H&R Block Income Tax Course UPDATED
ACTUAL Exam Questions and CORRECT
Answers
Traditional IRA - CORRECT ANSWER - An individual retirement arrangement,
contributions to which may or may not be deductible depending on the taxpayer's AGI and
whether or not he is covered under an employer-sponsored retirement plan.
What is the full retirement age? - CORRECT ANSWER - For workers born before 1938, it
is 65. For those born after it is gradually being increased to 67.
How much of a client's social security and equivalent tier 1 RR benefits may be taxable? -
CORRECT ANSWER - Up to 85%.
Form SSA-1099 - CORRECT ANSWER - Social Security Benefits
Form RRB-1099 - CORRECT ANSWER - Railroad Retirement Benefits
None of Social Security Benefits Taxable - CORRECT ANSWER - Single, Head of
Household, Qualified Widow - $0-$25,000; Married Filing Jointly - $0-$32,000
Up to 50% of Social Security Benefits Taxable - CORRECT ANSWER - Single, Head of
Household, Qualified Widow - $25,001-$34,000; Married Filing Jointly - $32,001-$44,000
Up to 85% of Social Security Benefits Taxable - CORRECT ANSWER - Single, Head of
Household, Qualified Widow - $34,001+; Married Filing Jointly - $44,001+; Married Filing
Single - $1+
Fully Taxable Pension - CORRECT ANSWER - Pensions to which the taxpayer did not
make after-tax contributions or from which all pre-tax amounts have been recovered in previous
years.
,Partly Taxable Pensions - CORRECT ANSWER - Those pensions funded through
employer plans to which the employee contributed some after-tax money.
Form 1099-R - CORRECT ANSWER - Distributions from Pensions, Annuities,
Retirement, or Profit-Sharing Plans, IRAs, Insurance Contracts, Etc.
Exceptions to the Early Withdrawal Penalty - CORRECT ANSWER - 01 - The
distribution was made to an employee who separated from service during or after the year in
which they reached age 55.
02 - The distribution is part of a series of substantially equal periodic payments, made at least
annually for the life of the participant or the life expenctancy of the participant.
03 - The distribution was made due to permanent and total disability.
04 - The distribution was made due to the death of the employee.
05 - The distribution was made in a year that the taxpayer's medical expenses exceeds 7.5% of
AGI.
06 - The distribution was made to an alternate payee under a qualified domestic relations order.
07 - The distribution was made in a year an unemployed taxpayer paid health insurance
premiums.
08 - The distribution was made to pay qualified higher education expenses for the taxpayer,
spouse, their child, or their grandchild.
09 - The distribution was made to pay qualified first-time, home-buying expenses.
10 - The distribution was made due to an IRS levy of the qualified plan.
11 - The distribution was made to a reservist while serving on active duty for at least 180 days.
12 - Other.
401(k) Plan - CORRECT ANSWER - Deferred compensation plan available through a
wide range of employers. Contributions to a 401(k) plan are tax deferred to the employee.
Distributions from the plan are taxed as ordinary income to the recipient when received.
,Roth IRA - CORRECT ANSWER - A type of individual arrangement in which
contributions are not tax deductible, earnings grow tax deferred, and qualified withdrawals are
tax free.
Traditional IRA - CORRECT ANSWER - An individual retirement arrangement,
contributions to which may or may not be deductible depending on the taxpayer's AGI and
whether or not he is covered under an employer-sponsored retirement plan. Earnings within a
traditional IRA grow tax-deferred. Distributions from a traditional IRA are taxable except to the
extent they represent nondeductible contributions.
Qualified Plan - CORRECT ANSWER - A plan which is eligible for favorable tax
treatment because it meets the requirements of both the following: IRC 401(a); the Employment
Retirement Income Security Act of 1974.
Nonqualified Plan - CORRECT ANSWER - A plan that does not meet the requirements of
IRC 401(a) and ERISA and do not qualify for favorable tax treatment.
403(b) Plans - CORRECT ANSWER - A tax-advantaged retirement savings plan available
for employees of: public education organizations; some non-profit organizations; cooperative
hospital service organizations.
