H&R BLOCK INCOME TAX COURSE
QUESTIONS WITH COMPLETE
SOLUTIONS
Circular 230 -Correct Ans: Regulations Governing The Practice Of Attorneys, Certified Public
Accountants, Enrolled Agents, Enrolled Actuaries, And Appraisers Before The Irs.
Disclosure -Correct Ans: The Release Of Tax Information By An Irs Employee.
Due Diligence -Correct Ans: Requirements That Tax Professionals Must Follow When
Preparing Income Tax Returns.
Noncompliance -Correct Ans: Failure Or Refusal To Comply With The Tax Code.
Privilege -Correct Ans: Protection From Being Required To Disclose Confidential
Communications Between Two Parties, Such As Attorney And Client.
Estimated Tax -Correct Ans: The Amount Of Tax A Taxpayer Expects To Owe For The Year
After Subtracting Expected Amounts Withheld And Certain Refundable Credits.
Estimated Tax Voucher -Correct Ans: A Statement By An Individual Of (1) The Amount Of
Income Tax He Estimates He Will Incur During The Current Taxable Year On Income That Is
Not Subject To Withholding, (2) The Excess Amount Over That Withheld On Income Which Is
Subject To Withholding, And (3) His Estimated Self-Employment Tax.
Exemption From Withholding -Correct Ans: Status Claimed On Form W-4 Directing The
Employer Not To Withhold Federal Income Taxes From The Employee.
Underpayment Penalty -Correct Ans: If A Taxpayer Did Not Pay Enough Tax On A Timely
Basis During The Year, He May Be Required To Pay An Underpayment Penalty.
Withholding Allowances -Correct Ans: An Increase By Which Income Tax Withholding On
Certain Income Is Reduced.
Two Ways To Pay As You Go -Correct Ans: Withholding And Estimated Tax Payments
Form W-4 -Correct Ans: Employee's Withholding Allowance Certificate
Form 8815 -Correct Ans: Exclusion Of Interest From Series Ee And I U.S. Savings Bonds
Issued After 1989
Form 2210 -Correct Ans: Underpayment Of Estimated Tax By Individuals, Estates, And Trusts
,Form 4868 -Correct Ans: Application For Automatic Extension Of Time To File U.S.
Individual Income Tax Return
Form 8888 -Correct Ans: Allocation Of Refund
Form 9465 -Correct Ans: Installment Agreement Request
Amended Return -Correct Ans: A Tax Return Filed On Form 1040x After The Original Return
Has Been Filed.
Closed Year -Correct Ans: A Tax Year For Which The Statute Of Limitations Has Expired.
Open Year -Correct Ans: A Taxable Year For Which The Statute Of Limitations Has Not Yet
Expired.
Failure-To-File Penalty -Correct Ans: Generally 5% For Each Month Or Part Of A Month The
Return Is Late, But Not More Than 25% Of The Tax Not Paid.
Failure To File -Correct Ans: Taxpayer Fails To File The Return By The Due Date, And There
Is A Balance Due.
Failure To Pay -Correct Ans: Taxpayer Fails To Pay The Tax Owed By The Due Date.
Failure-To-Pay Penalty -Correct Ans: 0.5% Of The Unpaid Taxes For Each Month Or Part Of
A Month After The Due Date, But Not More Than 25%.
Negligence Or Intentional Disregard -Correct Ans: Taxpayer Shows Negligence Or Disregard
Of The Rules Or Regulations Causing An Underpayment.
Negligence-Or-Intentional-Disregard Penalty -Correct Ans: 20% Of The Underpayment.
Substantial Understatment -Correct Ans: Taxpayer Understates Their Tax By The Larger Of
$5,000 Or 10% Of The Correct Tax.
Substantial-Understatement Penalty -Correct Ans: 20% Of The Underpayment.
Form 1040x -Correct Ans: Amended U.S. Individual Income Tax Return
When Can An Amended Return Be Filed? -Correct Ans: Within Three Years Of The Date The
Original Return Was Filed, Or Within Two Years Of The Date The Tax Was Paid, Whichever Is
Later.
Can The 1040x Be E-Filed? -Correct Ans: No.
Household Employee -Correct Ans: An Individual Who Performs Nonbusiness Services In A
Taxpayer's Home.
,Active Income And Losses -Correct Ans: Those For Which A Taxpayer Performs Services.
