Income tax Course UPDATED ACTUAL
QUESTIONS AND CORRECT ANSWERS
California standard deduction single and married/RDP filing separate - CORRECT
ANSWER $3,992
California standard deduction for married/RDP filing joint, head of household, and qualified
widow(er). - CORRECT ANSWER $7,984
To be deductible on state return, miscellaneous itemized deductions must... - CORRECT
ANSWER ...exceed 2% of the taxpayer's AGI (Ch. 15)
$(federal deduction) - (.02xAGI) = $(deductible amount on state return)
Example:
Claire claimed $250 Educator Expense Deduction and also had $5000 in qualified education
expenses used to claim the Lifetime Learning Credit. Her job required these education
expenses. Her MAGI is $25,000. What's her state Miscellaneous Itemized Deduction?
$5000 + $250 - (.02 x $25,000) = $4750
failure to file penalty - CORRECT ANSWER 5% of unpaid taxes for each month or
part of the month that the return is late, but not more than 25% - federal and state. (Ch. 21)
a return that shows a balance due, the minimum penalty for filing a return more than 60 days
late is $135 or 100% of the tax due, whichever is less. -state
failure to pay penalty - CORRECT ANSWER 0.50% of the unpaid taxes for each
month or part of the month that the return is late, but not more than 25% (Ch. 21)
The California penalty is 5% of the unpaid tax plus 0.5% of the unpaid tax for each month it
remains unpaid. The maximum penalty is 25% of the unpaid tax.
,negligence or intentional disregard penalty - CORRECT ANSWER 20% of the
underpayment. (Ch. 21)
substantial understatement penalty - CORRECT ANSWER 20% of the underpayment.
(Ch. 21)
combined penalties - CORRECT ANSWER when a taxpayer fails to file Andy on time,
the 5% (or 15%) failure to file penalty is reduced by the failure to file penalty. However, for
returns that are filed more than 60 days after the due date or extended due date, the minimum
penalty is smaller of $135 or 100% of the unpaid tax.(Ch.21)
Form 1040X - CORRECT ANSWER Correcting Forms 1040, 1040A, 1040EZ,
1040NR, or 1040NR-EZ.
Making certain elections after the prescribed deadline.
Changing amounts previously adjusted by the IRS.
Making a claim for a carryback due to a loss or unused credit.
(Ch.21)
amended returns deadline - CORRECT ANSWER Amended returns must be filed
within three years of the filing date of the return being amended or within two years of the
date the tax was paid, whichever is later. (Ch.21)
amended return no-no's - CORRECT ANSWER e-filing, direct deposit, and changing
filing status from married filing jointly to married filing separately.
interest on refund guidelines - CORRECT ANSWER taxpayer's refund is made within
45 days after the due date of the return, no interest is paid.
, taxpayer files their return after the due date (including extensions), no interest will be paid if
the refund is made within 45 days after the date the taxpayer filed.
refund is not made within this 45-day period, interest will be paid from the due date of the
return or from the date the taxpayer filed, whichever is later. (Ch.21)
extension deadline - CORRECT ANSWER usually October 15. (Ch.21)
tax preparer penalty - CORRECT ANSWER This occurs when the preparer knowingly
completes a tax return which understates the tax. The California penalty is the greater of $250
or 50% of income derived by the preparer for each return. (Ch.21)
willful or reckless conduct penalty - CORRECT ANSWER this occurs when a tax
preparer willfully understate the taxpayer's tax or intentionally disregards the tax regulations.
(Ch.21)
California Fails to Furnish a Copy Penalty - CORRECT ANSWER this occurs when
tax preparer does not give a copy of the completed return to the taxpayer. penalty is $50 per
failure, not to exceed $25,000 during the calendar year. (Ch.21)
CTEC penalty - CORRECT ANSWER occurs when a tax preparer fails to register with
the California Tax Education Council (CTEC). first time is $2500, then $5000 for subsequent
times. (Ch.21)
Form California 540X - CORRECT ANSWER used to correct errors or omissions on
the original return.
Generally, if a taxpayer files a federal Form 1040X, he must file a California Form 540X
within six months (also mat of time to file if IRS examines/changes a federal return), unless
the changes do not affect his California tax liability.
If the original return was for a refund, Form 540X should not be filed until the refund has
been received.
