1. When does a child no longer qualify a taxpayer for the Child Tax Credit?
The year the child reaches age 17.
The year the child reaches majority, which is 18 in most states.
The year the child reaches age 19.
The year the child reaches age 19, or age 24 if the child is a full-time student at least five months of the year.
2. Which one of the following statements is true about alimony?
Couples may live together while one pays the other alimony and it is still considered alimony.
Alimony payments can be continued to be paid beyond the death of the recipient and still be deductible.
Child support is equivalent to alimony payments.
Alimony must be paid in cash. Checks and money orders qualify as cash.
3. Which one of the following types of income IS included in federal gross income?
Federal income tax refund.
Checking account interest.
Personal injury compensation.
Qualified disaster relief payments.
4. Which one of the following items is deductible on Schedule A?
U.S. federal income taxes withheld.
Charitable contributions.
Personal credit card interest.
Will preparation fees.
5. John is a married taxpayer who has lived apart from his wife Mary for more than three years. John has no qualifying children or qualifying relatives. He no longer knows the whereabouts of his spouse. John must file:
Married filing jointly.
Qualified widow(er).
Single.
Married filing separately.
6. The maximum Child Tax Credit is $1,000 per qualifying child. What two situations may limit taxpayers from receiving the full amount?
Tax liability and earned income above the phase-out thresholds for three or more children.
Earned income above the phase-out thresholds and taxpayer filing status.
Tax liability and modified AGI above the phase-out thresholds.
Modified AGI above the phase-out thresholds and three or more children.
7. Taxpayers without a qualifying child must meet additional requirements to claim the EIC. All of the following are additional requirements EXCEPT:
The taxpayer must reside in the U.S. more than half the year.
The taxpayer cannot be the dependent of another taxpayer.
The taxpayer must earn their income as an employee. They cannot be self-employed.
The taxpayer must be between the ages of 25 and 65.
8. All of the following are requirements to claim EIC, EXCEPT:
The taxpayer must have earned income.
The taxpayer must be a U.S. citizen.
The taxpayer must have a valid SSN for employment in the U.S.
The taxpayer must file a tax return, even if not required.
9. What first triggers the calculation of the additional Child Tax Credit?
Due to tax liability limits, the taxpayer did not receive the maximum Child Tax Credit for which they were eligible.
More than two children lived with the taxpayer.
The taxpayer's modified AGI was more than 15% over the threshold.
The taxpayer's modified AGI exceeds $11,500 in 2013.
10. Which of the following is NOT earned compensation for IRA contribution purposes?
Deferred compensation.
Wages and salaries.
Self-employment income.
Commissions.
11. Which of the following taxpayers is an eligible student for purposes of the tuition and fees deduction?
Nancy is taking the H&R Block Income Tax Course.
Sheila is taking an HTML class at her local community center.
Sarah is enrolled in two Psychology classes at Your State University.
Cynthia has a Master's Degree in Accounting. She is taking a self-defense class at her local community center.
12. If an amended return is based on a non-business bad debt or worthless security, how many years (from the original due date of the return) does a taxpayer generally have to file the amended return?
4 years.
5 years.
6 years.
7 years.
13. Akil is a citizen of Belize and is attending StateUniversity. She worked part time and received a Form W-2. In 2011, she filed a Form 1040. She is a non-resident alien and will need to file an amended return. Which form(s) should Akil use?
Form 1040X and Form 1040NR.
Form 1040EZ only.
Form 1040NR only.
Form 1040X only.
14. Which of the following clients is insolvent?
Portia, who owns assets with a fair market value of $4,000 and has total liabilities of $5,000.
Juan, who owns assets with a fair market value of $10,000, has liabilities of $10,000, and retired last year.
Graham, who owns no assets, is unemployed, and has no liabilities.
Heather, who owns assets with a fair market value of $7,500 and has no liabilities.
15. When a taxpayer receives Form 1099-A for the repossession of a house, how is it treated?
As an involuntary conversion.
As a sale of the home.
Both A and B.
None of these.
16. Property, such as land, buildings, and their structural components, are called:
Real property.
