HR BLOCK Final Exam Review (ITC 2024) With 100% Correct And Verified Answers, Exams of Advanced Education

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HR BLOCK Final Exam Review (ITC

2024) With 100% Correct And Verified

Answers

Which of the following is a requirement for all taxpayers who want to claim the EIC? Live in the U.S. for more than half a year. Have a valid social security number. Have a qualifying child dependent. Have AGI less than $21,430 ($27,380 MFJ). - Correct Answer-Have a valid social security number. A combined due diligence penalty of $2,180 would indicate a penalty for which of the following? EIC, CTC/ODC/ACTC, and head of household. EIC, AOTC, and CTC/ODC/ACTC. EIC, AOTC, CTC/ODC/ACTC, and head of household. EIC, PTC, CTC/ODC/ACTC, and head of household. - Correct Answer-EIC, AOTC, CTC/ODC/ACTC, and head of household. When dependent care benefits are withheld from a taxpayer's income, where are they reported by the employer? Form 2441. Form 1040. Box 10 of Form W-2. The employer is not required to report them. - Correct Answer-Box 10 of Form W-2. All of the following are due diligence requirements a tax preparer must meet for EIC, AOTC, CTC/ODC/ACTC, and HOH, EXCEPT: Investigate and verify the accuracy of information the taxpayer provides to show eligibility for EIC, AOTC, CTC/ODC/ACTC, and HOH. Complete all worksheets used to compute the credits. If the worksheet is completed by hand, keep a copy in the taxpayer's client file. Maintain a copy of documents provided by the taxpayer that the tax preparer relied on when determining credit eligibility. Then record the date the information was obtained and the name of who provided the information. When information provided by the taxpayer appears to be incorrect, inconsistent, or incomplete, the tax preparer must make additional inquiries to determine if the taxpayer

is eligible for the benefit. Then document both the questions asked and responses provided. - Correct Answer-Investigate and verify the accuracy of information the taxpayer provides to show eligibility for EIC, AOTC, CTC/ODC/ACTC, and HOH. When a taxpayer receives Form 1099-R with no amount entered in box 2a and code 7 entered in box 7, the entire distribution: Could be partly or entirely taxable. Is never taxable. Is an early distribution and taxable. Has been rolled into a traditional IRA or into another qualified plan. - Correct Answer-Is never taxable. What is the maximum amount of the American Opportunity Tax Credit a taxpayer could receive per student? $1, $1, $2, $2,500 - Correct Answer-$2, Which test for a qualifying child does NOT need to be met in order for the child to be a qualifying person for purposes of Earned Income Credit (EIC)? Age. Relationship. Residency. Support. - Correct Answer-Support. Which of the following expenses qualifies for an education credit in 2021? Tuition payments. The taxpayer didn't receive scholarships, grants, or other nontaxable benefits. Fees for an optional student activity. Cost of student medical fees. Tuition payments. The taxpayer received a nontaxable grant, which covered the entire tuition expense. - Correct Answer- Employer-provided dependent care assistance: May be used for the Child and Dependent Care Credit. Is subtracted from the total expenses for child or dependent care on Form 2441. Is included in wages on Form W-2. Is not reported to the IRS. - Correct Answer- Which of the following is NOT a percentage of social security benefits subject to federal tax? Up to __________. 0% 50% 85%

100% - Correct Answer-100% What is the maximum amount of the lifetime learning credit? $1,100 per return. $1,650 per return. $2,000 per return. $2,500 per return. - Correct Answer-$2,000 per return. Employer-provided dependent care assistance: It may be used for the Child and Dependent Care Credit. It is subtracted from the total expenses for the child or dependent care on Form 2441. It is included in wages on Form W-2. It is not reported to the IRS. - Correct Answer- Earned Income - Correct Answer-Any income (wages/salary) that is generated by working Unearned Income - Correct Answer-include interest income, dividends, rents and royalties, pensions, alimony, and unemployment income. If an employee thinks their Form W-2 is incorrect, what should they do? - Correct Answer-If the taxpayer's name, social security number, earnings, or withholdings are incorrect, the taxpayer should notify their employer and request a corrected Form W-2. The employee should request that the employer update their records and verify that the earnings were properly credited with the Social Security Administration. However, the taxpayer is still responsible for filing a timely tax return. If the employee's attempts to obtain a corrected Form W-2 from their employer are not successful, the taxpayer should notify the IRS. It may be necessary to prepare a substitute Form W-2. Is interest received on U.S. Treasury obligations taxable on state and/or local returns? - Correct Answer-No. Interest on U.S. Treasury obligations is exempt from state and local tax by federal law. Is municipal bond interest taxable on a federal return? - Correct Answer-No, the federal government does not tax municipal bond interest. How is interest income reported to the taxpayer? - Correct Answer-Interest income is reported to the taxpayer on Form 1099-INT or a substitute statement. What information do you need to know to determine whether a nondependent taxpayer is required to file a return? - Correct Answer- For tax purposes, when is a person's marital status determined? - Correct Answer-On the last day of the tax year, or the date of death.

