HRB FINAL EXAM QUESTIONS &
ANSWERS 100% ACCURATE!!
What is the Difference between earned income and unearned income? - ANSWERSEarned income is
received for services performed. Examples are wages commissions, tips and generally farming and other
business income . Taxable income other than that received for services performed. Unearned Income
includes money received ro the investment of money or other property, such as interest, dividends, and
royalties. It also includes pensions alimony, unemployment compensation and other income that is not
earned
If an employee thinks their Form W2 is incorrect, what should they do? - ANSWERSEmployee should
discuss with employer who issued the document and request a W2C. If no help from employer, notify
IRS. Tax prepaper can then file a substitute.
What information do you need to know to determine whether a taxpayer is required to file a return? -
ANSWERSGross income, filing status, age and if they are a dependent
For tax purposes, when is a person's marital status determined? - ANSWERSOn the last day of the tax
year
Where on the tax form can you find the regular standard deduction amounts? - ANSWERSLine 22 on
1040A, In the left margin at the top of the page 2 of forms 1040 and 1040A. Look at actual form to look
for line
How much is added to the standard deduction if the taxpayer (or spouse is age 65 or older, or blind? -
ANSWERS$1550 if unmarried, $1250 if married
What is the personal exemption amount for 2016? - ANSWERS$4,050
What two amounts are combined to make up the gross income filing requirments for most taxpayers? -
ANSWERSThe standard deduction and the personal exemption amounts
,Under what circumstances might a taxpayer be required to file a return even though they do not meet
the gross income filing requirements? - ANSWERS1. Has net employment of $400 or more net self
employment 2. You had unemployment income you owe medicare Advantage MSA, receive HAS, Archer,
MSA 3. Reeived an Advanced Premium Tax credit even if they didn't otherwise have a filing requirment
for the year *Tips, HSA, SE $400, PTC
What is the difference between injured spouse allocation and innocent spouse relief? - ANSWERSThe
difference between injured spouse and innocent spouse is significant in the eyes of the IRS. Both release
you from an income tax liability arising from a "married filing jointly" return but different outcomes.
Innocent spouse filed a joint return byt was unaware that their spouse deliberately under reported tax
liability. Injured spouse seeks to protect his or her share of the refund in case it gets seized or offset due
to the other spouse's debts or unpaid obligations
CHAPTER 3: DEPENDENT EXEMPTIONS AND SUPPORT - ANSWERS
What four requirements must be met for an individual to be claimed as a dependent - ANSWERSMust
pass the dependent test, joint return test, citizenship, qualifying child or relative
What are the five tests for a qualifying child? - ANSWERS1. Relationship 2. Age 3. Residency 4. Support 5.
Joint Return
What happens when more than one taxpayer claims the same qualifying child? - ANSWERSTie Breaker
Rules apply : 1. The parent, if only one of the persons is the childs parent 2. The parent with whom the
child lived the longest during the tax 3. The parents with the highest AGI if no parent can claim the child
as a qualifying child
What four tests must be met for an individual to be considered a qualifying relative? - ANSWERS1. Not
be a qualifying child, the person cannot be the taxpayers qualifying child or the qualifying child of
another taxpayer 2. Relationship: Child, brother, sister, step sister, step brother, step father , step mother,
in-laws 3. Gross Income: gross income must be less than $4050 4. Support: Taxpayer must provide more
than half the support
How can the gross income for a qualifying relative test be satisfied? - ANSWERSGross income must be
less than $4050 (Do not include tax exempt income)
,What is the purpose of Form 2120 Multiple Support Declaration? - ANSWERSYou only need 2120
multiple support declaration if you are claiming someone other than a qualifying child as a dependent
and there are two or more people including yourself who provide support for the dependent
How much is the child tax credit worth? - ANSWERS$1,000
What additional requirements must be met for a taxpayer to be eligible to claim the Child Tax Credit for
the qualifying child? - ANSWERS1. Taxpayer 2. Child must be under17 at the end of the year 3. Qualifying
child must be claimed on tax payer returns 4. Qualifying child must be US Citizen US National or resident
of US
How can a married individual meet the joint return test to remain a qualifying child? - ANSWERSThey can
meet this test by not filing a joint return with their spouse or they can file a joint return with their
spouse if they are filing only to claim a refund on any taxes withheld
How can you determine who paid more than half of a person's support? - ANSWERSTotal support is
determined and reduced by the funds received by and for the person from all sources other than the
taxpaer. The remaining support is considered to be provided by the taxpayer. Other sources might
include government support Worksheet for Determining Support
What happens if an individual is a qualifying child of more than one taxpayer? - ANSWERSGenerally, the
custodial parent is the one in which the child spent the most nights
Is the Child Tax Credit refundable or nonrefundable - ANSWERSCTC is nonrefundable the The additional
child tax credit is refundable
How much is the penalty if a paid prepaerer fails to meet the child tax credit due diligence requirements
- ANSWERS$510 for each failure, for each credit on each return Total Penalty max for return is $1530
What is the first due diligence requirement for the EITC, CTC,ACTC, AOTC and how does a paid preparer
meet this requirement? - ANSWERSComplete and submit the form 8867. 1. Complete the form
thoroughly and conscientously read the form carefully 2. submit the form on every claim for eitc,
ctc/actc and aotc
, CHAPTER 4: DEPENDENT-RELATED FILING STATUS - ANSWERS
What filing statuses are available to taxpayers who are unmarried - ANSWERS1. Single 2. Head of
Household 3. Qualifying widow(er)
How may a married taxpayer qualify as unmarried for tax purposes? - ANSWERSMust be legally
seperated under a decree of divorce or separate maintenance or meet these requirements: 1. must file a
separate return 2. must have provided more than half the cost of maintaining a household 3. the home
must have been the principle place of abode
What requirements must be met for a taxpayer to use the qualifying wideo(er) status? - ANSWERS1.
