Enrolled Agent Exam Part 1
Provisional Income threshholds for exclusion of SS Benefits from Income -
CORRECT ANSWER-MFJ -- 32,000 to 44,000
All Others-- 25,000 to 34,000
MFSLT -- 0
What is excluded from gross income in the case of insurance proceeds? -
CORRECT ANSWER-Disability pay (excluded)
Accident insurance proceeds. sub for lost income (excluded)
Damages for emotional distress (included if no physical injury)
Punitive damages (included)
Gross income does not include benefits specified that might be received in the
form of disability pay, health or accident insurance proceeds (even if benefits are
a substitute for lost income), workers' compensation awards, or other damages
for personal physical injury or physical sickness. Also excluded are damages
received for emotional distress if an injury has its origin in a physical injury or
physical sickness (regardless of whether the damages are received by a lawsuit
or an agreement). Punitive damages received are included in gross income even
if in connection with a physical injury or sickness
Is unemployment compensation included in gross income? - CORRECT
ANSWER-Yes
Is disability pay included in gross income? - CORRECT ANSWER-No
Are punitive damages included in gross income? - CORRECT ANSWER-Yes
(unless you received a physical injury in connection with the punitive damages)
Are benefits from a health and accident plan included in gross income if paid by
employer? - CORRECT ANSWER-No (if you received a physical injury in
connection with the benefits)
is compensation for lost wages included in gross income? - CORRECT ANSWER-
No, as long as the income was given because of physical injury or illness
is compensation due to punitive damages included in gross income? - CORRECT
ANSWER-No, as long as the income was given because of physical injury or
illness
In December 2018, Jim and Tina, a married couple with $50,000 in gross income,
cashed qualified Series EE U.S. Savings Bonds, which they had purchased in
, January 2015. The proceeds were used to help pay for their son's 2018 college
tuition. They received gross proceeds of $3,500, representing principal of $3,000
and interest of $500. The qualified higher educational expenses they paid during
2018 totaled $2,100. Their modified adjusted gross income for 2018 was $80,000.
How much of the $500 interest can Jim and Tina exclude from income for 2018? -
CORRECT ANSWER-$300. Interest is excluded as long as the gross amount
received (principal and interest) do not exceed qualified educational expenses. If
they do exceed that amount, the amount excluded is limited to the percentage.
2100/3500 = .6 *500 = 300. The exclusion is reduced when AGI exceeds a
threshold of $79,550 (single) or $119,300 (MFJ). completely phased out at $94,550
and $149,300
What factors determine tax home? - CORRECT ANSWER-1. The taxpayer
performs his or her business in the area surrounding his/her main home and uses
that for lodging while in the area.
2. The taxpayer has living expenses at his or her main home that are duplicated
because business requires him/her to be away from the main home.
3. The taxpayer has not abandoned the area in which both his/her traditional
place of lodging and man home; family members live at his/her main home. She
often uses this main home for lodging.
Under what circumstance is a day NOT considered a day of personal use of a
dwelling unit for determining if it is used as a home? - CORRECT ANSWER-If the
taxpayer rents the home at fair rental value to any person (including relatives),
such use by that person is not considered personal use of the home
When are meals deductible? - CORRECT ANSWER-50% of meals are deductible if
eaten while away from home on business or with a client or business associate.
Dual status alien - CORRECT ANSWER-An alien who is both a nonresident and
resident alien during the same tax year. The most common dual-status tax years
are the years of arrival and departure.
Resident Alien - CORRECT ANSWER-If either the green card test or the
substantial presence test is met. Even if the taxpayer does not meet either of
these tests, (s)he may be able to choose to be treated as a U.S. resident for part
of the year.
