Test Bank for H&R Block - Latest Update 2025 Fully Solved
Earned Income - Answers received for services performed. some examples include wages, commissions,
tips, farming, and other business income.
Unearned Income - Answers taxable income that does not meet the definition of earned income.
Examples of unearned income include interest income, dividends, rents and royalties, pensions, alimony,
and unemployment income.
Is interest received on U.S. Treasury obligations taxable on state and/or local returns? - Answers No.
Interest on U.S. Treasury obligations is exempt from state and local tax by federal law.
Is municipal bond interest taxable on a federal return? - Answers No, the federal government does not
tax municipal bond interest. Some states tax municipal bond interest from outside the state, and from
their own state. Depends on the state.
How is interest income reported to the taxpayer? - Answers Interest income is reported to the taxpayer
on Form 1099-INT or a substitute statement.
What information do you need to know to determine whether a nondependent taxpayer is required to
file a return? - Answers The taxpayer's filing status, age at the end of the tax year, and gross income for
the year.
For tax purposes, when is a person's marital status determined? - Answers On the last day of the tax
year, or the date of death.
How much is added to the standard deduction if the taxpayer (or spouse) is age 65 or older, or blind? -
Answers $1,350 for married taxpayers and qualifying widow(er)s, or $1,700 for those filing single or
head of household.
What is the personal exemption amount for 2021? - Answers There is no personal exemption for 2021. A
personal exemption was an amount previously allowed by law to reduce income that would otherwise
be taxed. The Tax Cuts and Jobs Act of 2017 repealed this deduction beginning in 2018.
How is the gross income filing requirement determined for most nondependent taxpayers? - Answers
The taxpayer's standard deduction, including the additional amounts for age. However, for married filing
separately, or married filing jointly when the spouses did not live together at the end of the year, the
amount is $5.
What is the difference between injured spouse allocation and innocent spouse relief? - Answers The IRS
provides an injured spouse allocation for the taxpayer to protect their portion of a refund from a
spouse's past-due federal income tax, unpaid student loans, unpaid child and spousal support, or state
income tax.
,The IRS provides innocent spouse relief to taxpayers who file a joint return and later learn that their
spouse has underestimated income (or overstated a credit or deduction) on the return.
Is unemployment compensation taxable? - Answers Yes, unemployment compensation is fully taxable.
Are scholarships and fellowships taxable? - Answers Sometimes. Generally, scholarships and fellowships
are excluded from income by degree-seeking candidates to the extent that they are used to pay
qualified education expenses, such as tuition and course-related fees. However, if they are used to pay
for room and board or other expenses, they are taxable.
What document will the taxpayer receive from their employer reporting disability pension payments? -
Answers The income is reported on Form 1099-R.
Under what circumstances can a disability pension qualify as earned income for the EIC? - Answers
Disability pension income received before the taxpayer attains minimum retirement age for their
company is reported as wage income. It is also considered earned income for purposes of EIC.
What types of income must be reported on Schedule 1 (Form 1040) and then reported on Form 1040? -
Answers Gambling winnings, alimony, jury duty pay, canceled debts, and hobby income are some
examples of income that must be reported on Schedule 1 (Form 1040) and then reported on Form 1040.
What are the adjustments that can be claimed on Schedule 1 (Form 1040)? - Answers Some examples of
adjustments that can be claimed on Schedule 1 are:
Educator expense deduction.
The health savings account (HSA) deduction.
Moving expenses for members of the military.
Self-employment tax deduction.
Self-employed health insurance deduction.
Penalty on early withdrawal of savings.
Alimony payments.
IRA deduction.
Student loan interest deduction.
How much may an eligible educator deduct for qualified classroom expenses as an adjustment to
income? - Answers Up to $250 per eligible educator.
, Married taxpayers filing a joint return who are both eligible educators may each claim the $250
deduction, totaling $500.
Who is an eligible educator? - Answers Someone who worked at least 900 hours during the school year
as a teacher, teacher's aide, counselor, or principal in an elementary or secondary school.
Where is the educator expense deduction reported? - Answers Educator expenses are reported on
Schedule 1, Additional Income and Adjustments to Income, line 10.
Who may not claim a student loan interest deduction? - Answers Someone who is claimed as a
dependent may not claim the deduction in the current tax year, nor may someone who uses the married
filing separately filing status. The amount of income a taxpayer earns may also affect their deduction.
Taxpayers whose modified AGI exceeds a threshold amount for their filing status may not be able to
claim the deduction, or they may only be eligible to claim a reduced amount.
What is a qualified student loan? - Answers A loan used to pay qualified education expenses. Credit card
debt may be included, provided the card was used exclusively to pay for qualified expenses. Money
borrowed from a related person is not a qualified student loan.
What three requirements must be met for an individual to be claimed as either a qualifying child or a
qualifying relative? - Answers To be either a qualifying child or qualifying relative, they must be a U.S.
citizen, U.S. resident alien, U.S. national, or a resident of Canada, or Mexico; they cannot file a joint
return (unless solely to claim a refund of taxes paid); and the taxpayer claiming the dependent must not
be a dependent of another taxpayer.
What are the five tests for a qualifying child? - Answers 1. Relationship test.
2. Age test.
3. Residency test.
4. Support test.
5. Joint return test.
How can a married individual meet the joint return test to remain a qualifying child? - Answers They 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 of any taxes withheld.
How can you determine who paid more than half of a person's support? - Answers First, determine the
potential dependent's total support. Then, that amount is reduced by the funds used by all sources
other than the taxpayer. Other sources of support might include relatives, government programs, and
the dependent's own income. If the taxpayer paid more than one-half of the total support, they may
claim the potential dependent as a qualifying relative, if all the other requirements are met. If the
potential dependent paid more than one-half of their own support, then no one else may claim them
and they are not a dependent.