Taxpayer's spouse died in either of the two tax years immediately preceding the current tax year 2.
Taxpayer paid over half the cost of maintaining the household wich is home of their dependent son ,
stepson or step daughter for the entire year and cannot remarry
In the case of divorced or separated parents, which parent generally gets to claim the qualifying child? -
ANSWERSGenerally, the custodial parent is the one in which the child spent the most nights. If child lived
equal nights, the parent with the higher AGI
What is the exception to this rule? - ANSWERSCustodial parent may waive the right to claim dependency
exemption (Form 8332)
What happens when more than one taxpayer claims the same qualifying child? - ANSWERSThe IRS will
apply the TIE BREAKER RULES
CHAPTER 6: ITEMIZED DEDUCTIONS - ANSWERS
When is it considered advantageous for a taxpayer to itemize? - ANSWERSWhen allowable expenses for
things like home mortgage interest and property taxes, state income taxes or sales taxes, medical
expenses, charitable contributions that exceed the standard deduction
Is the deduction for medical expenses limited? - ANSWERSYou can deduct such costs only to the extent
that unreimbursed expenses exceed 10% of your AGI 7.5% if 65 years old or older
ANSWERS 100% ACCURATE!!
What is the Difference between earned income and unearned income? - ANSWERSEarned income is
received for services performed. Examples are wages commissions, tips and generally farming and other
business income . Taxable income other than that received for services performed. Unearned Income
includes money received ro the investment of money or other property, such as interest, dividends, and
royalties. It also includes pensions alimony, unemployment compensation and other income that is not
earned
If an employee thinks their Form W2 is incorrect, what should they do? - ANSWERSEmployee should
discuss with employer who issued the document and request a W2C. If no help from employer, notify
IRS. Tax prepaper can then file a substitute.
What information do you need to know to determine whether a taxpayer is required to file a return? -
ANSWERSGross income, filing status, age and if they are a dependent
For tax purposes, when is a person's marital status determined? - ANSWERSOn the last day of the tax
year
Where on the tax form can you find the regular standard deduction amounts? - ANSWERSLine 22 on
1040A, In the left margin at the top of the page 2 of forms 1040 and 1040A. Look at actual form to look
for line
How much is added to the standard deduction if the taxpayer (or spouse is age 65 or older, or blind? -
ANSWERS$1550 if unmarried, $1250 if married
What is the personal exemption amount for 2016? - ANSWERS$4,050
What two amounts are combined to make up the gross income filing requirments for most taxpayers? -
ANSWERSThe standard deduction and the personal exemption amounts
,Under what circumstances might a taxpayer be required to file a return even though they do not meet
the gross income filing requirements? - ANSWERS1. Has net employment of $400 or more net self
employment 2. You had unemployment income you owe medicare Advantage MSA, receive HAS, Archer,
MSA 3. Reeived an Advanced Premium Tax credit even if they didn't otherwise have a filing requirment
for the year *Tips, HSA, SE $400, PTC
What is the difference between injured spouse allocation and innocent spouse relief? - ANSWERSThe
difference between injured spouse and innocent spouse is significant in the eyes of the IRS. Both release
you from an income tax liability arising from a "married filing jointly" return but different outcomes.
Innocent spouse filed a joint return byt was unaware that their spouse deliberately under reported tax
liability. Injured spouse seeks to protect his or her share of the refund in case it gets seized or offset due
to the other spouse's debts or unpaid obligations
CHAPTER 3: DEPENDENT EXEMPTIONS AND SUPPORT - ANSWERS
What four requirements must be met for an individual to be claimed as a dependent - ANSWERSMust
pass the dependent test, joint return test, citizenship, qualifying child or relative
What are the five tests for a qualifying child? - ANSWERS1. Relationship 2. Age 3. Residency 4. Support 5.