Green Card Test - CORRECT ANSWER-A taxpayer is a resident for tax purposes if
(s)he was a lawful permanent resident (immigrant) of the United States at any
time during the year
Substantial presence Test - CORRECT ANSWER-A taxpayer is considered a U.S.
resident if she/he was physically present in the US for at least (1) 31 days during
Provisional Income threshholds for exclusion of SS Benefits from Income -
CORRECT ANSWER-MFJ -- 32,000 to 44,000
All Others-- 25,000 to 34,000
MFSLT -- 0
What is excluded from gross income in the case of insurance proceeds? -
CORRECT ANSWER-Disability pay (excluded)
Accident insurance proceeds. sub for lost income (excluded)
Damages for emotional distress (included if no physical injury)
Punitive damages (included)
Gross income does not include benefits specified that might be received in the
form of disability pay, health or accident insurance proceeds (even if benefits are
a substitute for lost income), workers' compensation awards, or other damages
for personal physical injury or physical sickness. Also excluded are damages
received for emotional distress if an injury has its origin in a physical injury or
physical sickness (regardless of whether the damages are received by a lawsuit
or an agreement). Punitive damages received are included in gross income even
if in connection with a physical injury or sickness
Is unemployment compensation included in gross income? - CORRECT
ANSWER-Yes
Is disability pay included in gross income? - CORRECT ANSWER-No
Are punitive damages included in gross income? - CORRECT ANSWER-Yes
(unless you received a physical injury in connection with the punitive damages)
Are benefits from a health and accident plan included in gross income if paid by
employer? - CORRECT ANSWER-No (if you received a physical injury in
connection with the benefits)
is compensation for lost wages included in gross income? - CORRECT ANSWER-
No, as long as the income was given because of physical injury or illness
is compensation due to punitive damages included in gross income? - CORRECT
ANSWER-No, as long as the income was given because of physical injury or
illness
In December 2018, Jim and Tina, a married couple with $50,000 in gross income,
cashed qualified Series EE U.S. Savings Bonds, which they had purchased in
, January 2015. The proceeds were used to help pay for their son's 2018 college
tuition. They received gross proceeds of $3,500, representing principal of $3,000
and interest of $500. The qualified higher educational expenses they paid during
2018 totaled $2,100. Their modified adjusted gross income for 2018 was $80,000.
How much of the $500 interest can Jim and Tina exclude from income for 2018? -
CORRECT ANSWER-$300. Interest is excluded as long as the gross amount
received (principal and interest) do not exceed qualified educational expenses. If
they do exceed that amount, the amount excluded is limited to the percentage.
2100/3500 = .6 *500 = 300. The exclusion is reduced when AGI exceeds a
threshold of $79,550 (single) or $119,300 (MFJ). completely phased out at $94,550
and $149,300
What factors determine tax home? - CORRECT ANSWER-1. The taxpayer
performs his or her business in the area surrounding his/her main home and uses
that for lodging while in the area.
2. The taxpayer has living expenses at his or her main home that are duplicated
because business requires him/her to be away from the main home.
3. The taxpayer has not abandoned the area in which both his/her traditional
place of lodging and man home; family members live at his/her main home. She
often uses this main home for lodging.
Under what circumstance is a day NOT considered a day of personal use of a
dwelling unit for determining if it is used as a home? - CORRECT ANSWER-If the
taxpayer rents the home at fair rental value to any person (including relatives),
such use by that person is not considered personal use of the home
When are meals deductible? - CORRECT ANSWER-50% of meals are deductible if
eaten while away from home on business or with a client or business associate.
Dual status alien - CORRECT ANSWER-An alien who is both a nonresident and
resident alien during the same tax year. The most common dual-status tax years
are the years of arrival and departure.
Resident Alien - CORRECT ANSWER-If either the green card test or the
substantial presence test is met. Even if the taxpayer does not meet either of
these tests, (s)he may be able to choose to be treated as a U.S. resident for part
of the year.
Green Card Test - CORRECT ANSWER-A taxpayer is a resident for tax purposes if
(s)he was a lawful permanent resident (immigrant) of the United States at any
time during the year
Substantial presence Test - CORRECT ANSWER-A taxpayer is considered a U.S.
resident if she/he was physically present in the US for at least (1) 31 days during