Partnership -Correct Ans: A Form Of Business In Which Two Or More Persons Join Their
Money And Skills In Conducting The Business As Co-Owners.
Passive Income And Losses -Correct Ans: Those From Business Activities In Which The
Taxpayer Does Not Materially Participate, And All Rental Activities.
Portfolio Income And Losses -Correct Ans: Those From Such Sources As Dividends, Interest,
Capital Gains And Losses, And Royalties.
Rental Income -Correct Ans: Income Received By The Taxpayer For Allowing Another
Person's Use Of The Taxpayer's Property.
Royalty -Correct Ans: (1) A Payment Received For The Right To Exploit A Taxpayer's
Ownership Of Natural Resources Or A Taxpayer's Literary, Musical, Or Artistic Creation. (2)
An Interest In The Oil And Gas In Place That Entitles The Holder To A Specified Fraction, In
Kind Or In Value, Of The Total Production From The Property, Free Of Any Expenses Of
Development And Operation.
S Corporation -Correct Ans: A Qualified Small Business Corporation That Has Elected Special
Tax Treatment Under Subchapter S Of The Internal Revenue Code. S Corporations Pass Income,
Losses, And Deductions Through To Shareholders To Report On Their Individual Returns.
Trust -Correct Ans: A Tax Entity That Distributes All Or Part Of Its Income To Beneficiaries
As Instructed By The Trust Agreement.
Requirements For A Real Estate Professional -Correct Ans: 1. More Than Half Of The Personal
Services Performed By The Taxpayer In All Trades Or Businesses During The Tax Year Were
Performed In Real Property Trades Or Businesses In Which The Taxpayer Materially
Participated.
2. The Taxpayer Performed More Than 750 Hours Of Services During The Year In Real
Property Trades Or Businesses In Which The Taxpayer Materially Participated.
Trade Or Business Activities -Correct Ans: Any Activity That: Involves The Conduct Of A
Trade Or Business; Is Conducted In Anticipation Of Starting A Trade Or Business; Involves
Research Or Experimental Expenditures That Are Deductible Under Irs Code 174.
Nonpassive Income -Correct Ans: Income Derived From Activities That Are Not Passive.
Types Of Nonpassive Income -Correct Ans: Portfolio Income; Personal Service Income; Other
Income.
Portfolio Income -Correct Ans: Includes Interest, Dividends, Annuities, And Royalties Not
Derived In The Ordinary Course Of Business.
, Personal Service Income -Correct Ans: Salaries, Wages, Commissions, Self-Employment
Income From Trade Or Business In Which The Taxpayer Materially Participates, Deferred
Compensation, Taxable Social Security And Other Retirement Benefits, And Payments From
Partnerships To Partners For Personal Services.
Rent -Correct Ans: Income Received For The Use Of Property.
Is Rent Earned Or Unearned Income? -Correct Ans: Unearned.
Schedule E -Correct Ans: Supplemental Income And Loss
Deductible Maintenance And Repairs -Correct Ans: Those That Do Not Appreciably Add To
The Value Or Useful Life Of The Property.
Is The Value Of The Owner's Labor Deductible When It Comes To Rental Property? -Correct
Ans: No.
Rental Property Depreciable Basis -Correct Ans: Basis Minus Land Value Times The Rental
Use Percentage.
Vacation Home -Correct Ans: A Dwelling Unit And May Be A House, Apartment,
Condominium, Mobile Home, Boat, Or Any Other Property That Provides Normal Living
Accomodations.
Used As A Residence -Correct Ans: A Dwelling Unit Is Used For Personal Purposes During
The Year For Whichever Is Greater: More Than 14 Days; More Than 10% Of The Days The
House Is Rented At Fair Rental Value.
Royalty -Correct Ans: Payments Received For The Right To Extract Natural Resources From
The Taxpayer's Property Or To Use A Taxpayer's Literary, Musical, Or Artistic Creation.
Economic Interest -Correct Ans: One Acquired By Investment, The Return On Which Is
Dependent Upon The Extraction Of The Natural Deposit Or Cutting Of The Timber.
Two Methods Of Computing Depletion -Correct Ans: Cost And Percentage
What Tax Form Must Estates And Trusts File? -Correct Ans: Form 1041
What Tax Form Must Partnerships File? -Correct Ans: Form 1065
Do Partnerships Pay Income Taxes? -Correct Ans: No.
General Partner -Correct Ans: One Who Is Personally Responsible For Partnership Debts.
