H&R Block Income Tax Course
Questions & Answers
Circular 230 - Verified ANS ✔✔ - Regulations governing the practice of
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attorneys, certified public accountants, enrolled agents, enrolled actuaries, and
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appraisers before the IRS.
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Disclosure - Verified ANS ✔✔ - The release of tax information by an IRS
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employee.
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Due Diligence - Verified ANS ✔✔ - Requirements that tax professionals must
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follow when preparing income tax returns.
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Noncompliance - Verified ANS ✔✔ - Failure or refusal to comply with the tax
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code.
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Privilege - Verified ANS ✔✔ - Protection from being required to disclose
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confidential communications between two parties, such as attorney and client.
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Estimated Tax - Verified ANS ✔✔ - The amount of tax a taxpayer expects to
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owe for the year after subtracting expected amounts withheld and certain
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refundable credits.
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Estimated Tax Voucher - Verified ANS ✔✔ - A statement by an individual of
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(1) the amount of income tax he estimates he will incur during the current
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taxable year on income that is not subject to withholding, (2) the excess
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amount over that withheld on income which is subject to withholding, and (3)
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his estimated self-employment tax.
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,Exemption from Withholding - Verified ANS ✔✔ - Status claimed on Form W-4
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directing the employer not to withhold federal income taxes from the
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employee.
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Underpayment Penalty - Verified ANS ✔✔ - If a taxpayer did not pay enough n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
tax on a timely basis during the year, he may be required to pay an
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underpayment penalty.
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Withholding Allowances - Verified ANS ✔✔ - An increase by which income tax
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withholding on certain income is reduced.
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Two Ways to Pay as You Go - Verified ANS ✔✔ - Withholding and Estimated
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Tax Payments
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Form W-4 - Verified ANS ✔✔ - Employee's Withholding Allowance Certificate
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Form 8815 - Verified ANS ✔✔ - Exclusion of Interest From Series EE and I U.S.
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Savings Bonds Issued After 1989
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Form 2210 - Verified ANS ✔✔ - Underpayment of Estimated Tax by
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Individuals, Estates, and Trusts
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Form 4868 - Verified ANS ✔✔ - Application for Automatic Extension of Time
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To File U.S. Individual Income Tax Return
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Form 8888 - Verified ANS ✔✔ - Allocation of Refund
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Form 9465 - Verified ANS ✔✔ - Installment Agreement Request
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Amended Return - Verified ANS ✔✔ - A tax return filed on Form 1040X after
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the original return has been filed.
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Closed Year - Verified ANS ✔✔ - A tax year for which the statute of limitations
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has expired.
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Open Year - Verified ANS ✔✔ - A taxable year for which the statute of
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limitations has not yet expired.
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Failure-to-File Penalty - Verified ANS ✔✔ - Generally 5% for each month or n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
part of a month the return is late, but not more than 25% of the tax not paid.
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Failure to File - Verified ANS ✔✔ - Taxpayer fails to file the return by the due
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date, and there is a balance due.
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,Failure to Pay - Verified ANS ✔✔ - Taxpayer fails to pay the tax owed by the
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due date.
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Failure-to-Pay Penalty - Verified ANS ✔✔ - 0.5% of the unpaid taxes for each n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
month or part of a month after the due date, but not more than 25%.
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Negligence or Intentional Disregard - Verified ANS ✔✔ - Taxpayer shows
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negligence or disregard of the rules or regulations causing an underpayment.
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Negligence-or-Intentional-Disregard Penalty - Verified ANS ✔✔ - 20% of the n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
underpayment.
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Substantial Understatment - Verified ANS ✔✔ - Taxpayer understates their
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tax by the larger of $5,000 or 10% of the correct tax.
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Substantial-Understatement Penalty - Verified ANS ✔✔ - 20% of the n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
underpayment.
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Form 1040X - Verified ANS ✔✔ - Amended U.S. Individual Income Tax Return
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When can an amended return be filed? - Verified ANS ✔✔ - Within three
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years of the date the original return was filed, or within two years of the date
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the tax was paid, whichever is later.
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Can the 1040X be e-filed? - Verified ANS ✔✔ - No.
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Household Employee - Verified ANS ✔✔ - An individual who performsn/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
nonbusiness services in a taxpayer's home.
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Active Income and Losses - Verified ANS ✔✔ - Those for which a taxpayer
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performs services.
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Partnership - Verified ANS ✔✔ - A form of business in which two or moren/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
persons join their money and skills in conducting the business as co-owners.
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Passive Income and Losses - Verified ANS ✔✔ - Those from business activities
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in which the taxpayer does not materially participate, and all rental activities.
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Portfolio Income and Losses - Verified ANS ✔✔ - Those from such sources as
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dividends, interest, capital gains and losses, and royalties.