Residential property.
Nonresidential property.
Personal property.
17. For a child to qualify for the "kiddie tax" rule, which statement below is not a true statement?
For a child to qualify for the "kiddie tax" rule, which statement below is not a true statement?
The child must not have attained age 24 in the tax year.
The child must have two living parents.
The child must have more than $1,900 investment income.
The child must have at least one living parent.
18. For children to be subject to the "kiddie tax" rule, which of the following statements must be true?
The child must have more than $2,000 investment income.
The child must not have attained age 24 in the tax year.
The child must have at least one living parent.
All of these must be true.
19. Which property is subject to depreciation?
The cars on the lot of an auto dealership.
A duplex that was purchased to use as rental property.
The fair market value of the land where the duplex sits.
A four-wheeler purchased for personal use.
20. Johnni placed the following items in service during 2013: 1) February 3 - a $2,000 machine (7-year property); 2) June 16 - a $1,500 desk (7-year property); and 3) November 10 - a $5,000 computer system (5-year property). No §179 expense deduction was taken. No bonus depreciation was taken. What is the 2013 depreciation for the machine?
$71
$286
$400
$500
21. Which property is subject to depreciation?
A computer used exclusively for business purposes.
A new oven in the taxpayer's home. The oven is used only for personal use by the taxpayer and family.
A lawn tractor used only to mow the taxpayer's lawn.
Business inventory.
22. What EITC Due Diligence question must you ask if the taxpayer wishes to claim a dependent who is not their son or daughter?
Are the dependent's parents still living?
If the dependent's parents are living, why isn't the dependent living with the parents?
Where are the dependent's parents living?
All of these are required.
23. Celia's spouse died in 2013. Her filing status option for that year is:
Married filing jointly or married filing separately.
Qualifying widow.
Single.
Head of household.
24. A person with an ITIN may file which of the following?
Form 1040.
Form 1040NR.
Form 1040ES.
Any of these forms.
25. Which of the following is CORRECT regarding the tiebreaker rules for a qualifying child?
The parent who has the higher AGI has the higher right, regardless of which parent the child lived with longer.
If neither claimant is a parent, the one who lived with the child longer has the higher right.
The parent who provided more support for the child has the higher right, regardless of AGI.
The parent who lived with the child longer has the higher right, regardless of AGI.
26. Interest income from which of the following institutions can be called a dividend?
Credit unions.
Cooperative banks.
Mutual savings banks.
All of the above.
27. When a bond is sold between interest dates, on whose tax return is the adjustment for accrued interest shown?
The seller's tax return.
The buyer's tax return.
Neither the buyer's nor the seller's tax return.
Both the buyer's and the seller's tax return.
28. Which one of the following items is deductible on Schedule A?
U.S. federal income taxes withheld.
Charitable contributions.
Personal credit card interest.
Will preparation fees.
29. Which one of the following items IS taxable income on the federal return?
Interest from municipal bonds.
Gambling winnings.
Life insurance proceeds paid due to the death of the insured.
30. All of the following non-dependent taxpayers are U.S. citizens. Who is required to file a 2013 income tax return?
April (age 50), QW, $16,500 AGI.
Frank (age 32), HH, $10,500 AGI.
Charity (age 29), S, $7,500 AGI.
Sam (age 62), MFS, $500 AGI, and spouse does not itemize.
31. Which one of the following types of income IS included in federal gross income?
Federal income tax refund.
Checking account interest.
Personal injury compensation.
Qualified disaster relief payments.
32. All of the following are requirements to claim EIC, EXCEPT:
The taxpayer must have earned income.
The taxpayer must be a U.S. citizen.
The taxpayer must have a valid SSN for employment in the U.S.
The taxpayer must file a tax return, even if not required.
33. What first triggers the calculation of the additional Child Tax Credit?
Due to tax liability limits, the taxpayer did not receive the maximum Child Tax Credit for which they were eligible.
More than two children lived with the taxpayer.
The taxpayer's modified AGI was more than 15% over the threshold.
