HRB FINAL EXAM WITH COMPLETE QUESTIONS
AND ANSWERS (100% CORRECT)
What is the Difference between earned income and unearned income?
Earned income is received for services performed. Examples are wages
commissions, tips and generally farming and other business income . Taxable
income other than that received for services performed. Unearned Income
includes money received ro the investment of money or other property, such as
interest, dividends, and royalties. It also includes pensions alimony,
unemployment compensation and other income that is not earned
If an employee thinks their Form W2 is incorrect, what should they do?
Employee should discuss with employer who issued the document and request a
W2C. If no help from employer, notify IRS. Tax prepaper can then file a substitute.
What information do you need to know to determine whether a taxpayer is
required to file a return?
Gross income, filing status, age and if they are a dependent
For tax purposes, when is a person’s marital status determined?
On the last day of the tax year
Where on the tax form can you find the regular standard deduction amounts?
Line 22 on 1040A, In the left margin at the top of the page 2 of forms 1040 and
1040A. Look at actual form to look for line
How much is added to the standard deduction if the taxpayer (or spouse is age 65
or older, or blind?
$1550 if unmarried, $1250 if married
What is the personal exemption amount for 2016?
$4,050
What two amounts are combined to make up the gross income filing requirments
for most taxpayers?
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?
- Has net employment of $400 or more net self employment 2. You had
unemployment income you owe medicare Advantage MSA, receive HAS, Archer,
MSA 3. Reeived an Advanced Premium Tax credit even if they didn’t otherwise
have a filing requirment for the year *Tips, HSA, SE $400, PTC
What is the difference between injured spouse allocation and innocent spouse
relief?
The difference between injured spouse and innocent spouse is significant in the
eyes of the IRS. Both release you from an income tax liability arising from a
“married filing jointly” return but different outcomes. Innocent spouse filed a
joint return byt was unaware that their spouse deliberately under reported tax
liability. Injured spouse seeks to protect his or her share of the refund in case it
gets seized or offset 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
Must pass the dependent test, joint return test, citizenship, qualifying child or
relative
What are the five tests for a qualifying child?
- Relationship 2. Age 3. Residency 4. Support 5. Joint Return
How can a married individual meet the joint return test to remain a qualifying
child?
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 on any
taxes withheld
How can you determine who paid more than half of a person’s support?
Total support is determined and reduced by the funds received by and for the
person from all sources other than the taxpaer. The remaining support is
considered to be provided by the taxpayer. Other sources might include
government support Worksheet for Determining Support
What happens if an individual is a qualifying child of more than one taxpayer?
Generally, the custodial parent is the one in which the child spent the most nights
What happens when more than one taxpayer claims the same qualifying child?
Tie Breaker Rules apply : 1. The parent, if only one of the persons is the childs
parent 2. The parent with whom the child lived the longest during the tax 3. The
parents with the highest AGI if no parent can claim the child as a qualifying child
What four tests must be met for an individual to be considered a qualifying
relative?
- Not be a qualifying child, the person cannot be the taxpayers qualifying child or
the qualifying child of another taxpayer 2. Relationship: Child, brother, sister, step
sister, step brother, step father , step mother, in-laws 3. Gross Income: gross
income must be less than $4050 4. Support: Taxpayer must provide more than
half the support
HRB-27 Final Exam Review (H&R Block Ch 27 Final
Exam Review) Already GRADED A
What income reporting form should an independent contractor sometimes
receive from the person who paid him for his services?
Form 1099-MISC (15.6)
Schedule C, Line F asks for the accounting method used in the business.
What is the difference between the cash method and the accrual method of
accounting?
- Under the accrual method, total sales and total charges for services are included
in income even though payment may be received in another tax year. - Under the cash method, only income actually received or expenses actually paid
during the year are included. (15.5)
What does it mean if a proprietor “materially participates” in the business?
He is active in running the business in a substantial way on a day-to-day basis.
(15.5)
Why is it important to know whether or not the proprietor materially
participates?
If the proprietor does not materially participate, any loss from the business is a
passive loss and generally may be currently deducted only against passive income.
(15.6)
What are returns and allowances?