Contribution - CORRECT ANSWER - When a taxpayer puts money into an IRA.
Rollover - CORRECT ANSWER - When a taxpayer moves money from one IRA to
another.
Three Sets of Rules for IRAs - CORRECT ANSWER - Taxpayers who are active
participants in employer-maintained retirement plans at any time during the year; taxpayers who
are not active participants, including joint filers whose spouses are not active participants; joint
filers who are not active participants, but whose spouses are active participants.
, American Opportunity Credit (AOC) - CORRECT ANSWER - Credit for qualifying
education expenses available for tax years 2009 through 2012. The AOC may be partially
refundable.
Credits - CORRECT ANSWER - Reductions of tax liability allowed for various purposes
to taxpayers who meet the qualifications. Some credits are refundable; that is, the IRS will send
the taxpayer a refund for any amount in excess of the tax liability. Some credits are
nonrefundable; that is, they can only reduce tax liability to zero. Some credits may be carried to
other tax years.
Lifetime Learning Credit - CORRECT ANSWER - A nonrefundable credit equal to 20%
of the first $10,000 of qualified higher education tuition and fees paid during the year on behalf
of the taxpayer, his spouse, or his dependents.
Nonrefundable Credit - CORRECT ANSWER - A credit which cannot exceed the
taxpayer's tax liability.
Refundable Credit - CORRECT ANSWER - A credit for which the IRS will send the
taxpayer a refund for any amount in excess of the taxpayer's tax liability.
Tuition and Fees Deduction - CORRECT ANSWER - An above-the-line deduction of up
to $4,000 per tax return for qualified tuition and course-related expenses.
Requirements to Claim the AOC - CORRECT ANSWER - The taxpayer pays qualified
education expenses of higher education; the qualified education expenses are paid for an eligible
student; the eligible student is the taxpayer, spouse, or dependent for whom the taxpayer actually
claims an exemption.
Modified Adjusted Gross Income (MAGI) - CORRECT ANSWER - AGI plus foreign
earned income exclusion, foreign housing exclusion, foreign housing deduction, income
excluded by residents of Puerto Rico and American Samoa.
ACTUAL Exam Questions and CORRECT
Answers
Traditional IRA - CORRECT ANSWER - An individual retirement arrangement,
contributions to which may or may not be deductible depending on the taxpayer's AGI and
whether or not he is covered under an employer-sponsored retirement plan.
What is the full retirement age? - CORRECT ANSWER - For workers born before 1938, it
is 65. For those born after it is gradually being increased to 67.
How much of a client's social security and equivalent tier 1 RR benefits may be taxable? -
CORRECT ANSWER - Up to 85%.
Form SSA-1099 - CORRECT ANSWER - Social Security Benefits
Form RRB-1099 - CORRECT ANSWER - Railroad Retirement Benefits
None of Social Security Benefits Taxable - CORRECT ANSWER - Single, Head of
Household, Qualified Widow - $0-$25,000; Married Filing Jointly - $0-$32,000
Up to 50% of Social Security Benefits Taxable - CORRECT ANSWER - Single, Head of
Household, Qualified Widow - $25,001-$34,000; Married Filing Jointly - $32,001-$44,000
Up to 85% of Social Security Benefits Taxable - CORRECT ANSWER - Single, Head of
Household, Qualified Widow - $34,001+; Married Filing Jointly - $44,001+; Married Filing
Single - $1+
Fully Taxable Pension - CORRECT ANSWER - Pensions to which the taxpayer did not
make after-tax contributions or from which all pre-tax amounts have been recovered in previous
years.
,Partly Taxable Pensions - CORRECT ANSWER - Those pensions funded through
employer plans to which the employee contributed some after-tax money.
Form 1099-R - CORRECT ANSWER - Distributions from Pensions, Annuities,
Retirement, or Profit-Sharing Plans, IRAs, Insurance Contracts, Etc.
Exceptions to the Early Withdrawal Penalty - CORRECT ANSWER - 01 - The
distribution was made to an employee who separated from service during or after the year in
which they reached age 55.
02 - The distribution is part of a series of substantially equal periodic payments, made at least
annually for the life of the participant or the life expenctancy of the participant.