The taxpayer's modified AGI exceeds $11,500 in 2013
34. Taxpayers without a qualifying child must meet additional requirements to claim the EIC. All of the following are additional requirements EXCEPT:
The taxpayer must reside in the U.S. more than half the year.
The taxpayer cannot be the dependent of another taxpayer.
The taxpayer must earn their income as an employee. They cannot be self-employed.
The taxpayer must be between the ages of 25 and 65.
35. Which of the following is an INCORRECT statement about the child and dependent care credit?
For a married couple to claim the credit, each must work, be looking for work, or be enrolled as full-time students, or the spouse must be physically or mentally incapable of self-care.
Taxpayers may claim the credit for the care of certain disabled adult children who live in the house.
Taxpayers may claim the credit for care of a disabled spouse.
The credit phases out when a taxpayer's AGI crosses a certain threshold.
36. In 2013, an eligible educator may deduct up to _____ of qualified expenses paid as an adjustment to income on Form 1040, line 23 (or Form 1040A, line 16).
$850
$500
$350
$250
37. Which of the following taxpayers is an eligible student for purposes of the tuition and fees deduction?
Nancy is taking the H&R Block Income Tax Course.
Sheila is taking an HTML class at her local community center.
Sarah is enrolled in two Psychology classes at Your State University.
Cynthia has a Master's Degree in Accounting. She is taking a self-defense class at her local community center.
38. Which of the following amended returns is NOT allowed after the due date of the original return?
Claiming an EIC that was not claimed on the original return.
Claiming a Child and Dependent Care Credit that was not on the original return.
Changing from a Form 1040 to a Form 1040NR.
Changing from "married-filing-jointly" to "married-filing-separately".
39. If an amended return is based on a non-business bad debt or worthless security, how many years (from the original due date of the return) does a taxpayer generally have to file the amended return?
4 years.
5 years.
6 years.
7 years.
40. Income may be recognized from cancellation of debt in which instance below?
The debt canceled from the mortgage on a taxpayer's second home.
The debt canceled by a purchase price reduction on the sale of a home.
The debt was canceled through a bankruptcy.
The debt canceled was intended as a gift.
41. To what extent is debt canceled in personal bankruptcy taxable as cancellation of debt income?
Unsecured debt that is canceled in bankruptcy is taxable as income.
All canceled debt, except that related to real property, is taxable.
Debt canceled in a bankruptcy proceeding is not taxable as cancellation of debt income.
Only secured debt in excess of the fair market value of the collateral is taxable as income.
42. Property, such as land, buildings, and their structural components, are called:
Real property.
Residential property.
Nonresidential property.
Personal property.
43. For children to be subject to the "kiddie tax" rule, which of the following statements must be true?
The child must have more than $2,000 investment income.
The child must not have attained age 24 in the tax year.
The child must have at least one living parent.
All of these must be true.
44. Mike and Janet, married and filing jointly, lived in their home for two years. At the beginning of the third year, they sold their home at a profit of $650,000. How much of the profit can they exclude from taxable gain?
They can exclude $500,000.
They can exclude $250,000.
They can exclude somewhere between $250,000 and $500,000, depending on why they moved.
They have no exclusion since they did not own the home for five years.
45. Johnni placed the following items in service during 2013: 1) February 3 - a $2,000 machine (7-year property); 2) June 16 - a $1,500 desk (7-year property); and 3) November 10 - a $5,000 computer system (5-year property). No §179 expense deduction was taken. No bonus depreciation was taken. What is the 2013 depreciation for the machine?
$71
$286
$400
$500
46. Which property is subject to depreciation?
A computer used exclusively for business purposes.
A new oven in the taxpayer's home. The oven is used only for personal use by the taxpayer and family.
A lawn tractor used only to mow the taxpayer's lawn.
Business inventory.
47. Samantha purchased a machine in 2012 and used a §179 expense deduction. In 2013, business use dropped below 50%. As a result of this drop, Samantha must ___?
Stop taking any depreciation on the machine.
Change from the general MACRS to a straight-line system.
Recapture (add back into income) a prorated portion of that which was expensed.
