H&R Block DIY Online Exam Prep | Midterm Test Questions and Verified Answers | 100% Accuracy Guaranteed

H&R Block DIY Online Exam Prep | Midterm Test Questions and Verified Answers | 100% Accuracy Guaranteed 1. Karen and Pete are married and will file a joint return. They brought all their tax documents to Jamal to prepare their return. The three documents are a Form W-2 for Karen ($55,300), a Form W-2 for Pete ($22,400), and unemployment compensation for Pete of $5,200. What will be their total income reported on their 2022 Form 1040, line 9? a) $27,600 b) $55,300 c) $77,700 d) $82,900 - ANSWER d) $82,900 2. Brian and Joy are divorced. Their divorce settlement agreement signed on June 1, 2017, states Brian must pay Joy $1,000 per month for child support and $1,000 per month for alimony. 3. Joy's child support payments are: a) Considered alimony. b) Fully taxable. c) Nontaxable. d) Partially taxable. - ANSWER c) Nontaxable. 4. Devan and Amber adopted a child with special needs in a domestic adoption. They had $5,500 in qualified adoption expenses in 2022, and the adoption was finalized on December 18, 2022. Their modified adjusted gross income is $210,000. Assuming all requirements are met, what is the maximum adoption credit they can claim in 2022? a) $5,500 b) $14,300 c) $14,890 d) $20,390 - ANSWER c) $14,890 5. If a taxpayer files their return claiming an education credit for the full amount of a student's qualified education expenses and later receives a refund from the institution, what advice will you give to the taxpayer? a) All credits will be reduced in future years. b) Any future education credits will be disallowed. c) There is no tax consequence. d) They will have to recapture (pay back) some of the credit claimed. - ANSWER d) They will have to recapture (pay back) some of the credit claimed. 6. Taxpayers who acquire qualifying commercial vehicles, weighing under 14,000 pounds, after December 31, 2022, through December 31, 2032 may qualify for the Credit for Qualified Commercial Clean Vehicles on the 2023 tax return. What is the maximum credit per vehicle? a) $3,750 b) $4,000 c) $5,000 d) $7,500 - ANSWER d) $7,500 7. Ellen and her husband were legally divorced in 2017. After divorce, Ellen retained physical custody of their children. Ellen received the following amounts from her ex-husband, on behalf of the children or as ordered by the court through a divorce decree: • Court-ordered child support of $1,000 per month. • Court-ordered alimony of $500 per month. 8. How much of this income should be reported on HELLEN federal return? a) $0 b) $6,000 c) $12,000 d) $18,000 - ANSWER b) $6,000 9. Monica cashed in a CD (certificate of deposit) early because she needed money quickly to pay credit card bills. The bank charged her an early withdrawal penalty of 3#, which amounted to $90. Can Monica deduct the penalty on her tax return? If so, where on the return is it reported? a) No; Monica will not be allowed to deduct the early withdrawal penalty. b) Yes; Monica can deduct the early withdrawal penalty but only if she uses Schedule A (Form 1040) and itemizes. c) Yes; Monica can deduct $90 on Part II, line 18 of Schedule 1 (Form 1040) as an adjustment to income. d) Yes; Monica can deduct $90 on Part II, line 8 of Schedule 2 (Form 1040) as an adjustment to income. - ANSWER c) Yes; Monica can deduct $90 on Part II, line 18 of Schedule 1 (Form 1040) as an adjustment to income. 10. Duke and his wife were legally divorced in 2021. After the divorce, Duke retained physical custody of their son. Duke received the following amounts from his ex-wife, on behalf of their son or as ordered by the court through a divorce decree: • Court-ordered child support of $2,000 per month. • Court-ordered alimony of $1,000 per month. 11. How much of this income should be reported on Duke's federal return? a) $0 b) $12,000 c) $24,000 d) $36,000 - ANSWER a) $0 12. mortgage that has fluctuating principal and interest payments. ARMs often begin as fixed mortgages and after a certain number of years shift into adjustable rates - ANSWER adjustable rate mortgage 13. a type of insurance used by vehicle owners to cover costs associated with car accidents - ANSWER auto insurance 14. a chart that documents how much money an individual earns and spends - ANSWER budget 15. the relationship between income and expenses in a budget. ex: if you spend more money than you have coming in, you have negative cash flow - ANSWER cash flow 16. a savings vehicle offered through banks with a set maturity date. ex: if you put $5,000 into a five year