03 - The distribution was made due to permanent and total disability.
04 - The distribution was made due to the death of the employee.
05 - The distribution was made in a year that the taxpayer's medical expenses exceeds 7.5% of
AGI.
06 - The distribution was made to an alternate payee under a qualified domestic relations order.
07 - The distribution was made in a year an unemployed taxpayer paid health insurance
premiums.
08 - The distribution was made to pay qualified higher education expenses for the taxpayer,
spouse, their child, or their grandchild.
09 - The distribution was made to pay qualified first-time, home-buying expenses.
10 - The distribution was made due to an IRS levy of the qualified plan.
11 - The distribution was made to a reservist while serving on active duty for at least 180 days.
12 - Other.
401(k) Plan - CORRECT ANSWER - Deferred compensation plan available through a
wide range of employers. Contributions to a 401(k) plan are tax deferred to the employee.
Distributions from the plan are taxed as ordinary income to the recipient when received.
,Roth IRA - CORRECT ANSWER - A type of individual arrangement in which
contributions are not tax deductible, earnings grow tax deferred, and qualified withdrawals are
tax free.
Traditional IRA - CORRECT ANSWER - An individual retirement arrangement,
contributions to which may or may not be deductible depending on the taxpayer's AGI and
whether or not he is covered under an employer-sponsored retirement plan. Earnings within a
traditional IRA grow tax-deferred. Distributions from a traditional IRA are taxable except to the
extent they represent nondeductible contributions.
Qualified Plan - CORRECT ANSWER - A plan which is eligible for favorable tax
treatment because it meets the requirements of both the following: IRC 401(a); the Employment
Retirement Income Security Act of 1974.
Nonqualified Plan - CORRECT ANSWER - A plan that does not meet the requirements of
IRC 401(a) and ERISA and do not qualify for favorable tax treatment.
403(b) Plans - CORRECT ANSWER - A tax-advantaged retirement savings plan available
for employees of: public education organizations; some non-profit organizations; cooperative
hospital service organizations.
Contribution - CORRECT ANSWER - When a taxpayer puts money into an IRA.
Rollover - CORRECT ANSWER - When a taxpayer moves money from one IRA to
another.
Three Sets of Rules for IRAs - CORRECT ANSWER - Taxpayers who are active
participants in employer-maintained retirement plans at any time during the year; taxpayers who
are not active participants, including joint filers whose spouses are not active participants; joint
filers who are not active participants, but whose spouses are active participants.
, American Opportunity Credit (AOC) - CORRECT ANSWER - Credit for qualifying
education expenses available for tax years 2009 through 2012. The AOC may be partially
refundable.
Credits - CORRECT ANSWER - Reductions of tax liability allowed for various purposes
to taxpayers who meet the qualifications. Some credits are refundable; that is, the IRS will send
the taxpayer a refund for any amount in excess of the tax liability. Some credits are
nonrefundable; that is, they can only reduce tax liability to zero. Some credits may be carried to
other tax years.
Lifetime Learning Credit - CORRECT ANSWER - A nonrefundable credit equal to 20%
of the first $10,000 of qualified higher education tuition and fees paid during the year on behalf
of the taxpayer, his spouse, or his dependents.
Nonrefundable Credit - CORRECT ANSWER - A credit which cannot exceed the
taxpayer's tax liability.
Refundable Credit - CORRECT ANSWER - A credit for which the IRS will send the
taxpayer a refund for any amount in excess of the taxpayer's tax liability.
Tuition and Fees Deduction - CORRECT ANSWER - An above-the-line deduction of up
to $4,000 per tax return for qualified tuition and course-related expenses.
Requirements to Claim the AOC - CORRECT ANSWER - The taxpayer pays qualified
education expenses of higher education; the qualified education expenses are paid for an eligible
student; the eligible student is the taxpayer, spouse, or dependent for whom the taxpayer actually
claims an exemption.
Modified Adjusted Gross Income (MAGI) - CORRECT ANSWER - AGI plus foreign
earned income exclusion, foreign housing exclusion, foreign housing deduction, income
excluded by residents of Puerto Rico and American Samoa.