Change nothing with depreciation on the return.
48. Taxpayers without a qualifying child must meet additional requirements to claim the EIC. All the following are additional requirements, EXCEPT:
The taxpayer must be between the ages of 25 and 65.
The taxpayer must not be the dependent of another taxpayer.
The taxpayer must earn their income as an employee. They cannot be self-employed.
The taxpayer must reside in the U.S. for more than half the year.
49. Which of the following items is included in support for a dependent?
Funeral expenses.
A manicure.
Amounts contributed to savings.
A college scholarship.
50. person with an ITIN may file which of the following?
Form 1040.
Form 1040NR.
Form 1040ES.
Any of these forms.
51. With respect to dependency, which of the following statements is NOT true?
The dependent generally cannot file a joint return.
The dependent must be a U.S. citizen or resident of the U.S., Canada, or Mexico.
A taxpayer who is a dependent of another taxpayer may not claim any dependents.
The individual must be raised as the taxpayer's child
52. When a bond is sold between interest dates, on whose tax return is the adjustment for accrued interest shown?
The seller's tax return.
The buyer's tax return.
Neither the buyer's nor the seller's tax return.
Both the buyer's and the seller's tax return.
53. Bonds issued by a state or political subdivision are often called:
U.S. savings bonds
Municipal bonds
Treasury bonds
Series HH bonds
54. Where do you deduct expenses related to a rental property conducted as a not-for-profit activity?
The expenses are subtracted from gross rental income before entering net rental income on Form 1040, line 21.
Schedule E, line 19, other expenses.
Schedule A, line 23, other expenses.
Form 1040, line 36 as a manual entry "not-for-profit rental".
55. What should a Tax Professional do if a client thinks the distribution code on Form 1099-R is incorrect?
Enter the distribution code the client thinks is correct in the tax preparation software and attach an e-note to the tax return explaining the correction.
Advise the client to contact the issuer of the Form 1099-R to obtain a corrected form.
Prepare an original tax return reporting the incorrect distribution code, and then immediately prepare an amended tax return with the correction and an explanation of the correction.
Prepare a paper tax return to be mailed in with a hand-corrected form and an explanation of the correction.
56. Which item is NOT permitted as a mortgage interest deduction on Schedule A?
Points paid to purchase a new home.
Mortgage interest paid on the taxpayer's second home.
Mortgage interest paid on the taxpayer's third home.
Late payment charges paid on the taxpayer's new home.
57. Which of the following taxes paid could be deductible on the taxpayer's 2013 Form 1040, Schedule A?
2013 fourth quarter estimated state income tax payment paid timely on January 15, 2014.
City tax balance due paid on November 15, 2013, for income earned in 2012.
Luxury tax in excess of the selective sales tax rate paid for a new car on February 12, 2013.
Employment tax for household workers paid February 10, 2013.
58. Which of the following items are deductible as a medical expense on Schedule A?
A walk-in shower for a handicapped individual, which increases the value of the home in excess of the cost of the improvement.
Insurance, which pays for lost wages when the beneficiary is disabled and unable to work.
Laser eye surgery undergone to avoid wearing glasses.
Over-the-counter birth control supplies.
59. Toby owns a duplex. He lives in the property and rents out the other half. Toby will report any income and expenses incurred on the half that is rented on which schedule?
Schedule E.
Schedule F.
Schedule D.
Schedule B.
60. Gregory owns a rental house, which he rents at $200 per month. Similar houses in the neighborhood rent for $600 per month. As Gregory's Tax Professional, how should you treat his rental income?
The income is reported, and all expenses deducted, on Schedule E.
The income is not reported because Gregory is operating the property as a charity.
The income is reported on Form 1040, line 21, and rental expenses, up to the amount of income, are deducted on Schedule A.
A charitable contribution of $400 is reported on Schedule A for every month Gregory rents the property at $200.
61. Which of the following is NOT rental income?
Expenses paid by the tenant for their own enjoyment.
Forfeited security deposit.
Rental expenses directly paid by the tenant.
Advance rental payments.
62.
