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Maryland Tax Preparer Exam 2026– 2027 Questions with
Verified Answers & Explanations
Overview
This Maryland Tax Preparer Exam study guide is designed to prepare candidates for state registration, certification, and competency assessments required to legally prepare tax returns for compensation in the state of Maryland. The exam content reflects current IRS regulations and Maryland Comptroller requirements , with a strong focus on most-tested concepts and real exam scenarios. The question set covers all major areas tested on the Maryland Tax Preparer Exam, including:
- Federal & Maryland Income Tax Fundamentals
- Filing Status, Dependents, and Residency Rules
- Gross Income, Adjustments, and Deductions
- Tax Credits (Federal and Maryland-Specific)
- Business Income, Self-Employment & Schedule C
- Maryland Forms, Local County Taxes, and Modifications
- Ethics, Due Diligence, and Preparer Penalties
- E-Filing, Recordkeeping, and Confidentiality Requirements All questions are written in exam-style multiple-choice format , with correct answers clearly shown in bold and supported by verified explanations to reinforce understanding and improve exam performance
Federal & Maryland Tax Fundamentals (Q1–20)
1. Who must register as a tax preparer in Maryland?
A. Anyone filing their own return B. Anyone preparing returns for compensation C. Only CPAs D. Only IRS employees Answer: B Explanation: Maryland requires paid tax preparers to register with the Comptroller.
2. What form reports individual federal income tax?
A. Form 1099 B. Form W- 2 C. Form 1040 D. Schedule C Answer: C Explanation: Form 1040 is the primary individual income tax return.
3. Maryland income tax is based on which principle?
A. Gross receipts B. Flat tax C. Progressive tax D. Consumption tax Answer: C Explanation: Maryland uses progressive tax rates that increase with income.
4. What is taxable income?
A. Gross income minus adjustments and deductions B. Total wages only C. Net business income D. Adjusted gross income only Answer: A Explanation: Taxable income = gross income − adjustments − deductions.
5. Which income is ALWAYS taxable?
A. Child support B. Gifts received C. Wages D. Life insurance proceeds Answer: C Explanation: Wages are taxable unless specifically excluded by law.
6. What does AGI stand for?
Answer: C Filing Status & Dependents (Q21–35)
21. Who qualifies as Head of Household?
A. Married taxpayers B. Unmarried with a qualifying dependent C. Anyone with dependents D. Anyone filing jointly Answer: B
22. A dependent must meet which test?
A. Citizenship test B. Relationship, residency, support tests C. Employment test D. Age only Answer: B
23. Can a taxpayer claim a dependent who provides over half their own support?
A. Yes B. No C. Only in Maryland D. Only federally Answer: B
24. Which filing status is MOST disadvantageous tax-wise?
A. Single B. Head of household C. Married filing jointly D. Married filing separately Answer: D
25. Who may claim a qualifying child?
A. Anyone living with the child B. Taxpayer meeting IRS dependency rules C. Only parents D. Only guardians Answer: B Income, Adjustments & Deductions (Q36–55)
36. Which is an adjustment to income?
A. Mortgage interest B. Charitable contributions C. Student loan interest D. Medical expenses Answer: C
37. Which income is NOT taxable?
A. Wages B. Interest C. Child support received D. Business income Answer: C
38. Itemized deductions include which expense?
A. Groceries B. Medical expenses exceeding threshold C. Rent D. Utilities Answer: B
39. Which deduction reduces AGI?
D. Tax credit Answer: C
40. Business income is reported on which schedule?
A. Schedule A B. Schedule B C. Schedule C D. Schedule D Answer: C
41. Self-employment tax covers what?
A. Income tax B. Social Security and Medicare C. State tax only D. Local tax Answer: B
42. Which expense is deductible for a business?
A. Personal groceries B. Ordinary and necessary expenses C. Family vacation D. Mortgage principal Answer: B
43. Capital gains are taxed when?
A. When purchased B. When sold C. When inherited D. When gifted Answer: B
44. Which schedule reports interest and dividends?
A. Schedule C B. Schedule D C. Schedule B D. Schedule E Answer: C
45. Maryland allows which type of subtraction modification?
A. Federal tax paid B. Certain retirement income C. Property taxes D. Social Security wages Answer: B Credits & Payments (Q56–70)
56. What is a tax credit?
A. Deduction from income B. Dollar-for-dollar tax reduction C. Penalty D. Refund only Answer: B
57. Which credit is refundable?
A. Mortgage interest B. Earned Income Tax Credit C. Standard deduction D. Personal exemption Answer: B
58. Maryland offers a state version of which credit?
Answer: B
73. A preparer may estimate figures when records are missing.
A. Always B. Never without disclosure C. Only for businesses D. Only federally Answer: B
74. What is the penalty for willful misrepresentation?
A. Refund denial B. Fines and possible criminal charges C. Interest only D. No penalty Answer: B
75. Tax preparers must keep records for how long?
A. 1 year B. 2 years C. At least 3 years D. 10 years Answer: C
76. Confidential client data must be:
A. Shared with family B. Sold to marketers C. Protected and confidential D. Public record Answer: C
77. Who enforces federal preparer penalties?
A. Maryland Comptroller B. IRS C. State police D. SSA Answer: B
78. A preparer guaranteeing a refund is:
A. Ethical B. Legal C. Prohibited D. Encouraged Answer: C
79. E-filing is required when:
A. Preparing one return B. Preparing multiple returns annually C. Requested by client D. Filing state returns only Answer: B
80. Failure to sign a return may result in:
A. No issue B. Penalties and sanctions C. Refund delay only D. Audit of taxpayer Answer: B Maryland-Specific & Final Review (Q86–100)
86. Maryland local tax is based on:
A. Flat statewide rate B. County of residence
91. Extensions extend time to:
A. Pay tax B. File return only
C. Avoid penalties D. Avoid interest Answer: B
92. Interest accrues when:
A. Extension filed B. Tax not paid by deadline C. Refund issued D. Audit begins Answer: B
93. Which form reports withholding?
A. 1099 - INT
B. W- 2
C. Schedule C D. 1040 - X Answer: B
94. Amended returns use:
A. 1040
B. 1040 - X
C. Schedule A D. Form 502 Answer: B
95. A preparer must provide the taxpayer with:
A. Copy of W- 2 B. Copy of completed return C. IRS transcript D. Audit notice Answer: B
A. Speed B. Client satisfaction C. Accuracy and compliance D. Maximizing refunds Answer: C
