Tax Preparer Final Exam Review
Questions and Answers
Are early distributions from qualified retirement plans always penalized? - Answer-
No.
• Does not apply to qualified disaster recovery assistance distributions.
• Does not apply to any recovery of cost or any amount rolled over in a timely
manner.
(22.12,13)
How does a Tax Professional know if a distribution exception applies? - Answer-• He
can determine that by using thorough interview questions when discussing the
distribution with the client.
• The distribution code on the 1099-R can also be helpful to the Tax Professional.
(22.12)
Is there a time limit for filing amended returns? - Answer-Yes.
Three years from the date the return was filed or within two years the tax was paid,
whichever is later. (23.3)
A taxpayer wants to amend his 2006 return. He filed it April 16, 2007. The return was
examined by the IRS on January 9, 2009 and $280 additional tax was paid that date.
What is the latest date on which an amended return may be filed? - Answer-January
9, 2011
Any refund will be limited to $280 (the tax paid within the two years preceding the
date the amended return was filed). (23.3)
What are the rules for changing filing status after the due date of the return? -
Answer-Married couples may not change their filing status from MFJ to MFS after
the due date. (23.4)
A taxpayer's employer paid $500 of a taxpayer's $2,000 child care expenses for him.
How will the employer's assistance affect the child-care credit? - Answer-Total child
care expenses must be reduced by any amounts paid by the employer. (8.11)
Where does the employer report the amount of child care expense assistance to the
taxpayer? - Answer-Form W-2 Box 10 (8.11)
What is the maximum amount of contributions on which the Saver's Credit may be
based? - Answer-$2,000 per individual or spouse (21.19)
What are the rates for the Saver's Credit? - Answer-The rates are 10%, 20%, or
50%, depending upon filing status and modified AGI. (21.17)
A taxpayer is building a new home and had a solar water heater installed in 2009,
but the home was not ready to be occupied until early 2010. Can they take the
residential energy credit? - Answer-Yes, they can take the credit on their 2010 tax
return. (8.21)
, How much may an eligible educator deduct for qualified classroom expenses as an
adjustment to income? - Answer-Up to $250 (11.4)
Who is an eligible educator? - Answer-Works at least 900 hours a year. (11.4)
Where is the educator expense deduction reported? - Answer-Form 1040 Line 23.
Who may not claim a student loan interest deduction? - Answer-Someone who is
claimed as a dependent may not claim the deduction in the current tax year, nor may
someone who uses the married filing separately filing status.(11.8)
What is a qualified student loan? - Answer-• Any type of loan used to pay qualified
expenses. Credit card debt may be included, provided the card was used exclusively
to pay for qualified expenses.
• Money borrowed from a related person is not a qualified student loan. (11.5)
Where are moving expenses deducted on Form 1040? - Answer-Line 26, from Form
3903
What are qualified medical expenses with regards to an HSA? - Answer-
Unreimbursed medical expenses that would normally be deductible on Schedule A
(11.16)
What form is used to report HSA contributions and determine any allowable
deduction? - Answer-Form 8889. Reported on Form 1040 Line 25.
What is a qualified retirement plan? - Answer-A plan which is eligible for favorable
tax treatment because it meets the requirements of IRC §401(a) and the
Employment Retirement Income Security Act of 1974 (ERISA) (21.2)
What is the 2009 contribution limit to 401(k) plans? - Answer-• The maximum
contribution for 2009 is $16,500 (and 2010).
• Taxpayers age 50 and above are allowed a $5,500 annual "catch-up" contribution.
(21.4)
In tax terms, what is it called when a taxpayer puts money into an IRA? - Answer-
Contribution.
What is it called when a taxpayer takes money out of an IRA? - Answer-Distribution.
What is it called if a taxpayer takes money out of one IRA and puts it into another
(and all requirements are met)? - Answer-Roll-over.
What is the last date on which a contribution may be made and qualify as a
contribution for a given year? - Answer-The due date (not including extensions) of
the return for that year.
