HRB FINAL EXAM Questions And
Answers With Verified Solutions Already
Passed (GRADED A+)
What is the Difference between earned income and unearned income?
Answer:
Earned income is received for services performed, such as wages, commissions,
tips, and business income.
Unearned income includes money received from the investment of money or
property, such as interest, dividends, royalties, pensions, alimony, unemployment
compensation, and other income not earned through active service.
If an employee thinks their Form W-2 is incorrect, what should they do?
Answer:
The employee should discuss the issue with the employer who issued the form and
request a corrected Form W-2C. If the employer does not help, the employee
should notify the IRS. A tax preparer can then file a substitute return.
What information do you need to know to determine whether a taxpayer is
required to file a return?
Answer:
Gross income, filing status, age, and whether they are a dependent.
For tax purposes, when is a person's marital status determined?
Answer:
On the last day of the tax year.
Where on the tax form can you find the regular standard deduction amounts?
Answer:
Line 22 on Form 1040A, or in the left margin at the top of page 2 of Forms 1040
and 1040A.
How much is added to the standard deduction if the taxpayer (or spouse) is
age 65 or older, or blind?
Answer:
$1,550 if unmarried, $1,250 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
requirements for most taxpayers?
Answer:
The 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?
Answer:
1. Net self-employment income of $400 or more.
2. Unemployment income or eligibility for Medicare, HSA, Archer MSA.
3. Received an Advanced Premium Tax Credit.
Other examples include tips, HSA contributions, self-employment income,
and the Premium Tax Credit (PTC).
What is the difference between injured spouse allocation and innocent spouse
relief?
Answer:
Innocent spouse relief applies to individuals who filed jointly but were unaware
that their spouse deliberately underreported tax liability. Injured spouse allocation
protects the taxpayer's share of a refund if it is seized due to the other spouse’s
debts or unpaid obligations.
CHAPTER 3: DEPENDENT EXEMPTIONS AND SUPPORT
What four requirements must be met for an individual to be claimed as a
dependent?
Answer:
1. Dependent test.
2. Joint return test.
3. Citizenship.
4. Qualifying child or relative.
What are the five tests for a qualifying child?
Answer:
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?
Answer:
They can meet this test by not filing a joint return with their spouse, or by filing a
joint return solely to claim a refund of any withheld taxes.
How can you determine who paid more than half of a person's support?
Answer:
Total support is determined and reduced by funds received from other sources. The
remaining support is considered provided by the taxpayer. Use the Worksheet for
Determining Support.
What happens if an individual is a qualifying child of more than one
taxpayer?
Answer:
Generally, the custodial parent, or the parent with whom the child spent the most
nights, gets the claim.
What happens when more than one taxpayer claims the same qualifying
child?
Answer:
Tie-breaker rules apply:
1. The parent, if only one is the child's parent.
2. The parent with whom the child lived the most nights during the tax year.
3. The parent with the highest AGI if no parent can claim the child.
What four tests must be met for an individual to be considered a qualifying
relative?
Answer:
1. Not a qualifying child.
2. Relationship test (e.g., child, sibling, step-sibling, in-laws).
3. Gross income must be less than $4,050.
4. Support test (the taxpayer must provide more than half the support).
, How can the gross income for a qualifying relative test be satisfied?
Answer:
Gross income must be less than $4,050 (tax-exempt income is excluded).
What is the purpose of Form 2120, Multiple Support Declaration?
Answer:
Form 2120 is used when two or more people, including the taxpayer, provide
support for a dependent who is not a qualifying child. It allows for one person to
claim the exemption.
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?
Answer:
1. The child must be under 17 at the end of the year.
2. The child must be claimed on the taxpayer's return.
3. The child must be a U.S. citizen, U.S. national, or resident.
Is the Child Tax Credit refundable or nonrefundable?
Answer:
The Child Tax Credit is nonrefundable, but the Additional Child Tax Credit
(ACTC) is refundable.
How much is the penalty if a paid preparer fails to meet the child tax credit
due diligence requirements?
Answer:
$510 for each failure, for each credit on each return, with a maximum penalty of
$1,530 per return.
What is the first due diligence requirement for the EITC, CTC, ACTC,
AOTC, and how does a paid preparer meet this requirement?
Answer:
Complete and submit Form 8867. The form must be thoroughly completed and
submitted for every claim related to the EITC, CTC/ACTC, and AOTC.