How much is added to the standard deduction if the taxpayer (or spouse) is age 65 or older, or blind? - Correct Answer-$1,350 for married taxpayers and qualifying widow(er)s, or $1,700 for those filing single or head of household. What is the personal exemption amount for 2021? - Correct Answer-There is no personal exemption for 2021. A personal exemption was an amount previously allowed by law to reduce income that would otherwise be taxed. The Tax Cuts and Jobs Act of 2017 repealed this deduction beginning in 2018. How is the gross income filing requirement determined for most nondependent taxpayers? - Correct Answer-The taxpayer's standard deduction, including the additional amounts for age. However, for married filing separately, or married filing jointly when the spouses did not live together at the end of the year, the amount is $5. What is the difference between injured spouse allocation and innocent spouse relief? - Correct Answer-The IRS provides an injured spouse allocation for the taxpayer to protect their portion of a refund from a spouse's past-due federal income tax, unpaid student loans, unpaid child and spousal support, or state income tax. The IRS provides innocent spouse relief to taxpayers who file a joint return and later learn that their spouse has underestimated income (or overstated a credit or deduction) on the return. What document will the taxpayer receive from their employer reporting disability pension payments? - Correct Answer-The income is reported on Form 1099-R. What types of income must be reported on Schedule 1 (Form 1040) and then reported on Form 1040? - Correct Answer-Gambling winnings, alimony, jury duty pay, canceled debts, and hobby income are some examples of income that must be reported on Schedule 1 (Form 1040) and then reported on Form 1040. What are the adjustments that can be claimed on Schedule 1 (Form 1040)? - Correct Answer-Some examples of adjustments that can be claimed on Schedule 1 are: Educator expense deduction. The health savings account (HSA) deduction. Moving expenses for members of the military. Self-employment tax deduction. Self-employed health insurance deduction. Penalty on early withdrawal of savings. Alimony payments. IRA deduction. Student loan interest deduction. How much may an eligible educator deduct for qualified classroom expenses as an adjustment to income? - Correct Answer-Up to $250 per eligible educator.

Married taxpayers filing a joint return who are both eligible educators may each claim the $250 deduction, totaling $500. Who is an eligible educator? - Correct Answer-Someone who worked at least 900 hours during the school year as a teacher, teacher's aide, counselor, or principal in an elementary or secondary school. Where is the educator expense deduction reported? - Correct Answer-Educator expenses are reported on Schedule 1, Additional Income and Adjustments to Income, line 11. What is a qualified student loan? - Correct Answer-A loan used to pay qualified education expenses. Credit card debt may be included, provided the card was used exclusively to pay for qualified expenses. Money borrowed from a related person is not a qualified student loan. What three requirements must be met for an individual to be claimed as either a qualifying child or a qualifying relative? - Correct Answer-To be either a qualifying child or qualifying relative, they must be a U.S. citizen, U.S. resident alien, U.S. national, or a resident of Canada, or Mexico; they cannot file a joint return (unless solely to claim a refund of taxes paid); and the taxpayer claiming the dependent must not be a dependent of another taxpayer What are the five tests for a qualifying child? - Correct 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? - Correct Answer-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 of any taxes withheld. What four tests must be met for an individual to be considered a qualifying relative? - Correct Answer-1. Not a qualifying child of someone else.
6. Relationship OR member of the household for the entire year.
7. Gross income.
8. Support. How can the gross income test for a qualifying relative be satisfied? - Correct Answer- The qualifying relative's gross income must be less than $4,300. When determining the gross income, tax-exempt income, such as certain social security benefits, is not included.

