KN Simon
Paul, James, Ryan, and Amy pay 80% of the support for their mother. Paul pays 40%, James and Ryan pay 15% each, and Amy pays 10%. Who is eligible to claim their mother as a dependent?.
Test – CA Midterm 2
(ITC 2019)
Section 1
Question 1 of 60.
Paul,
James, Ryan, and Amy pay 80% of the support for their mother. Paul pays 40%,
James and Ryan pay 15% each, and Amy pays 10%. Who is eligible to claim their
mother as a dependent?
Since
no one person pays over 50% of the support, none of the children may claim her
as a dependent.
Since
together they pay more than 50% of their mother’s support, any one of them may
claim their mother under a multiple support agreement.
Since
together they pay more than 50% of their mother’s support, Paul, James, or Ryan
may claim their mother under a multiple support agreement.
Since
together they pay more than 50% of their mother’s support, they may share the
dependency exemption based on the percentage each one pays.
Mark
for follow up
Question 2 of 60.
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.
Mark
for follow up
Question 3 of 60.
Which
of these statements is TRUE concerning a partially taxable distribution of
pension income?
Taxpayers
are required to use the simplified method for any pensions with a starting date
after July 1, 1986.
If
box 2a of the Form 1099-R is blank, the pension is not taxable.
For a distribution for a pension with a starting date after November 18, 1996, the simplified method should be used when box 2a of Form 1099-R is blank and “taxable amount not determined” is checked.
For the simplified method, the age of the taxpayer is the age they turned during the year the pension began.
Mark
for follow up
Question 4 of 60.
What is
the most an employee would pay in social security tax in 2018?
$2,175.00
$4,350.00
$7,960.80
$15,921.60
Mark
for follow up
Question 5 of 60.
When a
tax preparer has knowledge that a client has not complied with any tax law,
they must:
Advise
the client that the IRS may contact them about their tax return.
Notify
their manager of the noncompliance and let them handle it.
Advise
the client promptly of the fact and the consequences of the noncompliance,
error, or omission.
Notify
the IRS of the noncompliance.
Mark
for follow up
Question 6 of 60.
When dependent care benefits are withheld from taxpayers’ income, where does the employer report them?
Form
2441.
Form
1040.
Box
10 of Form W-2.
The
employer is not required to report them.
Mark
for follow up
Question 7 of 60.
Health
insurance purchased through the Marketplace would be reported to the taxpayer
on which form(s)?
Form
1095-A.
Form
1095-B.
Form
1095-C.
Forms
1095-B and 1095-C.
Mark
for follow up
Question 8 of 60.
An
employer who has a SIMPLE IRA retirement plan for employees:
Is
required to make a nonelective contribution paid to all employees.
Must make matching contributions to employees‘ contributions.
Must
give employees a contribution adjustment.
Receives
a deduction on their business return for the contribution they made to their
employee’s accounts.
Mark
for follow up
Question 9 of 60.
During the year, Fred and Dolores received $10,000 in wages; $5,000 in social security benefits; a $500 gift from their daughter; and $325 interest from a U.S. Treasury Savings Bond. If they file MFJ, what will their federal AGI be for the year?
$10,000
$10,325
$15,325
$15,825
Mark
for follow up
Question 10 of 60.
Carol’s
divorce was final on July 3, 2018. Carol’s 24-year-old daughter (a full-time
student and nondependent) lives with her. What is Carol’s correct filing
status?
Single.
Married
filing jointly.
Married
filing separately.
Head
of household.
Mark
for follow up
Question 11 of 60.
Which
of the following is a valid tie-breaker rule?
If
neither claimant is a parent, the taxpayer who lived with the qualifying child
longer will be allowed to claim the tax benefits.
The
parent who provided more support for the qualifying child, regardless of
residency and AGI, will be allowed to claim the tax benefits.
The
parent with the higher AGI, regardless of residency, will be allowed to claim the
tax benefits.
The
parent who lived with the qualifying child longer, regardless of AGI, will be
allowed to claim the tax benefits.
Mark
for follow up
Question 12 of 60.
In order to qualify for the federal Child Tax Credit, a qualifying child must be under the age of:
13
17
18
21
Mark
for follow up
Question 13 of 60.
A tax
preparer is required to complete Form 8867, Paid Preparer’s Due Diligence
Checklist, to ensure they:
Compute
the amounts of all credits correctly.
