H&R Block Tax Preparation Test
Questions And Answers With Verified
Solutions Already Passed Rated A+
Dependent - ANSWER✔✔An individual who may be claimed on another person's
income tax return. To be claimed as a dependent, a person must meet the
qualifying child or qualifying relative test.
Active Participant - ANSWER✔✔A taxpayer who is covered by a qualified
employer-maintained retirement plan, or a qualified self-employed retirement plan,
if even for only one day during the year.
Additional Child Tax Credit (ACTC) - ANSWER✔✔A refundable credit available
to certain taxpayers who get less than the full amount of the Child Tax Credit. The
credit is available to taxpayers with earned income exceeding $2,500 or those with
three or more qualifying children and whose regular Child Tax Credit exceeds tax
liabilities minus other refundable credits. The Additional Child Tax Credit is
computed on Form 8812. See also: Child Tax Credit.
Adjusted Gross Income (AGI) - ANSWER✔✔Adjusted gross income equals gross
income less reductions that are allowable, regardless of whether personal
deductions are itemized.
Adoption Credit - ANSWER✔✔A nonrefundable credit for qualified adoption
expenses incurred for each eligible child. For 2020, the credit cannot exceed
$14,300 per child. The limit is a per-child limit, not an annual limit, and can be
carried forward for up to five years or until used.
American Opportunity Tax Credit (AOTC) - ANSWER✔✔A credit for qualifying
education expenses paid for an eligible student to an eligible educational
,institution. One restriction is that the expenses must be for the first four years of
higher education. The AOTC may be partially refundable.
Audit - ANSWER✔✔An IRS examination and verification of a taxpayer's return
or other transactions with tax consequences. A correspondence audit is a tax audit
the IRS performs by mail. An office audit is an audit by the IRS conducted in the
agent's office. A field audit is conducted by the IRS on the business premises of the
taxpayer or in the office of the tax practitioner representing the taxpayer.
403(b) Plan - ANSWER✔✔A deferred compensation plan available to employees
of many public educational institutions and tax-exempt organizations. Also known
as a tax-sheltered annuity (TSA) plan.
Bronze/Silver/Gold/Platinum Plans - ANSWER✔✔The four levels of qualified
health plans offered by health insurance marketplaces, based on the value of the
coverage provided.
Cafeteria Plan - ANSWER✔✔A plan wherein an employer offers a choice of
nontaxable, fringe benefits from which participating employees may select. The
plan may be funded with employer contributions, employee contributions (usually
through salary reduction agreements), or a combination of both. It is also often
called a §125 plan or a flexible spending account (FSA).
Calendar Year - ANSWER✔✔An accounting period that extends from January 1
to December 31.
Capital Gains Distribution - ANSWER✔✔Amounts paid by mutual funds,
regulated investment companies, and real estate investment trusts. These amounts
represent the shareholder's portion of gain from the sale of capital assets owned by
, these investment companies. Capital gain distributions are taxed in the year
constructively received and are always considered to be held long-term.
Capital Gain - ANSWER✔✔The gains from the sales or exchanges of capital
assets.
Capital Loss - ANSWER✔✔The loss from the sale or exchange of a capital asset.
If capital losses exceed capital gains, the excess can be deducted on a taxpayer's
return and used to reduce other income up to a limit. Up to $3,000 ($1,500 if MFS)
of net capital loss is deductible annually with the excess carried forward to future
years. Losses on personal-use assets are not deductible.
Charitable Contributions - ANSWER✔✔Money or property donated to a qualified
charitable organization. Beginning for tax year 2020, cash-only contributions up to
$300 ($150 MFS) are deductible on form 1040. Cash contributions greater than
$300 ($150 MFS), and all other types of contributions, are only deductible on
Schedule A as an itemized deduction. A taxpayer can either take the above-the-line
deduction or itemize deductions, not both.
Child and Dependent Care Tax Credit - ANSWER✔✔A nonrefundable tax credit
of 20-35% of employment-related child and dependent care expenses for amounts
of up to $6,000, available to individuals who are employed and have a qualifying
child or disabled spouse or dependent.
Child Tax Credit (CTC) - ANSWER✔✔A nonrefundable credit of up to $2,000
per dependent child under age 17 at the end of the tax year with an SSN.
Combat Pay - ANSWER✔✔Pay received by a servicemember assigned to a
combat zone and exempted from taxable income.