QUESTIONS WITH COMPLETE
SOLUTIONS
Circular 230 -Correct Ans: Regulations Governing The Practice Of Attorneys, Certified Public
Accountants, Enrolled Agents, Enrolled Actuaries, And Appraisers Before The Irs.
Disclosure -Correct Ans: The Release Of Tax Information By An Irs Employee.
Due Diligence -Correct Ans: Requirements That Tax Professionals Must Follow When
Preparing Income Tax Returns.
Noncompliance -Correct Ans: Failure Or Refusal To Comply With The Tax Code.
Privilege -Correct Ans: Protection From Being Required To Disclose Confidential
Communications Between Two Parties, Such As Attorney And Client.
Estimated Tax -Correct Ans: The Amount Of Tax A Taxpayer Expects To Owe For The Year
After Subtracting Expected Amounts Withheld And Certain Refundable Credits.
Estimated Tax Voucher -Correct Ans: A Statement By An Individual Of (1) The Amount Of
Income Tax He Estimates He Will Incur During The Current Taxable Year On Income That Is
Not Subject To Withholding, (2) The Excess Amount Over That Withheld On Income Which Is
Subject To Withholding, And (3) His Estimated Self-Employment Tax.
Exemption From Withholding -Correct Ans: Status Claimed On Form W-4 Directing The
Employer Not To Withhold Federal Income Taxes From The Employee.
Underpayment Penalty -Correct Ans: If A Taxpayer Did Not Pay Enough Tax On A Timely
Basis During The Year, He May Be Required To Pay An Underpayment Penalty.
Withholding Allowances -Correct Ans: An Increase By Which Income Tax Withholding On
Certain Income Is Reduced.
Two Ways To Pay As You Go -Correct Ans: Withholding And Estimated Tax Payments
Form W-4 -Correct Ans: Employee's Withholding Allowance Certificate
Form 8815 -Correct Ans: Exclusion Of Interest From Series Ee And I U.S. Savings Bonds
Issued After 1989
Form 2210 -Correct Ans: Underpayment Of Estimated Tax By Individuals, Estates, And Trusts
,Form 4868 -Correct Ans: Application For Automatic Extension Of Time To File U.S.
Individual Income Tax Return
Form 8888 -Correct Ans: Allocation Of Refund
Form 9465 -Correct Ans: Installment Agreement Request
Amended Return -Correct Ans: A Tax Return Filed On Form 1040x After The Original Return
Has Been Filed.
Closed Year -Correct Ans: A Tax Year For Which The Statute Of Limitations Has Expired.
Open Year -Correct Ans: A Taxable Year For Which The Statute Of Limitations Has Not Yet
Expired.
Failure-To-File Penalty -Correct Ans: Generally 5% For Each Month Or Part Of A Month The
Return Is Late, But Not More Than 25% Of The Tax Not Paid.
Failure To File -Correct Ans: Taxpayer Fails To File The Return By The Due Date, And There
Is A Balance Due.
Failure To Pay -Correct Ans: Taxpayer Fails To Pay The Tax Owed By The Due Date.
Failure-To-Pay Penalty -Correct Ans: 0.5% Of The Unpaid Taxes For Each Month Or Part Of
A Month After The Due Date, But Not More Than 25%.
Negligence Or Intentional Disregard -Correct Ans: Taxpayer Shows Negligence Or Disregard
Of The Rules Or Regulations Causing An Underpayment.
Negligence-Or-Intentional-Disregard Penalty -Correct Ans: 20% Of The Underpayment.
Substantial Understatment -Correct Ans: Taxpayer Understates Their Tax By The Larger Of
$5,000 Or 10% Of The Correct Tax.
Substantial-Understatement Penalty -Correct Ans: 20% Of The Underpayment.
Form 1040x -Correct Ans: Amended U.S. Individual Income Tax Return
When Can An Amended Return Be Filed? -Correct Ans: Within Three Years Of The Date The
Original Return Was Filed, Or Within Two Years Of The Date The Tax Was Paid, Whichever Is
Later.
Can The 1040x Be E-Filed? -Correct Ans: No.
Household Employee -Correct Ans: An Individual Who Performs Nonbusiness Services In A
Taxpayer's Home.
,Active Income And Losses -Correct Ans: Those For Which A Taxpayer Performs Services.