Joint Return
What happens when more than one taxpayer claims the same qualifying child? - ANSWERSTie Breaker
Rules apply : 1. The parent, if only one of the persons is the childs parent 2. The parent with whom the
child lived the longest during the tax 3. The parents with the highest AGI if no parent can claim the child
as a qualifying child
What four tests must be met for an individual to be considered a qualifying relative? - ANSWERS1. Not
be a qualifying child, the person cannot be the taxpayers qualifying child or the qualifying child of
another taxpayer 2. Relationship: Child, brother, sister, step sister, step brother, step father , step mother,
in-laws 3. Gross Income: gross income must be less than $4050 4. Support: Taxpayer must provide more
than half the support
How can the gross income for a qualifying relative test be satisfied? - ANSWERSGross income must be
less than $4050 (Do not include tax exempt income)
,What is the purpose of Form 2120 Multiple Support Declaration? - ANSWERSYou only need 2120
multiple support declaration if you are claiming someone other than a qualifying child as a dependent
and there are two or more people including yourself who provide support for the dependent
How much is the child tax credit worth? - ANSWERS$1,000
What additional requirements must be met for a taxpayer to be eligible to claim the Child Tax Credit for
the qualifying child? - ANSWERS1. Taxpayer 2. Child must be under17 at the end of the year 3. Qualifying
child must be claimed on tax payer returns 4. Qualifying child must be US Citizen US National or resident
of US
How can a married individual meet the joint return test to remain a qualifying child? - ANSWERSThey can
meet this test by not filing a joint return with their spouse or they can file a joint return with their
spouse if they are filing only to claim a refund on any taxes withheld
How can you determine who paid more than half of a person's support? - ANSWERSTotal support is
determined and reduced by the funds received by and for the person from all sources other than the
taxpaer. The remaining support is considered to be provided by the taxpayer. Other sources might
include government support Worksheet for Determining Support
What happens if an individual is a qualifying child of more than one taxpayer? - ANSWERSGenerally, the
custodial parent is the one in which the child spent the most nights
Is the Child Tax Credit refundable or nonrefundable - ANSWERSCTC is nonrefundable the The additional
child tax credit is refundable
How much is the penalty if a paid prepaerer fails to meet the child tax credit due diligence requirements
- ANSWERS$510 for each failure, for each credit on each return Total Penalty max for return is $1530
What is the first due diligence requirement for the EITC, CTC,ACTC, AOTC and how does a paid preparer
meet this requirement? - ANSWERSComplete and submit the form 8867. 1. Complete the form
thoroughly and conscientously read the form carefully 2. submit the form on every claim for eitc,
ctc/actc and aotc
, CHAPTER 4: DEPENDENT-RELATED FILING STATUS - ANSWERS
What filing statuses are available to taxpayers who are unmarried - ANSWERS1. Single 2. Head of
Household 3. Qualifying widow(er)
How may a married taxpayer qualify as unmarried for tax purposes? - ANSWERSMust be legally
seperated under a decree of divorce or separate maintenance or meet these requirements: 1. must file a
separate return 2. must have provided more than half the cost of maintaining a household 3. the home
must have been the principle place of abode
What requirements must be met for a taxpayer to use the qualifying wideo(er) status? - ANSWERS1.
Taxpayer's spouse died in either of the two tax years immediately preceding the current tax year 2.
Taxpayer paid over half the cost of maintaining the household wich is home of their dependent son ,
stepson or step daughter for the entire year and cannot remarry
In the case of divorced or separated parents, which parent generally gets to claim the qualifying child? -
ANSWERSGenerally, the custodial parent is the one in which the child spent the most nights. If child lived
equal nights, the parent with the higher AGI
What is the exception to this rule? - ANSWERSCustodial parent may waive the right to claim dependency
exemption (Form 8332)
What happens when more than one taxpayer claims the same qualifying child? - ANSWERSThe IRS will
apply the TIE BREAKER RULES
CHAPTER 6: ITEMIZED DEDUCTIONS - ANSWERS
When is it considered advantageous for a taxpayer to itemize? - ANSWERSWhen allowable expenses for
things like home mortgage interest and property taxes, state income taxes or sales taxes, medical
expenses, charitable contributions that exceed the standard deduction
Is the deduction for medical expenses limited? - ANSWERSYou can deduct such costs only to the extent
that unreimbursed expenses exceed 10% of your AGI 7.5% if 65 years old or older