What is the purpose of Form 2120, Multiple Support Declaration? - Correct Answer-If two or more persons combined provided over one-half of a person's support, they may together agree to allow any one of them who contributed at least 10% of the support to claim the exemption. A statement waiving the right to claim the dependency exemption should be signed by each contributor who is not claiming the exemption and retained by the one who is. Form 2120 is attached to the return of the taxpayer claiming the exemption. How much is the Child Tax Credit worth? - Correct Answer-Up to $3,600 per qualifying child under age 6 and up to $3,000 per qualifying child ages 6 through 17. What additional requirements must be met for a taxpayer to be eligible to claim the Child Tax Credit for their qualifying child? - Correct Answer-The child must: Be a qualifying child who is the taxpayer's dependent and who has not reached their 18th birthday by the end of the year. Have a social security number valid for employment before the due date of the return. Be a citizen, national, or resident of the United States. Is the Child Tax Credit refundable or nonrefundable? - Correct Answer-For most taxpayers, the Child Tax Credit is fully refundable in 2021. In other years, the Child Tax Credit is nonrefundable. However, certain taxpayers may qualify for the Additional Child Tax Credit, which is refundable. How much is the penalty if a paid preparer fails to meet the Child Tax Credit due diligence requirements? - Correct Answer-There is a $545 penalty for failing to meet the CTC/ODC/ACTC due diligence requirement on one taxpayer's return. What is the first due diligence requirement for the CTC/ODC, and how does a paid preparer meet this requirement? - Correct Answer-Complete and submit Form 8867, Paid Preparer's Earned Income Credit Checklist. How may a married taxpayer qualify as unmarried for tax purposes? - Correct Answer- To qualify as unmarried for the purpose of claiming the head of household filing status, a taxpayer must meet all of the following: Not file a joint return with their spouse. Provide more than half the cost of maintaining their home. The home must be the main home for the taxpayer and their dependent child (or child who would be a dependent except that the exemption was given to the noncustodial parent) for more than six months of the tax year. The taxpayer's spouse must not have lived in the home during the last six months of the year. List at least four costs of maintaining a home: - Correct Answer-Among other things, mortgage interest and real estate taxes (or rent), fire/casualty (or renter's) insurance,

upkeep and repairs, utilities, and food consumed in the home are all costs of maintaining a home. What requirements must be met for a taxpayer to use the qualifying widow(er) status? - Correct Answer-The death of the taxpayer's spouse must have occurred during one of the two preceding tax years; the taxpayer must not have remarried and must have been entitled to file a joint return for the year of death. The taxpayer must have paid over half the cost of maintaining the home, which was the main home of their dependent son, daughter, stepson, or stepdaughter for the entire year. In the case of divorced or separated parents, which parent generally gets to claim the qualifying child? - Correct Answer-The custodial parent, according to the IRS definition, which is the person with whom the child spent more nights during the year. What is the exception to the rules for children of divorced or separated parents? - Correct Answer-For divorces granted after December 31, 2008, Form 8332, Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent, must be filed if parents are separating tax benefits. What happens when more than one taxpayer claims the same qualifying child (QC)? - Correct Answer-The IRS will apply tiebreaker rules as follows: If only one of the taxpayers is the child's parent, the child is treated as the qualifying child (QC) of the parent. If the parents do not file a joint return together, but both parents claim the child, the IRS will treat the child as the QC of the parent with whom the child lived and stayed over for the greater number of nights during the year. If the child lived with each parent and stayed over the same number of nights during the year, the IRS will treat the child as the QC of the parent with the highest AGI. If neither parent can claim the child as a QC, the child is treated as the QC of the person with the highest AGI for the year. This particular tiebreaker rule does not allow any choice. Only the taxpayer with the highest AGI can claim the child. If either parent can claim the child but no parent does claim the child, the child is treated as the QC of the person who had the highest AGI for the year, but only if that person's AGI is greater than the higher AGI of either of the child's parents who could have claimed the child. Why is it important to distinguish qualified home mortgage interest from personal interest? - Correct Answer-Qualified home mortgage interest is deductible, with limitations, on Schedule A. Personal interest, such as credit card interest, is not deductible.