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Rental Income - Verified ANS ✔✔ - Income received by the taxpayer for
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allowing another person's use of the taxpayer's property.
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, Royalty - Verified ANS ✔✔ - (1) A payment received for the right to exploit a
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taxpayer's ownership of natural resources or a taxpayer's literary, musical, or
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artistic creation. (2) An interest in the oil and gas in place that entitles the
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holder to a specified fraction, in kind or in value, of the total production from
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the property, free of any expenses of development and operation.
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S Corporation - Verified ANS ✔✔ - A qualified small business corporation that
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has elected special tax treatment under subchapter S of the Internal Revenue
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Code. S corporations pass income, losses, and deductions through to
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shareholders to report on their individual returns.
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Trust - Verified ANS ✔✔ - A tax entity that distributes all or part of its income
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to beneficiaries as instructed by the trust agreement.
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Requirements for a Real Estate Professional - Verified ANS ✔✔ - 1. More than n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
half of the personal services performed by the taxpayer in all trades or
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businesses during the tax year were performed in real property trades or
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businesses in which the taxpayer materially participated.
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2. The taxpayer performed more than 750 hours of services during the year in
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real property trades or businesses in which the taxpayer materially
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participated.
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Trade or Business Activities - Verified ANS ✔✔ - Any activity that: Involves the
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conduct of a trade or business; is conducted in anticipation of starting a trade
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or business; Involves research or experimental expenditures that are
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deductible under IRS Code 174.
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Nonpassive Income - Verified ANS ✔✔ - Income derived from activities thatn/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
are not passive.
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Types of Nonpassive Income - Verified ANS ✔✔ - Portfolio income; personal
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service income; other income.
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Portfolio Income - Verified ANS ✔✔ - Includes interest, dividends, annuities,
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and royalties not derived in the ordinary course of business.
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Personal Service Income - Verified ANS ✔✔ - Salaries, wages, commissions,
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self-employment income from trade or business in which the taxpayer
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materially participates, deferred compensation, taxable social security and
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Questions & Answers
Circular 230 - Verified ANS ✔✔ - Regulations governing the practice of
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attorneys, certified public accountants, enrolled agents, enrolled actuaries, and
n/ n/ n/ n/ n/ n/ n/ n/ n/
appraisers before the IRS.
n/ n/ n/ n/
Disclosure - Verified ANS ✔✔ - The release of tax information by an IRS
n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
employee.
n/
Due Diligence - Verified ANS ✔✔ - Requirements that tax professionals must
n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
follow when preparing income tax returns.
n/ n/ n/ n/ n/ n/
Noncompliance - Verified ANS ✔✔ - Failure or refusal to comply with the tax
n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
code.
n/
Privilege - Verified ANS ✔✔ - Protection from being required to disclose
n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
confidential communications between two parties, such as attorney and client.
n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
Estimated Tax - Verified ANS ✔✔ - The amount of tax a taxpayer expects to
n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
owe for the year after subtracting expected amounts withheld and certain
n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
refundable credits.
n/ n/
Estimated Tax Voucher - Verified ANS ✔✔ - A statement by an individual of
n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
(1) the amount of income tax he estimates he will incur during the current
n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
taxable year on income that is not subject to withholding, (2) the excess
n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
amount over that withheld on income which is subject to withholding, and (3)
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his estimated self-employment tax.
n/ n/ n/ n/
,Exemption from Withholding - Verified ANS ✔✔ - Status claimed on Form W-4
n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
directing the employer not to withhold federal income taxes from the
n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
employee.
n/
Underpayment Penalty - Verified ANS ✔✔ - If a taxpayer did not pay enough n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
tax on a timely basis during the year, he may be required to pay an
n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
underpayment penalty.
n/ n/
Withholding Allowances - Verified ANS ✔✔ - An increase by which income tax
n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
withholding on certain income is reduced.
n/ n/ n/ n/ n/ n/
Two Ways to Pay as You Go - Verified ANS ✔✔ - Withholding and Estimated
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Tax Payments
n/ n/
Form W-4 - Verified ANS ✔✔ - Employee's Withholding Allowance Certificate
n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
Form 8815 - Verified ANS ✔✔ - Exclusion of Interest From Series EE and I U.S.
n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
Savings Bonds Issued After 1989
n/ n/ n/ n/ n/
Form 2210 - Verified ANS ✔✔ - Underpayment of Estimated Tax by
n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
Individuals, Estates, and Trusts
n/ n/ n/ n/
Form 4868 - Verified ANS ✔✔ - Application for Automatic Extension of Time
n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
To File U.S. Individual Income Tax Return
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Form 8888 - Verified ANS ✔✔ - Allocation of Refund
n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
Form 9465 - Verified ANS ✔✔ - Installment Agreement Request
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Amended Return - Verified ANS ✔✔ - A tax return filed on Form 1040X after
n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
the original return has been filed.