Why is it important to distinguish between taxpayers who are active participants in an
employer-maintained retirement plan and those who are not? - Answer-• Those who
Questions and Answers
Are early distributions from qualified retirement plans always penalized? - Answer-
No.
• Does not apply to qualified disaster recovery assistance distributions.
• Does not apply to any recovery of cost or any amount rolled over in a timely
manner.
(22.12,13)
How does a Tax Professional know if a distribution exception applies? - Answer-• He
can determine that by using thorough interview questions when discussing the
distribution with the client.
• The distribution code on the 1099-R can also be helpful to the Tax Professional.
(22.12)
Is there a time limit for filing amended returns? - Answer-Yes.
Three years from the date the return was filed or within two years the tax was paid,
whichever is later. (23.3)
A taxpayer wants to amend his 2006 return. He filed it April 16, 2007. The return was
examined by the IRS on January 9, 2009 and $280 additional tax was paid that date.
What is the latest date on which an amended return may be filed? - Answer-January
9, 2011
Any refund will be limited to $280 (the tax paid within the two years preceding the
date the amended return was filed). (23.3)
What are the rules for changing filing status after the due date of the return? -
Answer-Married couples may not change their filing status from MFJ to MFS after
the due date. (23.4)
A taxpayer's employer paid $500 of a taxpayer's $2,000 child care expenses for him.
How will the employer's assistance affect the child-care credit? - Answer-Total child
care expenses must be reduced by any amounts paid by the employer. (8.11)
Where does the employer report the amount of child care expense assistance to the
taxpayer? - Answer-Form W-2 Box 10 (8.11)
What is the maximum amount of contributions on which the Saver's Credit may be
based? - Answer-$2,000 per individual or spouse (21.19)
What are the rates for the Saver's Credit? - Answer-The rates are 10%, 20%, or
50%, depending upon filing status and modified AGI. (21.17)
A taxpayer is building a new home and had a solar water heater installed in 2009,
but the home was not ready to be occupied until early 2010. Can they take the
residential energy credit? - Answer-Yes, they can take the credit on their 2010 tax
return. (8.21)
, How much may an eligible educator deduct for qualified classroom expenses as an
adjustment to income? - Answer-Up to $250 (11.4)
Who is an eligible educator? - Answer-Works at least 900 hours a year. (11.4)
Where is the educator expense deduction reported? - Answer-Form 1040 Line 23.
Who may not claim a student loan interest deduction? - Answer-Someone who is
claimed as a dependent may not claim the deduction in the current tax year, nor may
someone who uses the married filing separately filing status.(11.8)
What is a qualified student loan? - Answer-• Any type of loan used to pay qualified
expenses. Credit card debt may be included, provided the card was used exclusively
to pay for qualified expenses.
• Money borrowed from a related person is not a qualified student loan. (11.5)
Where are moving expenses deducted on Form 1040? - Answer-Line 26, from Form
3903
What are qualified medical expenses with regards to an HSA? - Answer-
Unreimbursed medical expenses that would normally be deductible on Schedule A
(11.16)
What form is used to report HSA contributions and determine any allowable
deduction? - Answer-Form 8889. Reported on Form 1040 Line 25.
What is a qualified retirement plan? - Answer-A plan which is eligible for favorable
tax treatment because it meets the requirements of IRC §401(a) and the
Employment Retirement Income Security Act of 1974 (ERISA) (21.2)
What is the 2009 contribution limit to 401(k) plans? - Answer-• The maximum
contribution for 2009 is $16,500 (and 2010).
• Taxpayers age 50 and above are allowed a $5,500 annual "catch-up" contribution.
(21.4)
In tax terms, what is it called when a taxpayer puts money into an IRA? - Answer-
Contribution.
What is it called when a taxpayer takes money out of an IRA? - Answer-Distribution.
What is it called if a taxpayer takes money out of one IRA and puts it into another
(and all requirements are met)? - Answer-Roll-over.
What is the last date on which a contribution may be made and qualify as a
contribution for a given year? - Answer-The due date (not including extensions) of
the return for that year.
Why is it important to distinguish between taxpayers who are active participants in an
employer-maintained retirement plan and those who are not? - Answer-• Those who