- Amounts that were refunded to customers who returned merchandise for
refund or partial refund. - These amounts are subtracted from gross receipts. (15.6)
How is cost of goods sold determined?
Beginning inventory plus purchases, plus labor, supplies, depreciation, etc.
attributable to product manufacture or preparation for sale, minus ending
inventory. (15.7)
If the client has contract labor, what should you remind the client that they
should do? - Provide a Form 1099-MISC to any independent contractor who worked and
earned $600 or more. (15.9)
What is the purpose of self-employment tax?
To pay social security and medicare taxes. (15.14)
What amounts does a proprietor have “at risk”?
Amounts invested in the business plus any business debts for which the
proprietor is personally liable. (15.16)
What difference does it make if the proprietor is “at risk” or not?
Only amounts at risk may be used to determine the actual loss on Schedule C.
(15.16)
How does a Tax Professional meet due diligence requirements?
- Tax Professionals fulfill due diligence requirements by making every effort to
prepare accurate and complete returns. - Tax Professionals must have knowledge of tax law, and apply a reasonability
check to the information provided by their clients. (26.1)
What is a thorough interview?
A thorough interview consists of asking general information questions, then
asking additional questions whenever information is incomplete or seems
inaccurate or inconsistent. (26.2)
What is a conflict of interest?
H&R Block Income Tax Course Completed
(Already GRADED A)
Circular 230
Regulations governing the practice of attorneys, certified public accountants,
enrolled agents, enrolled actuaries, and appraisers before the IRS.
Disclosure
The release of tax information by an IRS employee.
Due Diligence
Requirements that tax professionals must follow when preparing income tax
returns.
Noncompliance
Failure or refusal to comply with the tax code.
Privilege
Protection from being required to disclose confidential communications between
two parties, such as attorney and client.
Estimated Tax
The amount of tax a taxpayer expects to owe for the year after subtracting
expected amounts withheld and certain refundable credits.
Estimated Tax Voucher
A statement by an individual of (1) the amount of income tax he estimates he will
incur during the current taxable year on income that is not subject to withholding,
(2) the excess amount over that withheld on income which is subject to
withholding, and (3) his estimated self-employment tax.
Exemption from Withholding
Status claimed on Form W-4 directing the employer not to withhold federal
income taxes from the employee.
Underpayment Penalty
If a taxpayer did not pay enough tax on a timely basis during the year, he may be
required to pay an underpayment penalty.
Withholding Allowances
An increase by which income tax withholding on certain income is reduced.
Two Ways to Pay as You Go
Withholding and Estimated Tax Payments
Form W-4
Employee’s Withholding Allowance Certificate
Form 8815
Exclusion of Interest From Series EE and I U.S. Savings Bonds Issued After 1989
Form 2210
Underpayment of Estimated Tax by Individuals, Estates, and Trusts
Form 4868
Application for Automatic Extension of Time To File U.S. Individual Income Tax
Return
Form 8888
Allocation of Refund
Form 9465
Installment Agreement Request
Amended Return
A tax return filed on Form 1040X after the original return has been filed.
Closed Year
A tax year for which the statute of limitations has expired.
Open Year
A taxable year for which the statute of limitations has not yet expired.
Failure-to-File Penalty
Generally 5% for each month or part of a month the return is late, but not more
than 25% of the tax not paid.
Failure to File
Taxpayer fails to file the return by the due date, and there is a balance due.
H&R Block Mid Term Review Questions and Answers
(Download To Score An A)
What is the standard deduction for a taxpayer filing single?
$6200
What is the standard deduction for a taxpayer filing married filing joint?
$12400
What is the standard deduction for a taxpayer filing married filing separate?
$6200
What is the standard deduction for a taxpayer filing qualifying widow?
$9100
What is the standard deduction for a taxpayer filing head of household?
$9100
What does Form 1099-G provide?
Certain government payments such as unemployment.
What is a standard deduction?
A reduction in the amount of income subject to tax. It varies based on the
taxpayer’s filing status.
What is the amount of taxable income that you can earn and still use the Tax
Table?
$100,000
What three factors determine the filing requirements for nondependents?
- filing status
- age
- gross income
What are the five filing status’? - Single
- Married filing joint
- Married filing separate
- Qualifying widow
- Head of household