Is the cost of items purchased to benefit a charitable organization deductible? - Correct Answer-This amount is deductible on Schedule A. what is the second due diligence requirement for the CTC/ODC/ACTC and EIC? - Correct Answer-The CTC has a worksheet that needs to be completed, and the ACTC is calculated using Schedule 8812. The EIC requires the completion of several different worksheets. Who may qualify for the Additional Child Tax Credit (ACTC)? - Correct Answer-A taxpayer may qualify for the Additional Child Tax Credit if: They do not qualify for the fully refundable Child Tax Credit because their main home was not in the U.S or they were not a bona fide resident of Puerto Rice for more than half the year (2021 only). Form 2555, Foreign Earned Income, has not been filed. Taxpayer and spouse have an SSN or IRS ITIN issued on or before the due date of the return (including extensions). (If an ITIN was applied for on or before the due date of the return (including extensions), and the IRS issues an ITIN as a result of the application, the IRS will consider the ITIN as issued on or before the due date of the return.) Qualifying child or children have social security numbers valid for employment, issued before the due date of the tax return (including extensions). Full Child Tax Credit was limited due to the amount of tax liability. Amount of tentative CTC (each qualifying child x $3,000 [or $3,600 for under age 6]) is more than the actual CTC from Form 1040, line 19. Taxpayer(s) has one of the following: Earned Income exceeding $2,500. Three or more qualifying children. What are the six qualifications that must be met for any taxpayer to be eligible to claim the Earned Income Credit? - Correct Answer-The taxpayer must: Have a valid SSN. Meet certain requirements if separated from their spouse. Be a U.S. citizen or resident alien all year. Not file a Form 2555. Have investment income of $10,000 or less. Have earned income. Why are tax credits valuable to taxpayers? - Correct Answer-Credits are valuable because they reduce tax liability dollar for dollar. What is the difference between nonrefundable and refundable credits? - Correct Answer-Nonrefundable credits may not reduce a taxpayer's tax liability below zero. Refundable credits may reduce the taxpayer's tax liability below zero, and the difference is refunded to the taxpayer.

If a taxpayer's employer paid part of their child care expenses, how will this affect their Child and Dependent Care Credit, and on which form is it reported to the taxpayer? - Correct Answer-The expenses eligible for the credit must be reduced by the employer- provided assistance that can be excluded from income. Dependent care expenses are reported in box 10 of Form W-2. What is the Premium Tax Credit? - Correct Answer-The Premium Tax Credit (PTC) is a credit that helps pay the cost of health care coverage through the Marketplace. It is either advanced to the taxpayer or refunded through their income tax return What is the purpose of Form 1095-A? - Correct Answer-Taxpayers who purchase insurance coverage through the Marketplace will be sent a Form 1095-A, Health Insurance Marketplace Statement. All taxpayers who obtained coverage through the Marketplace for themselves, a spouse, or dependents, and either received the advance Premium Tax Credit or are eligible to claim the Premium Tax Credit on their tax return, must have a Form 1095-A to complete their return. How is the Premium Tax Credit calculated, and how does a taxpayer reconcile the premium tax credit with any Advance Premium Tax Credit received? - Correct Answer- Form 8962, Premium Tax Credit, calculates the taxpayer's premium tax credit and reconciles it with any advance premium tax credit received. Form 8962 must be filed for any taxpayer who received the advance premium tax credit. It may also be prepared for any taxpayer who is eligible for the premium tax credit but did not receive the advance premium tax credit. Information from Form 1095-A is used to complete Form 8962. What is the maximum Adoption Credit for 2021? - Correct Answer-$14,440 per child. Which taxpayers may claim the American Opportunity Tax Credit (AOTC)? - Correct Answer-Paid qualified education expenses for higher education for an eligible student and the student is the taxpayer, spouse, or someone that they claim as a dependent. Are not filing MFS, claimed as a dependent on another taxpayer's return, and their MAGI is below $90,000 ($180,000 for MFJ). The student must: Not have completed the first four years of college or claimed the AOTC or the former Hope credit for more than four tax years. Be enrolled at least half-time in a program leading to a degree, certificate, or other recognized academic credential for at least five months of the tax year. Not have been convicted of any federal or state felony for possessing or distributing a controlled substance. How is the lifetime learning credit calculated? - Correct Answer-It is 20% of the first $10,000 of qualifying expenses per return, per year.

