H&R Block Final Review Questions
with Accurate Answers
A tax preparer may not sign a return reporting clearly inaccurate information or
otherwise assist a taxpayer in filing an inaccurate return. correct answer The
dependent must be a qualifying child or qualifying relative; they must be a U.S.
citizen or a resident of the United States, 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.
A taxpayer makes their final 2018 state estimated tax payment on January 15,
2019. Where should they report this item? correct answer They should report this
payment as an estimated payment on their 2018 state return as this is the final
payment for 2018. They may also deduct it on line 5 of Schedule A on their 2019
federal return as an itemized deduction, since it was paid in 2019.
A taxpayer wrote a check for a $500 donation to their house of worship. Is their
canceled check sufficient documentation to support the deduction? correct
answer No, contributions of $250 or more at any one time require written
substantiation from the charity. Such substantiation must be received before the
tax return is completed. The IRS will not accept reconstructions.
Are early distributions from qualified retirement plans always penalized? correct
answer No, there are exceptions that apply to many situations, depending on the
type of retirement account from which the distribution was made.
Are scholarships and fellowships taxable? correct answer 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.
At what threshold amount must interest or dividend income be reported on
Schedule B? correct answer When total taxable interest or ordinary dividend
income exceeds $1,500.
Chris (26) has an earned income and AGI of $9,486. He has no other income. He
lived in the United States all year and is no one's dependent. He has a valid SSN
and is filing as single. He is a U.S. citizen. Does Chris qualify for EITC? correct
answer YES
Complete and keep all worksheets used to compute any of these four credits.
The CTC has a worksheet that needs to be completed, and the ACTC is calculated
using Schedule 8812. The EITC has several worksheets that need to be completed
that tie to Schedule EITC. correct answer The five qualifications are:
Be at least 25 years old, but younger than age 65, on January 1, 2020.
Not be able to be claimed as a dependent on another taxpayer's return.
Not be a qualifying child of another person.
Live in the United States more than half the year.
Have earned income and AGI of less than $15,570 ($21,370 if married filing
jointly).
How can a married individual meet the joint return test to remain a qualifying
child? correct answer 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 the gross income test for a qualifying relative be satisfied? correct
answer The qualifying relative's gross income must be less than $4,200. When
determining the gross income, tax-exempt income, such as certain social security
benefits, is not included.
How can you determine who paid more than half of a person's support? correct
answer The amount of total support is reduced by the funds received for the
person from all sources other than the taxpayer. Other sources of support might
include relatives, government programs, and the dependent's own income.
How do you determine the taxable portion of a social security distribution?
correct answer The amount of a taxpayer's social security or tier 1 railroad
retirement benefits subject to federal tax varies from zero to 85%, depending
upon filing status and income. The level of taxability is based on MAGI increased
by one-half of the net benefits received by the taxpayer (and spouse, if MFJ).
The taxable portion is calculated using the Social Security Taxable Benefits
Worksheet.
How does a tax preparer know if an exception to the early distribution penalty
applies? correct answer The tax preparer can determine if an exception applies by
using thorough interview questions when discussing the distribution with the
taxpayer. The distribution code on the Form 1099-R can also be helpful to the tax
preparer, but may not correctly report an exception that applies.
How is interest income reported to the taxpayer? correct answer Interest income
is reported to the taxpayer on Form 1099-INT or a substitute statement.
How is the gross income filing requirement determined for most taxpayers?
correct answer The taxpayer's standard deduction, including the additional
amounts for age and blindness. However, for MFS, the amount is $5.
with Accurate Answers
A tax preparer may not sign a return reporting clearly inaccurate information or
otherwise assist a taxpayer in filing an inaccurate return. correct answer The
dependent must be a qualifying child or qualifying relative; they must be a U.S.
citizen or a resident of the United States, 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.
A taxpayer makes their final 2018 state estimated tax payment on January 15,
2019. Where should they report this item? correct answer They should report this
payment as an estimated payment on their 2018 state return as this is the final
payment for 2018. They may also deduct it on line 5 of Schedule A on their 2019
federal return as an itemized deduction, since it was paid in 2019.
A taxpayer wrote a check for a $500 donation to their house of worship. Is their
canceled check sufficient documentation to support the deduction? correct
answer No, contributions of $250 or more at any one time require written
substantiation from the charity. Such substantiation must be received before the
tax return is completed. The IRS will not accept reconstructions.
Are early distributions from qualified retirement plans always penalized? correct
answer No, there are exceptions that apply to many situations, depending on the
type of retirement account from which the distribution was made.
Are scholarships and fellowships taxable? correct answer 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.
At what threshold amount must interest or dividend income be reported on
Schedule B? correct answer When total taxable interest or ordinary dividend
income exceeds $1,500.
Chris (26) has an earned income and AGI of $9,486. He has no other income. He
lived in the United States all year and is no one's dependent. He has a valid SSN
and is filing as single. He is a U.S. citizen. Does Chris qualify for EITC? correct
answer YES
Complete and keep all worksheets used to compute any of these four credits.
The CTC has a worksheet that needs to be completed, and the ACTC is calculated
using Schedule 8812. The EITC has several worksheets that need to be completed
that tie to Schedule EITC. correct answer The five qualifications are:
Be at least 25 years old, but younger than age 65, on January 1, 2020.
Not be able to be claimed as a dependent on another taxpayer's return.
Not be a qualifying child of another person.
Live in the United States more than half the year.
Have earned income and AGI of less than $15,570 ($21,370 if married filing
jointly).
How can a married individual meet the joint return test to remain a qualifying
child? correct answer 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 the gross income test for a qualifying relative be satisfied? correct
answer The qualifying relative's gross income must be less than $4,200. When
determining the gross income, tax-exempt income, such as certain social security
benefits, is not included.
How can you determine who paid more than half of a person's support? correct
answer The amount of total support is reduced by the funds received for the
person from all sources other than the taxpayer. Other sources of support might
include relatives, government programs, and the dependent's own income.
How do you determine the taxable portion of a social security distribution?
correct answer The amount of a taxpayer's social security or tier 1 railroad
retirement benefits subject to federal tax varies from zero to 85%, depending
upon filing status and income. The level of taxability is based on MAGI increased
by one-half of the net benefits received by the taxpayer (and spouse, if MFJ).
The taxable portion is calculated using the Social Security Taxable Benefits
Worksheet.
How does a tax preparer know if an exception to the early distribution penalty
applies? correct answer The tax preparer can determine if an exception applies by
using thorough interview questions when discussing the distribution with the
taxpayer. The distribution code on the Form 1099-R can also be helpful to the tax
preparer, but may not correctly report an exception that applies.
How is interest income reported to the taxpayer? correct answer Interest income
is reported to the taxpayer on Form 1099-INT or a substitute statement.
How is the gross income filing requirement determined for most taxpayers?
correct answer The taxpayer's standard deduction, including the additional
amounts for age and blindness. However, for MFS, the amount is $5.