Reviewed
the taxpayer’s records completely.
Considered
all the due diligence requirements for each credit claimed on the return.
All
of the above.
Mark
for follow up
Question 14 of 60.
Which
of these would be an exception to the early retirement distribution penalty?
A
45-year-old taxpayer lost his job and cashed in his 401(k).
A
401(k) distribution was part of a property settlement in a divorce.
An
unemployed taxpayer withdrew money from her 401(k) to pay health insurance
premiums.
A
401(k) distribution used to pay higher education costs.
Mark
for follow up
Question 15 of 60.
Which
of these is incorrect regarding a Roth IRA conversion?
The
taxpayer can receive a distribution from their traditional IRA and personally
contribute the money into their Roth IRA within 60 days of the distribution.
The
taxpayer is not required to pay income tax on the transferred amounts in the
year of conversion. Income tax will be paid when the taxpayer receives
distributions from the converted funds.
The
taxpayer can request the traditional IRA trustee to transfer the funds directly
into their Roth IRA.
The
taxpayer can reclassify their traditional IRA account as a Roth IRA, if the
account is maintained by the same trustee.
Mark
for follow up
Question 16 of 60.
Which
of the following items is NOT considered when determining the cost of
maintenance of a home for the head of household filing status?
Utilities.
Insurance
on the home.
Food
consumed in the home.
Mortgage
principal payment.
Mark
for follow up
Question 17 of 60.
Which
statement is incorrect concerning alimony?
Alimony
payments executed under orders after December 31, 2018, will no longer be
taxable income for the recipient or deductible by the payer.
Taxpayers
who make taxable alimony payments may be eligible to deduct these payments as
an adjustment to income.
Alimony
payments may not include child support.
To
claim an adjustment for alimony paid, all that is necessary is the recipient’s
name and the amount of alimony paid.
Mark
for follow up
Question 18 of 60.
Jasmine,
age 48, contributed $5,000 to her traditional IRA. She is an active participant
in a retirement plan at work. Her IRA MAGI is $75,000. What is her IRA
adjustment to income?
$0
$5,000
$5,500
$6,500
Mark
for follow up
Question 19 of 60.
Noncompliance
for a tax preparer includes:
Refusing
to provide records and information lawfully requested by the IRS.
Reporting
inaccurate income.
Claiming
deductions or credits for which the taxpayer does not qualify.
All
of the above are considered noncompliance issues.
Mark
for follow up
Question 20 of 60.
For a
taxpayer to claim a dependent, that person must be:
A
U.S. citizen.
A
resident of Mexico.
A
resident of the United States.
Any
of the above.
Mark
for follow up
Question 21 of 60.
Jerry
(52) and Diana (50) are married and lived with their qualifying relative,
Rachel (25), for all of 2018. In October 2018, Rachel married Mike (27), and
both lived with Jerry and Diana for the rest of the year. Rachel earned $2,400,
and Mike earned $24,500 in 2018. Which of these is correct?
Jerry
and Diana may claim Rachel, even if she chooses to file a joint return with
Mike.
Jerry
and Diana may claim Rachel if Mike chooses to file married filing separately.
Jerry
and Diana may not claim Rachel because she is now Mike’s dependent.
Jerry
and Diana may claim Rachel for the nine months she was single, but not for the
time after she was married.
Mark
for follow up
Question 22 of 60.
Jamie
is a degree candidate at her local state college. She received a scholarship
for $4,000 which covered half of her tuition costs. How much, if any, of the
scholarship is taxable income?
$0
$1,000
$2,000
$4,000
Mark
for follow up
Question 23 of 60.
Sheila
is the daughter of your neighbor, Mary. She and her 6 year-old son moved in
with Mary in August. Mary would like you to prepare a return claiming the
grandson as her qualifying child. What do you do?
File
the return since you know that Mary has done them a favor by allowing them to
move in.
Explain
the residency requirement and file the return showing the grandson lived with
Mary for more than half the year.
File
the return, but only after Mary assures you that Sheila will not be claiming
her son.
Explain
to Mary that she is not eligible to claim her grandson, and that you cannot
knowingly file an incorrect tax return.
Mark
for follow up
Question 24 of 60.
What is
the age requirement (if any) to contribute to a Roth IRA?
The
taxpayer must be at least age 18 and less than age 70?.
The
taxpayer must be at least age 18, but there is no maximum age.
