H&R BLOCK INCOME TAX COURSE ASSESSMENT
EXAM 2026/2027 | ACTUAL QUESTIONS,
ANSWERS & RATIONALES
SECTION 1 — FILING REQUIREMENTS & BASIC TAX CONCEPTS
1. What is the primary purpose of Form 1040?
A. Report federal individual income tax information
B. Report only business income
C. Report only state taxes
D. Report payroll taxes for employers
Answer: A
Rationale: Form 1040 is the principal federal individual income tax return used by
most individual taxpayers.
2. Which organization administers the federal individual income tax system?
A. IRS
B. SSA
C. SEC
D. FDIC
Answer: A
Rationale: The Internal Revenue Service administers and enforces federal tax
laws.
3. A taxpayer generally determines whether they must file a federal return
based primarily on:
A. Filing status, age, gross income, and other applicable factors
B. Whether they own a home
C. Whether they have a driver's license
D. Whether they received a refund last year
,Answer: A
Rationale: Filing requirements depend on several factors, including filing status,
age, income, and special circumstances.
4. Which is generally considered gross income?
A. Taxable wages
B. A personal loan received
C. A bona fide gift received
D. Borrowed money
Answer: A
Rationale: Wages are generally included in gross income, while genuine loans and
certain gifts are generally not income to the recipient.
5. What is the difference between a tax deduction and a tax credit?
A. A deduction generally reduces taxable income; a credit generally reduces tax
liability
B. Both always reduce tax dollar-for-dollar
C. A deduction is always refundable
D. A credit always reduces gross income
Answer: A
Rationale: Deductions reduce the income subject to tax, while credits generally
reduce the tax itself.
6. What does "taxable income" generally represent?
A. Income remaining after applicable adjustments and deductions
B. Gross receipts before any adjustments
C. Only wages
D. Only investment income
Answer: A
Rationale: Taxable income is generally determined after applying allowable
adjustments and deductions to income.
,7. Which form is commonly used by an employer to report an employee's
annual wages and withholding?
A. W-2
B. W-4
C. 1099-INT
D. 1098-T
Answer: A
Rationale: Form W-2 reports wages, tips, and other compensation along with
federal and certain other tax withholding.
8. Form W-4 is primarily used to:
A. Provide information to an employer for federal income-tax withholding
B. Report annual wages to the IRS
C. Report mortgage interest
D. Report stock sales
Answer: A
Rationale: Employees use Form W-4 to provide withholding information to
employers.
9. Which form generally reports interest paid by a financial institution?
A. 1099-INT
B. W-2
C. 1099-NEC
D. 1098-E
Answer: A
Rationale: Form 1099-INT generally reports taxable interest.
10. Which form generally reports nonemployee compensation?
A. 1099-NEC
, B. W-2
C. 1098-T
D. W-4
Answer: A
Rationale: Form 1099-NEC is generally used to report nonemployee
compensation.
11. What is withholding?
A. Tax collected from certain payments before the taxpayer receives them
B. A tax deduction available to homeowners only
C. A type of retirement account
D. A state filing requirement
Answer: A
Rationale: Employers and certain payers withhold amounts from payments and
remit them to the government.
12. If total tax withholding exceeds a taxpayer's final federal tax liability, the
taxpayer may generally:
A. Receive a refund
B. Automatically owe a penalty
C. Lose all deductions
D. Become exempt from future taxes
Answer: A
Rationale: Excess payments can result in a refund after the return is processed.
13. If a taxpayer's total payments are less than their tax liability, the taxpayer
may:
A. Owe additional tax
B. Automatically receive a refund
C. Become exempt from filing
D. Eliminate all income
EXAM 2026/2027 | ACTUAL QUESTIONS,
ANSWERS & RATIONALES
SECTION 1 — FILING REQUIREMENTS & BASIC TAX CONCEPTS
1. What is the primary purpose of Form 1040?
A. Report federal individual income tax information
B. Report only business income
C. Report only state taxes
D. Report payroll taxes for employers
Answer: A
Rationale: Form 1040 is the principal federal individual income tax return used by
most individual taxpayers.
2. Which organization administers the federal individual income tax system?
A. IRS
B. SSA
C. SEC
D. FDIC
Answer: A
Rationale: The Internal Revenue Service administers and enforces federal tax
laws.
3. A taxpayer generally determines whether they must file a federal return
based primarily on:
A. Filing status, age, gross income, and other applicable factors
B. Whether they own a home
C. Whether they have a driver's license
D. Whether they received a refund last year
,Answer: A
Rationale: Filing requirements depend on several factors, including filing status,
age, income, and special circumstances.
4. Which is generally considered gross income?
A. Taxable wages
B. A personal loan received
C. A bona fide gift received
D. Borrowed money
Answer: A
Rationale: Wages are generally included in gross income, while genuine loans and
certain gifts are generally not income to the recipient.
5. What is the difference between a tax deduction and a tax credit?
A. A deduction generally reduces taxable income; a credit generally reduces tax
liability
B. Both always reduce tax dollar-for-dollar
C. A deduction is always refundable
D. A credit always reduces gross income
Answer: A
Rationale: Deductions reduce the income subject to tax, while credits generally
reduce the tax itself.
6. What does "taxable income" generally represent?
A. Income remaining after applicable adjustments and deductions
B. Gross receipts before any adjustments
C. Only wages
D. Only investment income
Answer: A
Rationale: Taxable income is generally determined after applying allowable
adjustments and deductions to income.
,7. Which form is commonly used by an employer to report an employee's
annual wages and withholding?
A. W-2
B. W-4
C. 1099-INT
D. 1098-T
Answer: A
Rationale: Form W-2 reports wages, tips, and other compensation along with
federal and certain other tax withholding.
8. Form W-4 is primarily used to:
A. Provide information to an employer for federal income-tax withholding
B. Report annual wages to the IRS
C. Report mortgage interest
D. Report stock sales
Answer: A
Rationale: Employees use Form W-4 to provide withholding information to
employers.
9. Which form generally reports interest paid by a financial institution?
A. 1099-INT
B. W-2
C. 1099-NEC
D. 1098-E
Answer: A
Rationale: Form 1099-INT generally reports taxable interest.
10. Which form generally reports nonemployee compensation?
A. 1099-NEC
, B. W-2
C. 1098-T
D. W-4
Answer: A
Rationale: Form 1099-NEC is generally used to report nonemployee
compensation.
11. What is withholding?
A. Tax collected from certain payments before the taxpayer receives them
B. A tax deduction available to homeowners only
C. A type of retirement account
D. A state filing requirement
Answer: A
Rationale: Employers and certain payers withhold amounts from payments and
remit them to the government.
12. If total tax withholding exceeds a taxpayer's final federal tax liability, the
taxpayer may generally:
A. Receive a refund
B. Automatically owe a penalty
C. Lose all deductions
D. Become exempt from future taxes
Answer: A
Rationale: Excess payments can result in a refund after the return is processed.
13. If a taxpayer's total payments are less than their tax liability, the taxpayer
may:
A. Owe additional tax
B. Automatically receive a refund
C. Become exempt from filing
D. Eliminate all income