Earned Income - Answers received for services performed. some examples include wages, commissions,
tips, farming, and other business income.
Unearned Income - Answers taxable income that does not meet the definition of earned income.
Examples of unearned income include interest income, dividends, rents and royalties, pensions, alimony,
and unemployment income.
Is interest received on U.S. Treasury obligations taxable on state and/or local returns? - Answers No.
Interest on U.S. Treasury obligations is exempt from state and local tax by federal law.
Is municipal bond interest taxable on a federal return? - Answers No, the federal government does not
tax municipal bond interest. Some states tax municipal bond interest from outside the state, and from
their own state. Depends on the state.
How is interest income reported to the taxpayer? - Answers Interest income is reported to the taxpayer
on Form 1099-INT or a substitute statement.
What information do you need to know to determine whether a nondependent taxpayer is required to
file a return? - Answers The taxpayer's filing status, age at the end of the tax year, and gross income for
the year.
For tax purposes, when is a person's marital status determined? - Answers On the last day of the tax
year, or the date of death.
How much is added to the standard deduction if the taxpayer (or spouse) is age 65 or older, or blind? -
Answers $1,350 for married taxpayers and qualifying widow(er)s, or $1,700 for those filing single or
head of household.
What is the personal exemption amount for 2021? - Answers There is no personal exemption for 2021. A
personal exemption was an amount previously allowed by law to reduce income that would otherwise
be taxed. The Tax Cuts and Jobs Act of 2017 repealed this deduction beginning in 2018.
How is the gross income filing requirement determined for most nondependent taxpayers? - Answers
The taxpayer's standard deduction, including the additional amounts for age. However, for married filing
separately, or married filing jointly when the spouses did not live together at the end of the year, the
amount is $5.
What is the difference between injured spouse allocation and innocent spouse relief? - Answers The IRS
provides an injured spouse allocation for the taxpayer to protect their portion of a refund from a
spouse's past-due federal income tax, unpaid student loans, unpaid child and spousal support, or state
income tax.
,The IRS provides innocent spouse relief to taxpayers who file a joint return and later learn that their
spouse has underestimated income (or overstated a credit or deduction) on the return.
Is unemployment compensation taxable? - Answers Yes, unemployment compensation is fully taxable.
Are scholarships and fellowships taxable? - Answers Sometimes. Generally, scholarships and fellowships
are excluded from income by degree-seeking candidates to the extent that they are used to pay
qualified education expenses, such as tuition and course-related fees. However, if they are used to pay
for room and board or other expenses, they are taxable.
What document will the taxpayer receive from their employer reporting disability pension payments? -
Answers The income is reported on Form 1099-R.
Under what circumstances can a disability pension qualify as earned income for the EIC? - Answers
Disability pension income received before the taxpayer attains minimum retirement age for their
company is reported as wage income. It is also considered earned income for purposes of EIC.
What types of income must be reported on Schedule 1 (Form 1040) and then reported on Form 1040? -
Answers Gambling winnings, alimony, jury duty pay, canceled debts, and hobby income are some
examples of income that must be reported on Schedule 1 (Form 1040) and then reported on Form 1040.
What are the adjustments that can be claimed on Schedule 1 (Form 1040)? - Answers Some examples of
adjustments that can be claimed on Schedule 1 are:
Educator expense deduction.
The health savings account (HSA) deduction.
Moving expenses for members of the military.
Self-employment tax deduction.
Self-employed health insurance deduction.
Penalty on early withdrawal of savings.
Alimony payments.
IRA deduction.
Student loan interest deduction.
How much may an eligible educator deduct for qualified classroom expenses as an adjustment to
income? - Answers Up to $250 per eligible educator.
, Married taxpayers filing a joint return who are both eligible educators may each claim the $250
deduction, totaling $500.
Who is an eligible educator? - Answers Someone who worked at least 900 hours during the school year
as a teacher, teacher's aide, counselor, or principal in an elementary or secondary school.
Where is the educator expense deduction reported? - Answers Educator expenses are reported on
Schedule 1, Additional Income and Adjustments to Income, line 10.
Who may not claim a student loan interest deduction? - Answers Someone who is claimed as a
dependent may not claim the deduction in the current tax year, nor may someone who uses the married
filing separately filing status. The amount of income a taxpayer earns may also affect their deduction.
Taxpayers whose modified AGI exceeds a threshold amount for their filing status may not be able to
claim the deduction, or they may only be eligible to claim a reduced amount.
What is a qualified student loan? - Answers A loan used to pay qualified education expenses. Credit card
debt may be included, provided the card was used exclusively to pay for qualified expenses. Money
borrowed from a related person is not a qualified student loan.
What three requirements must be met for an individual to be claimed as either a qualifying child or a
qualifying relative? - Answers To be either a qualifying child or qualifying relative, they must be a U.S.
citizen, U.S. resident alien, U.S. national, or a resident of Canada, or Mexico; they cannot file a joint
return (unless solely to claim a refund of taxes paid); and the taxpayer claiming the dependent must not
be a dependent of another taxpayer.
What are the five tests for a qualifying child? - Answers 1. Relationship test.
2. Age test.
3. Residency test.
4. Support test.
5. Joint return test.
How can a married individual meet the joint return test to remain a qualifying child? - Answers They 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 of any taxes withheld.
How can you determine who paid more than half of a person's support? - Answers First, determine the
potential dependent's total support. Then, that amount is reduced by the funds used by all sources
other than the taxpayer. Other sources of support might include relatives, government programs, and
the dependent's own income. If the taxpayer paid more than one-half of the total support, they may
claim the potential dependent as a qualifying relative, if all the other requirements are met. If the
potential dependent paid more than one-half of their own support, then no one else may claim them
and they are not a dependent.