The
taxpayer must be at least 19 if not a full-time student, or age 24 if they are
a full-time student, but there is no maximum age.
There
is no age requirement if the taxpayer meets the compensation requirements.
Mark
for follow up
Question 25 of 60.
Assuming
they meet all other requirements, which of these taxpayer’s could claim the
American Opportunity Tax Credit?
Mary
is claimed by her parents, but would like to claim her own education credit.
John
would like to claim the AOTC for his son, who is attending a private secondary
school.
Julie
is a full-time student working toward her MA and would like to claim the AOTC.
Jerry
would like to claim the AOTC for his son who is a sophomore at a state
university.
Mark
for follow up
Question 26 of 60.
What
happens if an education credit is received and later the school refunds part of
the fees?
There
is no tax consequence.
Part
of the credit may have to be recaptured (paid back).
The
credit will be reduced in future years.
Any
additional education credits will be disallowed.
Mark
for follow up
Question 27 of 60.
Which
of these is true regarding a U.S. national?
A
U.S. national is the same as a resident of the United States.
A
U.S. national is a resident who owes their allegiance to American Samoa.
A
U.S. national is a U.S. citizen residing in Mexico or Canada.
A
U.S. national meets the citizenship or residence test for a dependent.
Mark
for follow up
Question 28 of 60.
Which
of these is correct regarding a spousal IRA?
A
spouse may be eligible to contribute to an IRA even if they have no income of
their own.
A
spousal IRA is allowed for any filing status.
The
limitation on the amount that can be contributed to a spousal IRA is always the
same as that of the working spouse.
The
taxpayer’s income is not taken into consideration when establishing a spousal
IRA.
Mark
for follow up
Question 29 of 60.
Lisa is
a full-time undergraduate student who wants to claim AOTC. She brings in her
school billing statement, as well as receipts for books she purchased for her
college courses. Lisa informs her Tax Professional that she did not receive a
Form 1098-T. The tax preparer should do which of the following to meet the due
diligence record keeping requirement?
A.
Require Lisa to obtain a Form 1098-T before she can claim AOTC. Then make a
photocopy of the Form 1098-T to include in the H&R Block client file.
B.
Determine if Lisa’s college is an eligible educational institution and document
the conversation about verifying Lisa’s college attendance during the year.
C.
Take a photocopy of Lisa’s billing statement and book receipts to keep in the
H&R Block client file, as well as document the questions asked and answers
provided to determine Lisa’s AOTC eligibility.
D.
Both B and C are correct.
Mark
for follow up
Question 30 of 60.
Which
of these are ordinary dividends?
Dividends
paid on a credit union savings account and reported on a Form 1099-INT.
Exempt-interest
dividends paid by a mutual fund.
Capital
gain distributions reported in box 3a of a Form 1099-DIV.
Dividends
from stock reported in box 1a of a Form 1099-DIV.
Mark
for follow up
Question 31 of 60.
Lloyd,
a 50-year-old single taxpayer, earned $40,000 in wages. He is covered by an
employer-sponsored retirement plan. What is his maximum allowable contribution
to a traditional IRA for 2018?
$0
$5,500
$6,500
$18,000
Mark
for follow up
Question 32 of 60.
The
lifetime learning credit has a maximum credit of:
$2,000
per return.
$2,500
per return.
$4,000
per return.
$10,000
per return.
Mark
for follow up
Question 33 of 60.
Harry
(65) retired this year and began taking distributions from his 401(k).
Contributions to his 401(k) were made over the course of his career through a
combination of before-tax contributions, after-tax contributions, and employer
matching. How should Harry determine the taxable amount of his distribution?
All
of Harry’s distributions will be taxable because a 401(k) is a qualified plan.
Harry
should use the Simplified Method to determine how much of his distribution is
attributable to return of cost basis.
Harry
should use the General Rule to determine how much of his distribution is
attributable to cost basis.
Distributions
from a 401(k) plan are always tax free.
Mark
for follow up
Question 34 of 60.
Jeff
comes to you to file his tax return. He tells you that he has received all his
compensation in cash for several years, but this year he received a Form W-2 so
he will be filing his taxes. What do you do?
File
his current year return with a note to the IRS explaining that you believe he
has not filed previous years because he received his wages in cash.
Refuse
to file the current year return until you have filed all his previous returns.
File
the current year return, but explain to Jeff the law regarding filing
requirements and encourage him to file previous returns.