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Closed Year - Verified ANS ✔✔ - A tax year for which the statute of limitations
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has expired.
n/ n/
Open Year - Verified ANS ✔✔ - A taxable year for which the statute of
n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
limitations has not yet expired.
n/ n/ n/ n/ n/
Failure-to-File Penalty - Verified ANS ✔✔ - Generally 5% for each month or n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
part of a month the return is late, but not more than 25% of the tax not paid.
n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
Failure to File - Verified ANS ✔✔ - Taxpayer fails to file the return by the due
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date, and there is a balance due.
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,Failure to Pay - Verified ANS ✔✔ - Taxpayer fails to pay the tax owed by the
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due date.
n/ n/
Failure-to-Pay Penalty - Verified ANS ✔✔ - 0.5% of the unpaid taxes for each n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
month or part of a month after the due date, but not more than 25%.
n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
Negligence or Intentional Disregard - Verified ANS ✔✔ - Taxpayer shows
n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
negligence or disregard of the rules or regulations causing an underpayment.
n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
Negligence-or-Intentional-Disregard Penalty - Verified ANS ✔✔ - 20% of the n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
underpayment.
n/
Substantial Understatment - Verified ANS ✔✔ - Taxpayer understates their
n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
tax by the larger of $5,000 or 10% of the correct tax.
n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
Substantial-Understatement Penalty - Verified ANS ✔✔ - 20% of the n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
underpayment.
n/
Form 1040X - Verified ANS ✔✔ - Amended U.S. Individual Income Tax Return
n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
When can an amended return be filed? - Verified ANS ✔✔ - Within three
n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
years of the date the original return was filed, or within two years of the date
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the tax was paid, whichever is later.
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Can the 1040X be e-filed? - Verified ANS ✔✔ - No.
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Household Employee - Verified ANS ✔✔ - An individual who performsn/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
nonbusiness services in a taxpayer's home.
n/ n/ n/ n/ n/ n/
Active Income and Losses - Verified ANS ✔✔ - Those for which a taxpayer
n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
performs services.
n/ n/
Partnership - Verified ANS ✔✔ - A form of business in which two or moren/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
persons join their money and skills in conducting the business as co-owners.
n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
Passive Income and Losses - Verified ANS ✔✔ - Those from business activities
n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
in which the taxpayer does not materially participate, and all rental activities.
n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
Portfolio Income and Losses - Verified ANS ✔✔ - Those from such sources as
n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
dividends, interest, capital gains and losses, and royalties.
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Rental Income - Verified ANS ✔✔ - Income received by the taxpayer for
n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
allowing another person's use of the taxpayer's property.
n/ n/ n/ n/ n/ n/ n/ n/
, Royalty - Verified ANS ✔✔ - (1) A payment received for the right to exploit a
n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
taxpayer's ownership of natural resources or a taxpayer's literary, musical, or
n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
artistic creation. (2) An interest in the oil and gas in place that entitles the
n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
holder to a specified fraction, in kind or in value, of the total production from
n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
the property, free of any expenses of development and operation.
n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
S Corporation - Verified ANS ✔✔ - A qualified small business corporation that
n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
has elected special tax treatment under subchapter S of the Internal Revenue
n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
Code. S corporations pass income, losses, and deductions through to
n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
shareholders to report on their individual returns.
n/ n/ n/ n/ n/ n/ n/
Trust - Verified ANS ✔✔ - A tax entity that distributes all or part of its income
n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
to beneficiaries as instructed by the trust agreement.
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Requirements for a Real Estate Professional - Verified ANS ✔✔ - 1. More than n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
half of the personal services performed by the taxpayer in all trades or
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businesses during the tax year were performed in real property trades or
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businesses in which the taxpayer materially participated.
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2. The taxpayer performed more than 750 hours of services during the year in
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real property trades or businesses in which the taxpayer materially
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participated.
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Trade or Business Activities - Verified ANS ✔✔ - Any activity that: Involves the
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conduct of a trade or business; is conducted in anticipation of starting a trade
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or business; Involves research or experimental expenditures that are
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deductible under IRS Code 174.
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Nonpassive Income - Verified ANS ✔✔ - Income derived from activities thatn/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/ n/
are not passive.
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Types of Nonpassive Income - Verified ANS ✔✔ - Portfolio income; personal
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service income; other income.
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Portfolio Income - Verified ANS ✔✔ - Includes interest, dividends, annuities,
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and royalties not derived in the ordinary course of business.
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Personal Service Income - Verified ANS ✔✔ - Salaries, wages, commissions,
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self-employment income from trade or business in which the taxpayer
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materially participates, deferred compensation, taxable social security and
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