H&R Block Income Tax Course Cert. Exam (ITC 2026) 1, 2 &3 VERSIONS ACTUAL EXAM 600 QUESTIONS AND CORRECT DETAILED ANSWERS WITH RATIONLES (VERIFIED ANSWERS) | ASSURED SUCCESS

H&R Block Income Tax Course Cert. Exam (ITC 2026) 1, 2 &3
VERSIONS ACTUAL EXAM 600 QUESTIONS AND CORRECT
DETAILED ANSWERS WITH RATIONLES (VERIFIED ANSWERS) |
ASSURED SUCCESS 2026-2027




Amended Return


ANSWERS: A tax return filed on Form 1040X after the original return has been
filed.

Closed Year




ANSWERS: A tax year for which the statute of limitations has expired.

Open Year


ANSWERS: A taxable year for which the statute of limitations has not yet expired.


Failure-to-File Penalty


ANSWERS: 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


ANSWERS: Taxpayer fails to file the return by the due date, and there is a balance
due.

,Failure to Pay


ANSWERS: Taxpayer fails to pay the tax owed by the due date.


Failure-to-Pay Penalty


ANSWERS: 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


ANSWERS: Taxpayer shows negligence or disregard of the rules or regulations
causing an underpayment.


Negligence-or-Intentional-Disregard Penalty


ANSWERS: 20% of the underpayment.


Substantial Understatment


ANSWERS: Taxpayer understates their tax by the larger of $5,000 or 10% of the
correct tax.

Substantial-Understatement Penalty


ANSWERS: 20% of the underpayment.


Form 1040X


ANSWERS: Amended U.S. Individual Income Tax Return

,When can an amended return be filed?


ANSWERS: 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?


ANSWERS: No.


Household Employee


ANSWERS: An individual who performs nonbusiness services in a taxpayer's
home.

Active Income and Losses


ANSWERS: Those for which a taxpayer performs services.


Partnership


ANSWERS: 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


ANSWERS: Those from business activities in which the taxpayer does not
materially participate, and all rental activities.


Portfolio Income and Losses


ANSWERS: Those from such sources as dividends, interest, capital gains and
losses, and royalties.

, Rental Income


ANSWERS: Income received by the taxpayer for allowing another person's use of
the taxpayer's property.


Royalty

ANSWERS:
(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


ANSWERS: 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


ANSWERS: 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

ANSWERS:
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.