What is the maximum lifetime learning credit, and which taxpayers may take advantage of this credit? - Correct Answer-The maximum is $2,000 per return. The lifetime learning credit is available to certain taxpayers paying for higher education courses, including graduate-level courses. Students may be degree candidates, or they may be non- degree candidates taking college courses to maintain or improve job skills. What is a thorough interview? - Correct Answer-A thorough interview consists of asking general information questions, then asking additional questions whenever information is incomplete or seems inaccurate or inconsistent. What is a conflict of interest? - Correct Answer-Circular 230 states that a conflict of interest exists if the representation of one client will be directly adverse to another client, or if there is a significant risk that the representation of one or more clients will be materially limited by the practitioner's responsibilities to another client, a former client, or a third person, or by a personal interest of the practitioner. What actions can resolve a conflict of interest? - Correct Answer-A conflict of interest is resolved when it is acknowledged, disclosed to all parties, and the parties have consented to waiving the conflict. What is a qualified retirement plan? - Correct Answer-A plan that meets the requirement of IRC Section 401(a) and the Employment Retirement Income Security Act of 1974 (ERISA), and is therefore eligible for favorable tax treatment. What is the IRA contribution limit for 2021? - Correct Answer-The lesser of 100% of the taxpayer's compensation or $6,000. Individuals who have reached age 50 by the end of the year may contribute an additional $1,000 for a total of $7,000. On what form are social security benefits reported to the recipient? - Correct Answer- Form SSA-1099. When the taxpayer has contributed after-tax money to the cost and has not yet recovered it. - Correct Answer-Form 1099-R. Under what circumstances would a pension be partly taxable? - Correct Answer-When the taxpayer has contributed after-tax money to the cost and has not yet recovered it. What are the two methods used to calculate the taxable amount of a partly taxable pension distribution? When is each used? - Correct Answer-The simplified method and the general rule. The simplified method is required to be used to compute the taxable portion of a pension or annuity with a starting date after November 18, 1996, where the taxpayer has after-tax contributions in the plan.

The general rule for calculating the excludible portion of pension and annuity payments may be used if a taxpayer started receiving payments before November 19, 1996. Taxpayers with an annuity date starting after July 1, 1986, and before November 19, 1996, generally could have chosen to use the simplified method or the general rule. Where is income tax withheld from a retirement account or IRA distribution reported on the tax return? - Correct Answer-Amounts withheld and reported to the taxpayer on Form 1099-R are included on Form 1040 or Form 1040-SR, line 25b. How do you determine the taxable portion of a social security distribution? - Correct Answer-The amount of a taxpayer's social security or tier 1 railroad retirement benefits subject to federal tax varies from zero to 85%, depending upon filing status and income. The level of taxability is based on MAGI increased by one-half of the net benefits received by the taxpayer (and spouse, if MFJ). The taxable portion is calculated using the Social Security Taxable Benefits Worksheet. When is an asset held long-term? - Correct Answer-In general, assets held for more than one year are long-term. Assets held for one year or less are short-term. Define basis. - Correct Answer-Basis is a measure of the taxpayer's investment in property, which is used to determine gain or loss for tax purposes What is the cost basis of purchased property? - Correct Answer-The basis of property acquired by purchase is generally the cost, which includes cash paid, the fair market value (FMV) of services rendered, and the FMV of property traded in exchange for the property. It also includes certain closing costs, such as commissions paid by the purchaser, legal and recording fees, and state transfer taxes on real estate. On what schedule do you report the gain or loss from the sale of a capital asset? - Correct Answer-Schedule D, Capital Gains and Losses. What are the long-term capital gain tax rates? - Correct Answer-Long-term capital gains are taxed at lower rates than ordinary income and short-term capital gains. For 2021, the maximum tax rates for most long-term capital gains are: 0% on taxable income less than $80,800 MFJ/QW, $54,100 HH, and $40,400 S/MFS that otherwise would be taxed at higher tax rates. 15% on taxable income greater than the amounts listed above and below $501, MFJ/QW, $473,750 HH, $445,850 S, and $250,800 MFS. 20% on any amount above the maximum 15% rate amount. What income is taxed at the 28% maximum rate? - Correct Answer-Long-term gain from the sale of collectibles and certain gain from the sale of qualified small business stock.