CHAPTER 4: DEPENDENT-RELATED FILING STATUS
Answers With Verified Solutions Already
Passed (GRADED A+)
What is the Difference between earned income and unearned income?
Answer:
Earned income is received for services performed, such as wages, commissions,
tips, and business income.
Unearned income includes money received from the investment of money or
property, such as interest, dividends, royalties, pensions, alimony, unemployment
compensation, and other income not earned through active service.
If an employee thinks their Form W-2 is incorrect, what should they do?
Answer:
The employee should discuss the issue with the employer who issued the form and
request a corrected Form W-2C. If the employer does not help, the employee
should notify the IRS. A tax preparer can then file a substitute return.
What information do you need to know to determine whether a taxpayer is
required to file a return?
Answer:
Gross income, filing status, age, and whether they are a dependent.
For tax purposes, when is a person's marital status determined?
Answer:
On the last day of the tax year.
Where on the tax form can you find the regular standard deduction amounts?
Answer:
Line 22 on Form 1040A, or in the left margin at the top of page 2 of Forms 1040
and 1040A.
How much is added to the standard deduction if the taxpayer (or spouse) is
age 65 or older, or blind?
Answer:
$1,550 if unmarried, $1,250 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
requirements for most taxpayers?
Answer:
The 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?
Answer:
1. Net self-employment income of $400 or more.
2. Unemployment income or eligibility for Medicare, HSA, Archer MSA.
3. Received an Advanced Premium Tax Credit.
Other examples include tips, HSA contributions, self-employment income,
and the Premium Tax Credit (PTC).
What is the difference between injured spouse allocation and innocent spouse
relief?
Answer:
Innocent spouse relief applies to individuals who filed jointly but were unaware
that their spouse deliberately underreported tax liability. Injured spouse allocation
protects the taxpayer's share of a refund if it is seized due to the other spouse’s
debts or unpaid obligations.
CHAPTER 3: DEPENDENT EXEMPTIONS AND SUPPORT
What four requirements must be met for an individual to be claimed as a
dependent?
Answer:
1. Dependent test.
2. Joint return test.
3. Citizenship.
4. Qualifying child or relative.
What are the five tests for a qualifying child?
Answer:
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?
Answer:
They can meet this test by not filing a joint return with their spouse, or by filing a
joint return solely to claim a refund of any withheld taxes.
How can you determine who paid more than half of a person's support?
Answer:
Total support is determined and reduced by funds received from other sources. The
remaining support is considered provided by the taxpayer. Use the Worksheet for
Determining Support.
What happens if an individual is a qualifying child of more than one
taxpayer?
Answer:
Generally, the custodial parent, or the parent with whom the child spent the most
nights, gets the claim.
What happens when more than one taxpayer claims the same qualifying
child?
Answer:
Tie-breaker rules apply:
1. The parent, if only one is the child's parent.
2. The parent with whom the child lived the most nights during the tax year.
3. The parent with the highest AGI if no parent can claim the child.
What four tests must be met for an individual to be considered a qualifying
relative?
Answer:
1. Not a qualifying child.
2. Relationship test (e.g., child, sibling, step-sibling, in-laws).
3. Gross income must be less than $4,050.
4. Support test (the taxpayer must provide more than half the support).
, How can the gross income for a qualifying relative test be satisfied?
Answer:
Gross income must be less than $4,050 (tax-exempt income is excluded).
What is the purpose of Form 2120, Multiple Support Declaration?
Answer:
Form 2120 is used when two or more people, including the taxpayer, provide
support for a dependent who is not a qualifying child. It allows for one person to
claim the exemption.
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?
Answer:
1. The child must be under 17 at the end of the year.
2. The child must be claimed on the taxpayer's return.
3. The child must be a U.S. citizen, U.S. national, or resident.
Is the Child Tax Credit refundable or nonrefundable?
Answer:
The Child Tax Credit is nonrefundable, but the Additional Child Tax Credit
(ACTC) is refundable.
How much is the penalty if a paid preparer fails to meet the child tax credit
due diligence requirements?
Answer:
$510 for each failure, for each credit on each return, with a maximum penalty of
$1,530 per return.
What is the first due diligence requirement for the EITC, CTC, ACTC,
AOTC, and how does a paid preparer meet this requirement?
Answer:
Complete and submit Form 8867. The form must be thoroughly completed and
submitted for every claim related to the EITC, CTC/ACTC, and AOTC.
CHAPTER 4: DEPENDENT-RELATED FILING STATUS