QUESTIONS AND CORRECT ANSWERS
California standard deduction single and married/RDP filing separate - CORRECT
ANSWER $3,992
California standard deduction for married/RDP filing joint, head of household, and qualified
widow(er). - CORRECT ANSWER $7,984
To be deductible on state return, miscellaneous itemized deductions must... - CORRECT
ANSWER ...exceed 2% of the taxpayer's AGI (Ch. 15)
$(federal deduction) - (.02xAGI) = $(deductible amount on state return)
Example:
Claire claimed $250 Educator Expense Deduction and also had $5000 in qualified education
expenses used to claim the Lifetime Learning Credit. Her job required these education
expenses. Her MAGI is $25,000. What's her state Miscellaneous Itemized Deduction?
$5000 + $250 - (.02 x $25,000) = $4750
failure to file penalty - CORRECT ANSWER 5% of unpaid taxes for each month or
part of the month that the return is late, but not more than 25% - federal and state. (Ch. 21)
a return that shows a balance due, the minimum penalty for filing a return more than 60 days
late is $135 or 100% of the tax due, whichever is less. -state
failure to pay penalty - CORRECT ANSWER 0.50% of the unpaid taxes for each
month or part of the month that the return is late, but not more than 25% (Ch. 21)
The California penalty is 5% of the unpaid tax plus 0.5% of the unpaid tax for each month it
remains unpaid. The maximum penalty is 25% of the unpaid tax.
,negligence or intentional disregard penalty - CORRECT ANSWER 20% of the
underpayment. (Ch. 21)
substantial understatement penalty - CORRECT ANSWER 20% of the underpayment.
(Ch. 21)
combined penalties - CORRECT ANSWER when a taxpayer fails to file Andy on time,
the 5% (or 15%) failure to file penalty is reduced by the failure to file penalty. However, for
returns that are filed more than 60 days after the due date or extended due date, the minimum
penalty is smaller of $135 or 100% of the unpaid tax.(Ch.21)
Form 1040X - CORRECT ANSWER Correcting Forms 1040, 1040A, 1040EZ,
1040NR, or 1040NR-EZ.
Making certain elections after the prescribed deadline.
Changing amounts previously adjusted by the IRS.
Making a claim for a carryback due to a loss or unused credit.
(Ch.21)
amended returns deadline - CORRECT ANSWER Amended returns must be filed
within three years of the filing date of the return being amended or within two years of the
date the tax was paid, whichever is later. (Ch.21)
amended return no-no's - CORRECT ANSWER e-filing, direct deposit, and changing
filing status from married filing jointly to married filing separately.
interest on refund guidelines - CORRECT ANSWER taxpayer's refund is made within
45 days after the due date of the return, no interest is paid.
, taxpayer files their return after the due date (including extensions), no interest will be paid if
the refund is made within 45 days after the date the taxpayer filed.
refund is not made within this 45-day period, interest will be paid from the due date of the
return or from the date the taxpayer filed, whichever is later. (Ch.21)
extension deadline - CORRECT ANSWER usually October 15. (Ch.21)
tax preparer penalty - CORRECT ANSWER This occurs when the preparer knowingly
completes a tax return which understates the tax. The California penalty is the greater of $250
or 50% of income derived by the preparer for each return. (Ch.21)
willful or reckless conduct penalty - CORRECT ANSWER this occurs when a tax
preparer willfully understate the taxpayer's tax or intentionally disregards the tax regulations.
(Ch.21)
California Fails to Furnish a Copy Penalty - CORRECT ANSWER this occurs when
tax preparer does not give a copy of the completed return to the taxpayer. penalty is $50 per
failure, not to exceed $25,000 during the calendar year. (Ch.21)
CTEC penalty - CORRECT ANSWER occurs when a tax preparer fails to register with
the California Tax Education Council (CTEC). first time is $2500, then $5000 for subsequent
times. (Ch.21)
Form California 540X - CORRECT ANSWER used to correct errors or omissions on
the original return.
Generally, if a taxpayer files a federal Form 1040X, he must file a California Form 540X
within six months (also mat of time to file if IRS examines/changes a federal return), unless
the changes do not affect his California tax liability.
If the original return was for a refund, Form 540X should not be filed until the refund has
been received.