What is the maximum net capital loss that a taxpayer may deduct in one year? - Correct Answer-Capital losses may be used to offset capital gains from the sale of other property. If a taxpayer's capital losses exceed their capital gains, they can use up to $3,000 of the excess loss to offset ordinary income each year. For taxpayers using the MFS filing status, the amount that can be used to offset ordinary income is limited to $1,500 each year. What does Form 1099-B report? What about Form 1099-S? - Correct Answer-Form 1099-B is used by brokers to report the proceeds from the sale of shares of stock, mutual funds, bonds, commodities, futures contracts, foreign currency contracts, and other securities. Form 1099-S is used by the person responsible for the closing of a real estate transaction to report the sales proceeds. When can a taxpayer exclude all or some of the gains from the sale of their home? - Correct Answer-A taxpayer can exclude up to $250,000 ($500,000 MFJ) on the sale of their main home if they owned the home and used it as their main residence for at least two of the last five years and did not exclude the gain from the sale of another home in the two-year period ending on the date of the sale. How do you determine whether someone is an employee or an independent contractor?

• Correct Answer-There are three main factors to look at to determine whether someone is an employee or independent contractor. Does the employer have a right to direct and control the behavior of the employee? Does the employer have the right to control the business portion of the work? How do the employer and employee view their relationship, as evidenced by employment agreements and similar documents? What income-reporting form could an independent contractor sometimes receive from the person who paid them for their services? - Correct Answer-What income-reporting form could an independent contractor sometimes receive from the person who paid them for their services? Line F of Schedule C asks for the accounting method used in the business. What is the difference between the cash and accrual methods of accounting? - Correct Answer-Line F of Schedule C 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 cash method, only income actually or constructively received during the tax year is included. Under the accrual method of reporting income, total sales and total charges for services in the tax year are included in income, even though payment may be received in another tax year. Why is it important to know whether or not the proprietor materially participates? - Correct Answer-If the proprietor does not materially participate, any loss from the

business is considered a passive loss and generally can only currently be deducted against passive income. What are returns and allowances? - Correct Answer-Returns and allowances are amounts included in gross receipts that were refunded to customers who returned merchandise for a refund or who were given a partial refund because they received damaged merchandise or for other similar reasons. How is cost of goods sold determined? - Correct Answer-Cost of goods sold is beginning inventory plus purchases and other direct costs of goods minus the ending inventory. It is calculated on Schedule C, Part III, page 2. If the taxpayer has contract labor, or subcontractors, what should you remind the taxpayer that they should do? - Correct Answer-File Forms 1099-NEC. This is required if they are paid more than $600 but can still be completed for amounts lower than $600. What is the purpose of self-employment tax? - Correct Answer-To pay social security and Medicare taxes on self-employment income. Qualified business income (QBI) is derived from various trade or business net amounts. In general, QBI is the net amount of what? - Correct Answer-Qualified business income (QBI) is the net amount of qualified items of income, gain, deductions, and losses with respect to the taxpayer's qualified trade or business. How do members of the clergy and statutory employees pay income taxes and self- employment taxes? - Correct Answer-Generally, clergy are considered employees of the church and receive a Form W-2; however, they are considered self-employed in regard to social security and medicare. Because of this, they must complete Schedule SE and pay self-employment taxes. A statutory employee is an employee for social security and medicare tax purposes and self-employed for income tax purposes. They must report their wages on Schedule C. Their social security and medicare taxes are generally withheld from their paychecks, so they do not need to complete Schedule SE. Determining if a trade or business is considered a specified service trade or business (SSTB) is significant for taxpayers that have taxable income over the lowest thresholds. What type of trades or businesses are considered SSTBs? - Correct Answer-A specified service trade or business (SSTB) is any trade or business involving the performance of services in the fields of health, law, consulting, athletics, financial services, brokerage services or any trade or business in which the principal asset of the business is the reputation or skill of one or more of its owners or employees, or that involves the performance of services that consist of investing and investment management, trading, or dealing in securities, partnership interests, or commodities.