Income from rental real estate is generally considered to be:
Income from rental real estate is generally considered to be:
Active income.
Passive income.
Portfolio income.
Earned income.
63. Generally, a taxpayer may be subject to a 10% early distribution penalty from an IRA or 401(k), unless he or she has reached the age of:
50
59.5
65.5
67
64. The IRS may offset (apply) a taxpayer's refund to which of the following types of debts?
Past-due child support.
Past-due car payments.
Past-due mortgage payments.
Past-due credit card accounts.
65. Nichole has operated a shoe store since 2004. In 2013, she began selling socks and handbags. How many Schedules C should Nichole file for 2013?
Zero.
One.
Two.
Three.
66. Chris is a self-employed certified financial planner and began his business in 2013. During 2013 he purchased a $500 computer and a $250 desk. He also paid $6,000 in legal/incorporation fees, and spent $12,000 for a new roof for the office building he owns. Which purchase(s) can he expense in 2013 without limitation?
Computer, desk, legal/incorporation fees, roof.
Computer, desk, legal/incorporation fees.
Computer, and desk.
Legal fees/incorporation fees, roof.
67. A taxpayer can be exempt from withholding when: A. Taxpayer had no federal tax liability in the preceding year. B. Taxpayer does not expect to have federal tax liability for the current year.
B only.
Neither A nor B.
A and B.
A only.
68. The cost basis of property includes which of the following items?
Settlement fees and other costs of purchase.
Sales tax charged on purchase of the property.
Unreimbursed real estate tax paid on the seller's behalf.
All of the above.
69. The cost basis of rental property includes:
The cost basis of rental property includes:
Fees paid to the settlement attorney.
Recording fees and transfer taxes.
Real estate taxes paid on behalf of the seller without reimbursement.
All of the above.
70. Which statement about a qualifying child is true?
A child who is the qualifying child to one taxpayer may claim his or her own qualifying child.
A child may be a qualifying child to multiple taxpayers in the household.
A child may be claimed as a qualifying child by multiple taxpayers in the household.
A child who is a qualifying child to one taxpayer may be claimed as a qualifying relative by another taxpayer.
71. Which situation below qualifies a taxpayer to file as head of household?
A child not living in the household whose dependency exemption was released to the taxpayer.
A dependent brother who lived in the household almost half the year.
A dependent girlfriend who lived in the household all year.
A dependent nephew who lived in the household more than half the year.
72. Using the shell return, Diane M. Willsey (SSN 744-81-3003) owns a travel agency. On September 3, 2012, she purchased and placed in service a new computer for $3,000 to be used exclusively at her place of business. Using the Depreciation Worksheet in TPS, compute the 2012 and 2013 computer depreciation. Diane did not take any §179 or bonus depreciation.
a. 2012 Depreciation = $600
2013 Depreciation = $600
b. 2012 Depreciation = $900
2013 Depreciation = $960
c. 2012 Depreciation = $690
d. 2013 Depreciation = $990
2012 Depreciation = $600
2013 Depreciation = $960
73. When entering assets on Schedule C in TPS, a computer that is used 30% of the time for business and 70% for personal use would use which property code from the list shown?
P-Personal Property
O-Other Listed Property
Z-Nonrecoverable Assets, Capitalized
R-Real Property
74. In TPS, what is this screen, and how is it accessed?
Income Tax Summary Worksheet accessed by Alt+S
Income Tax Summary Worksheet accessed by Alt+L
Plan Ahead Calculator accessed by Alt-C
Last Year's Summary Information accessed by Alt-Y
75. Using the shell return, Tonya Jones (SSN 744-81-4004) received a Form 1099-INT with the following information: box 1, $374; box 2, $33. The form was issued by Warner Bank (EIN 03-2050771), 315 Main Street, Your City, YS, XXXXX. What are the entries on Tonya's Form 1040 for lines 22 and 37?
a. Line 22 = $13,319
Line 37 = $13,286
b. Line 22 = $13,139
Line 37 = $13,106
c. Line 22 = $13,286
Line 37 = $13,253
d. Line 22 = $13,200
Line 37 = $13,300