CD, you cannot withdraw the money until the five year maturity date without facing penalties. however, interest rates are usually higher in CDs that traditional savings accounts, making them desirable for longer term savings - ANSWER certificate of deposit 17. money collected by some city governments to be used for city public services, such as sidewalks and city water systems - ANSWER city income tax 18. the ability to purchase goods or services with the promise to pay for it at a later time - ANSWER credit 19. a number ranging from 300 to 850 representing a persons credit history. a credit score is calculated based on 10% credit in use, 10% new credit, 15% credit history, 30% amounts owed and 35% payment history - ANSWER credit score 20. demonstrating trust in repayment of borrowed money - ANSWER creditworthiness 21. a plastic card that allows an individual to make a purchase on credit - ANSWER credit card 22. a plastic card that allows an individual to make a purchase using funds from his or her bank account - ANSWER debit card 23. money withheld from a paycheck for tax or savings purposes - ANSWER deductions 24. money spent on items and bills - ANSWER expenses 25. money collected by the federal government to be used for a variety of national public services, such as military, national parks and monuments - ANSWER federal income tax 26. income and expenses that are the same each month - ANSWER fixed 27. interest payment that remains constant for the duration of the loan. ex: if you have a fixed interest rate loan at 5%, you will pay the consistent amount of 5% on the money you borrowed until it is fully paid back - ANSWER fixed interest rate loan 28. income and expenses that vary each month - ANSWER flexible 29. total pay before deductions - ANSWER gross income 30. a type of insurance that minimizes financial risk related to medical expenses. many employers offer health insurance as part of a benefits package to employees - ANSWER health insurance 31. protects a home by providing coverage in the event of damage or loss to the house itself or personal belongings inside due to the theft, fire, accidents, etc. - ANSWER homeowners insurance 32. money earned through the employment - ANSWER income 33. an investment tool for individuals to save for retirement. there are two different types of IRAs for individuals: traditional and roth - ANSWER individual retirement account 34. additional fee paid on a monthly basis to the lender - ANSWER interest 35. person or institution that provides you with the loan - ANSWER lender 36. amount of money you borrow, which must be paid back to the lender within a given period of time - ANSWER loan 37. a type of insurance that protects against the loss of income as a result of an individuals death - ANSWER life insurance 38. money collected by the federal government to provide health insurance benefits in retirement, and to certain individuals with disabilities or serious illnesses - ANSWER medicare tax 39. loan used to purchase a home, condo, or piece of property. it includes principal and interest payments. principal payments go toward reducing the cost of the original loan, and interest payments cover the additional fee incurred for borrowing the principal amount - ANSWER mortgage 40. an investment vehicle that pools investor money to purchase securities like bonds and stocks - ANSWER mutual funds 41. total pay after deductions, commonly referred to as take-home pay - ANSWER net income 42. a check given to an employee for earned income - ANSWER paycheck 43. a statement that accompanies a paycheck highlighting earned income and deductions - ANSWER paystub 44. the range of dates an employee works - ANSWER pay period 45. amount of money you pay on a monthly basis toward paying off your loan - ANSWER principal 46. a type of insurance used to protect lenders if a borrower puts less than 20% down on a home purchase - ANSWER private mortgage insurance 47. a traditional savings account where money is deposited directly from gross pay. A direct to savings deduction is optional, but many people find it helpful because it ensures a set portion of each paycheck is set aside for savings - ANSWER savings 48. a secure bank account that provides modest interest rates - ANSWER savings account 49. money collected by the federal government to provide financial benefits needed in retirement and for the disabled - ANSWER social security tax 50. money collected by some states governments to be used for state public services, such as education and state road maintenance - ANSWER state income tax