HRB FINAL EXAM
What is the Difference between earned income and unearned income? - answer Earned
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? - answer
Employee 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? - answerGross income, filing status, age and if they are a dependent
For tax purposes, when is a person's marital status determined? - answerOn the last
day of the tax year
Where on the tax form can you find the regular standard deduction amounts? -
answerLine 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? - answer$1550 if unmarried, $1250 if married
What is the personal exemption amount for 2016? - answer$4,050
What two amounts are combined to make up the gross income filing requirments for
most taxpayers? - answerThe 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? - answer1. 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? -
answerThe 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 - answer
What four requirements must be met for an individual to be claimed as a dependent -
answerMust pass the dependent test, joint return test, citizenship, qualifying child or
relative
What are the five tests for a qualifying child? - answer1. Relationship 2. Age 3.
Residency 4. Support 5. Joint Return
How can a married individual meet the joint return test to remain a qualifying child? -
answerThey 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? - answerTotal
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? -
answerGenerally, the custodial parent is the one in which the child spent the most
nights
What happens when more than one taxpayer claims the same qualifying child? -
answerTie 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? -
answer1. 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? - answerGross
income must be less than $4050 (Do not include tax exempt income)
What is the purpose of Form 2120 Multiple Support Declaration? - answerYou 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? - answer$1,000
What additional requirements must be met for a taxpayer to be eligible to claim the
Child Tax Credit for the qualifying child? - answer1. 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
Is the Child Tax Credit refundable or nonrefundable - answerCTC 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 - answer$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? - answerComplete 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 - answer
What filing statuses are available to taxpayers who are unmarried - answer1. Single 2.
Head of Household 3. Qualifying widow(er)
How may a married taxpayer qualify as unmarried for tax purposes? - answerMust 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 qualify to file as head of household -
answer1. unmarried on the last day of year 2. paid more than 1/2 to maintain home 3.
taxpayer has qualifying child or relative or parent
What are some of the costs of maintaining a home? - answerRent, mortgage interest,
real estate taxes, homeowner or renter insurance, repairs/maintenance, utilities, food
eaten in home
What requirements must be met for a taxpayer to use the qualifying wideo(er) status? -
answer1. 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
What is the Difference between earned income and unearned income? - answer Earned
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? - answer
Employee 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? - answerGross income, filing status, age and if they are a dependent
For tax purposes, when is a person's marital status determined? - answerOn the last
day of the tax year
Where on the tax form can you find the regular standard deduction amounts? -
answerLine 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? - answer$1550 if unmarried, $1250 if married
What is the personal exemption amount for 2016? - answer$4,050
What two amounts are combined to make up the gross income filing requirments for
most taxpayers? - answerThe 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? - answer1. 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? -
answerThe 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 - answer
What four requirements must be met for an individual to be claimed as a dependent -
answerMust pass the dependent test, joint return test, citizenship, qualifying child or
relative
What are the five tests for a qualifying child? - answer1. Relationship 2. Age 3.
Residency 4. Support 5. Joint Return
How can a married individual meet the joint return test to remain a qualifying child? -
answerThey 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? - answerTotal
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? -
answerGenerally, the custodial parent is the one in which the child spent the most
nights
What happens when more than one taxpayer claims the same qualifying child? -
answerTie 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? -
answer1. 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? - answerGross
income must be less than $4050 (Do not include tax exempt income)
What is the purpose of Form 2120 Multiple Support Declaration? - answerYou 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? - answer$1,000
What additional requirements must be met for a taxpayer to be eligible to claim the
Child Tax Credit for the qualifying child? - answer1. 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
Is the Child Tax Credit refundable or nonrefundable - answerCTC 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 - answer$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? - answerComplete 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 - answer
What filing statuses are available to taxpayers who are unmarried - answer1. Single 2.
Head of Household 3. Qualifying widow(er)
How may a married taxpayer qualify as unmarried for tax purposes? - answerMust 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 qualify to file as head of household -
answer1. unmarried on the last day of year 2. paid more than 1/2 to maintain home 3.
taxpayer has qualifying child or relative or parent
What are some of the costs of maintaining a home? - answerRent, mortgage interest,
real estate taxes, homeowner or renter insurance, repairs/maintenance, utilities, food
eaten in home
What requirements must be met for a taxpayer to use the qualifying wideo(er) status? -
answer1. 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
