass the dependent test, joint return test, citizenship, qualifying child or
relative
What are the five tests for a qualifying child? - CORRECT ANSWER ✔✔ -1. Relationship 2.
Age 3. Residency 4. Support 5. Joint Return
,How can a married individual meet the joint return test to remain a qualifying child? -
CORRECT ANSWER ✔✔ -They can meet this test by not filing a joint return with their spouse
or they can file a joint return with their spouse if they are filing only to claim a refund on any
taxes withheld
How can you determine who paid more than half of a person's support? - CORRECT ANSWER
✔✔ -Total support is determined and reduced by the funds received by and for the person from
all sources other than the taxpaer. The remaining support is considered to be provided by the
taxpayer. Other sources might include government support Worksheet for Determining Support
What happens if an individual is a qualifying child of more than one taxpayer? - CORRECT
ANSWER ✔✔ -Generally, the custodial parent is the one in which the child spent the most
nights
What happens when more than one taxpayer claims the same qualifying child? - CORRECT
ANSWER ✔✔ -Tie Breaker Rules apply : 1. The parent, if only one of the persons is the childs
parent 2. The parent with whom the child lived the longest during the tax 3. The parents with the
highest AGI if no parent can claim the child as a qualifying child
What four tests must be met for an individual to be considered a qualifying relative? -
CORRECT ANSWER ✔✔ -1. Not be a qualifying child, the person cannot be the taxpayers
qualifying child or the qualifying child of another taxpayer 2. Relationship: Child, brother, sister,
step sister, step brother, step father , step mother, in-laws 3. Gross Income: gross income must be
less than $4050 4. Support: Taxpayer must provide more than half the support
, How can the gross income for a qualifying relative test be satisfied? - CORRECT ANSWER ✔✔
-Gross income must be less than $4050 (Do not include tax exempt income)
What is the purpose of Form 2120 Multiple Support Declaration? - CORRECT ANSWER ✔✔ -
You only need 2120 multiple support declaration if you are claiming someone other than a
qualifying child as a dependent and there are two or more people including yourself who provide
support for the dependent
How much is the child tax credit worth? - CORRECT ANSWER ✔✔ -$1,000
What additional requirements must be met for a taxpayer to be eligible to claim the Child Tax
Credit for the qualifying child? - CORRECT ANSWER ✔✔ -1. Taxpayer 2. Child must be
under17 at the end of the year 3. Qualifying child must be claimed on tax payer returns 4.
Qualifying child must be US Citizen US National or resident of US
Is the Child Tax Credit refundable or nonrefundable - CORRECT ANSWER ✔✔ -CTC is
nonrefundable the The additional child tax credit is refundable
How much is the penalty if a paid prepaerer fails to meet the child tax credit due diligence
requirements - CORRECT ANSWER ✔✔ -$510 for each failure, for each credit on each return
Total Penalty max for return is $1530
What is the first due diligence requirement for the EITC, CTC,ACTC, AOTC and how does a
paid preparer meet this requirement? - CORRECT ANSWER ✔✔ -Complete and submit the
form 8867. 1. Complete the form thoroughly and conscientously read the form carefully 2.
submit the form on every claim for eitc, ctc/actc and aotc