What kinds of property are not depreciable? - Correct Answer-Examples of assets that are not depreciable include: Property placed in service and disposed of in the same year. Personal-use assets. Equipment used to build capital improvements. Assets with an unlimited or indeterminable life (such as land). Most intangible assets (such as copyrights and patents) or inventory. For MACRS purposes, you need to divide real property into two categories. What are they? - Correct Answer-Land, which is not depreciated, and structures, which are depreciated. How is the Modified Accelerated Cost Recovery System (MACRS) General Depreciation System (GDS) deduction computed in the year of disposition for property being depreciated using the half-year convention? - Correct Answer-First, determine the class life using the Table of Class Lives and Recovery Periods ("CLADR table"). Second, determine the appropriate depreciation method. Finally, multiply the basis of the asset by the percentage amount provided in the table for the determined depreciation method and the half-year convention. Note: The year of dispostion is considered a half-year, as is the year an asset is placed in service. What kinds of property are eligible for the §179 deduction? - Correct Answer-Most property purchased, either new or used, for a taxpayer's trade or business. What limitations apply to the depreciation of passenger automobiles, trucks, and vans? - Correct Answer-The amount of the limitation depends on the date the vehicle was placed in service. A passenger automobile placed in service in 2021 is subject to the following limitations if it was acquired after September 27, 2017, and the first-year bonus depreciation applies. First year $18, Second year $16, Third year $9, Fourth and later years $5, What income, other than rental income, is reported on Schedule E? - Correct Answer- Royalties and income from estates and trusts, partnerships, and S corporations. How is income from an estate, trust, or other pass-through entity reported to a taxpayer? - Correct Answer-On one or more Schedules K-1.

How are deductible property expenses determined if part is strictly rental and part is strictly personal? - Correct Answer-Expenses must be divided between the rental and personal portion. This can be done by any reasonable method. The most common methods are by square footage or the number of rooms in the house. If the taxpayer itemizes deductions, the personal portions of real estate taxes, mortgage interest, and qualified casualty losses may be deducted on Schedule A. If a taxpayer is subject to both the failure-to-file and failure-to-pay penalty, how is the combined penalty calculated? - Correct Answer-The failure-to-file penalty for that month is reduced by the failure-to-pay penalty for that month for a combined penalty of 5% of the unpaid taxes. In what situations does the 20% accuracy penalty apply? - Correct Answer-The 20% penalty applies if any of the following are involved: Negligence or intentional disregard of the rules and regulations. Substantial understatement of income tax. Substantial misstatement of valuation. Substantial overstatement of pension liabilities. Substantial estate or gift tax valuation understatement. Disallowance of benefits claimed for a transaction that lacks economic substance. Undisclosed foreign financial assets. Inconsistent estate basis. When will the IRS pay interest on refunds? - Correct Answer-If the refund is paid more than 45 days after the due date of the return or more than 45 days from the date of filing (whichever is later). When does an amended return need to be filed in order to receive a refund? - Correct Answer-Within three years of the date the original return was filed, or within two years of the date the tax was paid, whichever is later. If a taxpayer receives an adjustment letter from the IRS showing a balance due, is an amended return always required? - Correct Answer-No. If the taxpayer agrees with the adjustment, they may simply pay the balance due. If they believe their original return, as filed, was correct, they can respond to the letter and provide any additional documentation required. What types of income are subject to mandatory federal income tax withholding? - Correct Answer-Some examples are wages of employees, including sick pay, commissions, bonuses, and vacation pay; pensions; and gambling winnings in excess of $5,000. Does the fact that an employee is having income tax withheld from their paycheck mean their tax liability will be covered? - Correct Answer-Not necessarily. If a taxpayer experiences a change of circumstances with regard to their personal or financial

situation, such as the loss of a dependent, or if they have substantial income that is not subject to withholding, they may owe additional taxes at the end of the year. Taxpayers with more than one job may also owe additional taxes On what dates are estimated payments normally required to be made? - Correct Answer-Typically, the estimated payments are due on April 15, June 15, September 15, and January 15 (of the following year). Taxpayers with taxable income from which there is no withholding usually must pay estimated tax. What are some examples of this type of income? - Correct Answer- Rental income, self-employment income, capital gains, wages of statutory employees. What options does a taxpayer have for depositing their refund? - Correct Answer-A taxpayer who will receive a refund can use Form 8888 to directly deposit their refund into two or three different accounts. The account can be a checking or savings account, or it can be another type of account, such as an IRA, a health savings account (HSA), or a Coverdell education savings account. A taxpayer also has the option to purchase up to $5,000 in Series I U.S. Savings Bonds with a portion of their refund.