HR BLOCK Final Test Review (ITC 2023) Exam Questions And Answers

HR BLOCK Final Test Review (ITC 2023) Exam Questions And Answers Which of the following is a requirement for all taxpayers who want to claim the EIC? Live in the U.S. for more than half a year. Have a valid social security number. Have a qualifying child dependent. Have AGI less than $21,430 ($27,380 MFJ). - ANSWER- Have a valid social security number. A combined due diligence penalty of $2,180 would indicate a penalty for which of the following? EIC, CTC/ODC/ACTC, and head of household. EIC, AOTC, and CTC/ODC/ACTC. EIC, AOTC, CTC/ODC/ACTC, and head of household. EIC, PTC, CTC/ODC/ACTC, and head of household. - ANSWER- EIC, AOTC, CTC/ODC/ACTC, and head of household. When dependent care benefits are withheld from a taxpayer's income, where are they reported by the employer? Form 2441. Form 1040. Box 10 of Form W-2. The employer is not required to report them. - ANSWER- Box 10 of Form W-2. All of the following are due diligence requirements a tax preparer must meet for EIC, AOTC, CTC/ODC/ACTC, and HOH, EXCEPT: Investigate and verify the accuracy of information the taxpayer provides to show eligibility for EIC, AOTC, CTC/ODC/ACTC, and HOH. Complete all worksheets used to compute the credits. If the worksheet is completed by hand, keep a copy in the taxpayer's client file. Maintain a copy of documents provided by the taxpayer that the tax preparer relied on when determining credit eligibility. Then record the date the information was obtained and the name of who provided the information. When information provided by the taxpayer appears to be incorrect, inconsistent, or incomplete, the tax preparer must make additional inquiries to determine if the taxpayer is eligible for the benefit. Then document both the questions asked and responses provided. - ANSWER- Investigate and verify the accuracy of information the taxpayer provides to show eligibility for EIC, AOTC, CTC/ODC/ACTC, and HOH. When a taxpayer receives Form 1099-R with no amount entered in box 2a and code 7 entered in box 7, the entire distribution: Could be partly or entirely taxable. Is never taxable. Is an early distribution and taxable. Has been rolled into a traditional IRA or into another qualified plan. - ANSWER- Is never taxable. What is the maximum amount of the American Opportunity Tax Credit a taxpayer could receive per student? $1,650 $1,800 $2,000 $2,500 - ANSWER- $2,500 Which test for a qualifying child does NOT need to be met in order for the child to be a qualifying person for purposes of Earned Income Credit (EIC)? Age. Relationship. Residency. Support. - ANSWER- Support. Which of the following expenses qualifies for an education credit in 2021? Tuition payments. The taxpayer didn't receive scholarships, grants, or other nontaxable benefits. Fees for an optional student activity. Cost of student medical fees. Tuition payments. The taxpayer received a nontaxable grant, which covered the entire tuition expense. - ANSWEREmployer-provided dependent care assistance: May be used for the Child and Dependent Care Credit. Is subtracted from the total expenses for child or dependent care on Form 2441. Is included in wages on Form W-2. Is not reported to the IRS. - ANSWERWhich of the following is NOT a percentage of social security benefits subject to federal tax? Up to __________. 0% 50% 85% 100% - ANSWER- 100% What is the maximum amount of the lifetime learning credit? $1,100 per return. $1,650 per return. $2,000 per return. $2,500 per return. - ANSWER- $2,000 per return. Employer-provided dependent care assistance: It may be used for the Child and Dependent Care Credit. It is subtracted from the total expenses for the child or dependent care on Form 2441. It is included in wages on Form W-2. It is not reported to the IRS. - ANSWEREarned Income - ANSWER- Any income (wages/salary) that is generated by working Unearned Income - ANSWER- include interest income, dividends, rents and royalties, pensions, alimony, and unemployment income. If an employee thinks their Form W-2 is incorrect, what should they do? - ANSWER- If the taxpayer's name, social security number, earnings, or withholdings are incorrect, the taxpayer should notify their employer and request a corrected Form W-2. The employee should request that the employer update their records and verify that the earnings were properly credited with the Social Security Administration. However, the taxpayer is still responsible for filing a timely tax return. If the employee's attempts to obtain a corrected Form W-2 from their employer are not successful, the taxpayer should notify the IRS. It may be necessary to prepare a substitute Form W-2. Is interest received on U.S. Treasury obligations taxable on state and/or local returns? - ANSWER- No. Interest on U.S. Treasury obligations is exempt from state and local tax by federal law. Is municipal bond interest taxable on a federal return? - ANSWER- No, the federal government does not tax municipal bond interest. How is interest income reported to the taxpayer? - ANSWER- Interest income is reported to the taxpayer on Form 1099-INT or a substitute statement. What information do you need to know to determine whether a nondependent taxpayer is required to file a return? - ANSWER- For tax purposes, when is a person's marital status determined? - ANSWER- On the last day of the tax year, or the date of death. How much is added to the standard deduction if the taxpayer (or spouse) is age 65 or older, or blind? - ANSWER- $1,350 for married taxpayers and qualifying widow(er)s, or $1,700 for those filing single or head of household. What is the personal exemption amount for 2021? - ANSWER- There is no personal exemption for 2021. A personal exemption was an amount previously allowed by law to reduce income that would otherwise be taxed. The Tax Cuts and Jobs Act of 2017 repealed this deduction beginning in 2018. How is the gross income filing requirement determined for most nondependent taxpayers? - ANSWER- The taxpayer's standard deduction, including the additional amounts for age. However, for married filing separately, or married filing jointly when the spouses did not live together at the end of the year, the amount is $5. What is the difference between injured spouse allocation and innocent spouse relief? - ANSWER- The IRS provides an injured spouse allocation for the taxpayer to protect their portion of a refund from a spouse's past-due federal income tax, unpaid student loans, unpaid child and spousal support, or state income tax. The IRS provides innocent spouse relief to taxpayers who file a joint return and later learn that their spouse has underestimated income (or overstated a credit or deduction) on the return.