Partnership -Correct Ans: A Form Of Business In Which Two Or More Persons Join Their
Money And Skills In Conducting The Business As Co-Owners.
Passive Income And Losses -Correct Ans: Those From Business Activities In Which The
Taxpayer Does Not Materially Participate, And All Rental Activities.
Portfolio Income And Losses -Correct Ans: Those From Such Sources As Dividends, Interest,
Capital Gains And Losses, And Royalties.
Rental Income -Correct Ans: Income Received By The Taxpayer For Allowing Another
Person's Use Of The Taxpayer's Property.
Royalty -Correct Ans: (1) A Payment Received For The Right To Exploit A Taxpayer's
Ownership Of Natural Resources Or A Taxpayer's Literary, Musical, Or Artistic Creation. (2)
An Interest In The Oil And Gas In Place That Entitles The Holder To A Specified Fraction, In
Kind Or In Value, Of The Total Production From The Property, Free Of Any Expenses Of
Development And Operation.
S Corporation -Correct Ans: A Qualified Small Business Corporation That Has Elected Special
Tax Treatment Under Subchapter S Of The Internal Revenue Code. S Corporations Pass Income,
Losses, And Deductions Through To Shareholders To Report On Their Individual Returns.
Trust -Correct Ans: A Tax Entity That Distributes All Or Part Of Its Income To Beneficiaries
As Instructed By The Trust Agreement.
Requirements For A Real Estate Professional -Correct Ans: 1. More Than Half Of The Personal
Services Performed By The Taxpayer In All Trades Or Businesses During The Tax Year Were
Performed In Real Property Trades Or Businesses In Which The Taxpayer Materially
Participated.
2. The Taxpayer Performed More Than 750 Hours Of Services During The Year In Real
Property Trades Or Businesses In Which The Taxpayer Materially Participated.
Trade Or Business Activities -Correct Ans: Any Activity That: Involves The Conduct Of A
Trade Or Business; Is Conducted In Anticipation Of Starting A Trade Or Business; Involves
Research Or Experimental Expenditures That Are Deductible Under Irs Code 174.
Nonpassive Income -Correct Ans: Income Derived From Activities That Are Not Passive.
Types Of Nonpassive Income -Correct Ans: Portfolio Income; Personal Service Income; Other
Income.
Portfolio Income -Correct Ans: Includes Interest, Dividends, Annuities, And Royalties Not
Derived In The Ordinary Course Of Business.
, Personal Service Income -Correct Ans: Salaries, Wages, Commissions, Self-Employment
Income From Trade Or Business In Which The Taxpayer Materially Participates, Deferred
Compensation, Taxable Social Security And Other Retirement Benefits, And Payments From
Partnerships To Partners For Personal Services.
Rent -Correct Ans: Income Received For The Use Of Property.
Is Rent Earned Or Unearned Income? -Correct Ans: Unearned.
Schedule E -Correct Ans: Supplemental Income And Loss
Deductible Maintenance And Repairs -Correct Ans: Those That Do Not Appreciably Add To
The Value Or Useful Life Of The Property.
Is The Value Of The Owner's Labor Deductible When It Comes To Rental Property? -Correct
Ans: No.
Rental Property Depreciable Basis -Correct Ans: Basis Minus Land Value Times The Rental
Use Percentage.
Vacation Home -Correct Ans: A Dwelling Unit And May Be A House, Apartment,
Condominium, Mobile Home, Boat, Or Any Other Property That Provides Normal Living
Accomodations.
Used As A Residence -Correct Ans: A Dwelling Unit Is Used For Personal Purposes During
The Year For Whichever Is Greater: More Than 14 Days; More Than 10% Of The Days The
House Is Rented At Fair Rental Value.
Royalty -Correct Ans: Payments Received For The Right To Extract Natural Resources From
The Taxpayer's Property Or To Use A Taxpayer's Literary, Musical, Or Artistic Creation.
Economic Interest -Correct Ans: One Acquired By Investment, The Return On Which Is
Dependent Upon The Extraction Of The Natural Deposit Or Cutting Of The Timber.
Two Methods Of Computing Depletion -Correct Ans: Cost And Percentage
What Tax Form Must Estates And Trusts File? -Correct Ans: Form 1041
What Tax Form Must Partnerships File? -Correct Ans: Form 1065
Do Partnerships Pay Income Taxes? -Correct Ans: No.
General Partner -Correct Ans: One Who Is Personally Responsible For Partnership Debts.