Questions And Answers With Verified
Solutions Already Passed Rated A+
Dependent - ANSWER✔✔An individual who may be claimed on another person's
income tax return. To be claimed as a dependent, a person must meet the
qualifying child or qualifying relative test.
Active Participant - ANSWER✔✔A taxpayer who is covered by a qualified
employer-maintained retirement plan, or a qualified self-employed retirement plan,
if even for only one day during the year.
Additional Child Tax Credit (ACTC) - ANSWER✔✔A refundable credit available
to certain taxpayers who get less than the full amount of the Child Tax Credit. The
credit is available to taxpayers with earned income exceeding $2,500 or those with
three or more qualifying children and whose regular Child Tax Credit exceeds tax
liabilities minus other refundable credits. The Additional Child Tax Credit is
computed on Form 8812. See also: Child Tax Credit.
Adjusted Gross Income (AGI) - ANSWER✔✔Adjusted gross income equals gross
income less reductions that are allowable, regardless of whether personal
deductions are itemized.
Adoption Credit - ANSWER✔✔A nonrefundable credit for qualified adoption
expenses incurred for each eligible child. For 2020, the credit cannot exceed
$14,300 per child. The limit is a per-child limit, not an annual limit, and can be
carried forward for up to five years or until used.
American Opportunity Tax Credit (AOTC) - ANSWER✔✔A credit for qualifying
education expenses paid for an eligible student to an eligible educational
,institution. One restriction is that the expenses must be for the first four years of
higher education. The AOTC may be partially refundable.
Audit - ANSWER✔✔An IRS examination and verification of a taxpayer's return
or other transactions with tax consequences. A correspondence audit is a tax audit
the IRS performs by mail. An office audit is an audit by the IRS conducted in the
agent's office. A field audit is conducted by the IRS on the business premises of the
taxpayer or in the office of the tax practitioner representing the taxpayer.
403(b) Plan - ANSWER✔✔A deferred compensation plan available to employees
of many public educational institutions and tax-exempt organizations. Also known
as a tax-sheltered annuity (TSA) plan.
Bronze/Silver/Gold/Platinum Plans - ANSWER✔✔The four levels of qualified
health plans offered by health insurance marketplaces, based on the value of the
coverage provided.
Cafeteria Plan - ANSWER✔✔A plan wherein an employer offers a choice of
nontaxable, fringe benefits from which participating employees may select. The
plan may be funded with employer contributions, employee contributions (usually
through salary reduction agreements), or a combination of both. It is also often
called a §125 plan or a flexible spending account (FSA).
Calendar Year - ANSWER✔✔An accounting period that extends from January 1
to December 31.
Capital Gains Distribution - ANSWER✔✔Amounts paid by mutual funds,
regulated investment companies, and real estate investment trusts. These amounts
represent the shareholder's portion of gain from the sale of capital assets owned by
, these investment companies. Capital gain distributions are taxed in the year
constructively received and are always considered to be held long-term.
Capital Gain - ANSWER✔✔The gains from the sales or exchanges of capital
assets.
Capital Loss - ANSWER✔✔The loss from the sale or exchange of a capital asset.
If capital losses exceed capital gains, the excess can be deducted on a taxpayer's
return and used to reduce other income up to a limit. Up to $3,000 ($1,500 if MFS)
of net capital loss is deductible annually with the excess carried forward to future
years. Losses on personal-use assets are not deductible.
Charitable Contributions - ANSWER✔✔Money or property donated to a qualified
charitable organization. Beginning for tax year 2020, cash-only contributions up to
$300 ($150 MFS) are deductible on form 1040. Cash contributions greater than
$300 ($150 MFS), and all other types of contributions, are only deductible on
Schedule A as an itemized deduction. A taxpayer can either take the above-the-line
deduction or itemize deductions, not both.
Child and Dependent Care Tax Credit - ANSWER✔✔A nonrefundable tax credit
of 20-35% of employment-related child and dependent care expenses for amounts
of up to $6,000, available to individuals who are employed and have a qualifying
child or disabled spouse or dependent.
Child Tax Credit (CTC) - ANSWER✔✔A nonrefundable credit of up to $2,000
per dependent child under age 17 at the end of the tax year with an SSN.
Combat Pay - ANSWER✔✔Pay received by a servicemember assigned to a
combat zone and exempted from taxable income.