Refuse
to file the current year return explaining that you don’t want to be put in
jeopardy because of his failure to file in the past.
Mark
for follow up
Question 35 of 60.
Which
of these is not required to receive a waiver of the penalty for not taking a
required minimum distribution from a retirement account.
File
Form 5329.
Prove
it was due to a reasonable error.
Withdraw
double the required minimum distribution (RMD) the following year.
Establish
they are taking steps to remedy the failure.
Mark
for follow up
Question 36 of 60.
Jennifer
Searcy, a single mother, has three children, Sydney (7), Patrick (11), and
Joanna (17). Jennifer’s AGI is $62,000, and her tax liability is $4,816. How much
is Jennifer’s Child Tax Credit and Other Dependent Credit?
$3,000
$4,500
$6,000
Jennifer
is not eligible for the Child Tax Credit
Mark
for follow up
Question 37 of 60.
Which
of these certificates qualifies for the mortgage interest credit?
Federal
Housing Administration Certificate.
Farmers
Home Administration Certificate.
Homestead
Staff Exemption Certificate.
Mortgage
Credit Certificate.
Mark
for follow up
Question 38 of 60.
Tax
preparer’s should always document every question and answer:
Only
for returns with EITC.
Any
time they think the IRS might question something on the return.
On
every tax return.
Only
when they believe a taxpayer has lied to them.
Mark
for follow up
Question 39 of 60.
Section
7525 privileged communication applies to:
State
tax law.
Corporate
tax matters.
Tax
advice.
Criminal
tax matters.
Mark
for follow up
Question 40 of 60.
John
and Sarah have three children (ages 5, 6, and 14). John earned $36,000 in 2018.
Sarah worked part-time and earned $5,000. They had no other income. They paid a
total of $4,600 in qualifying childcare expenses for their two youngest
children ($2,300 for each child). The 14-year-old is John’s son from a prior marriage.
He lives with John’s first wife, but John will be claiming the exemption this
year. What is the correct amount of the federal Child and Dependent Care
Credit?
$495
$945
$990
$1,012
Mark
for follow up
Question 41 of 60.
Joe
(55) and Gail (49) are filing jointly for 2018. Joe earned $40,000, and Gail
earned $2,500. Joe may contribute up to $6,500 to his IRA for 2018. If Joe
contributes $4,500 to his IRA, how much may they contribute to Gail’s IRA for
2018?
$2,000
$2,500
$5,500
$6,500
Mark
for follow up
Question 42 of 60.
Which
of these is TRUE regarding the adoption credit?
The
adoption credit is a refundable credit.
The
maximum credit is $13,810 per return.
The
maximum credit is $13,810 per child.
Employer
assistance payments qualify for the credit.
Mark
for follow up
Question 43 of 60.
Which
of these is incorrect in regards to child support payments?
Child
support is not taxable income.
Child
support is not included as an alimony payment adjustment.
Child
support payments are not included when calculating the Earned Income Credit.
Alimony
payments can never be treated as child support payments.
Mark
for follow up
Question 44 of 60.
Which
of these is a risk for a taxpayer when they are not compliant with the tax
laws?
The
IRS will interview both them and their employer.
Includes
an examination to check their compliance with all four EITC due diligence
requirements.
Their
returns will automatically be audited for the next 2-10 years.
Civil
penalties with the possibility of incarceration for criminal penalties.
Mark
for follow up
Question 45 of 60.
Which
of the following is not subject to federal tax?
Interest
on U.S. Treasury bills, notes, and bonds.
Interest
on a federal income tax refund.
Interest
on New York state bonds.
Dividends
paid by a credit union.
Mark
for follow up
Question 46 of 60.
Education
assistance from an employer:
Qualifies
for the American Opportunity Tax Credit, but not the lifetime learning credit.
Can
only be used for the lifetime learning credit.
Can
be used for any education credit.
Is
tax free and cannot be used for any credit or deduction.
Mark
for follow up
Question 47 of 60.
Documents
used to substantiate eligibility to claim either EITC, AOTC, and/or CTC/ACTC
must be:
Photocopied
and retained in the H&R Block client file (attached to Form 8879).
Shredded
when the taxpayer receives their refund.
Submitted
with the tax return. This means paper documents attached to the paper filed
return or digital copies submitted with the e-filed return.
Verified
for accuracy and authenticity prior to filing the return.
Mark
for follow up
Question 48 of 60.
When
may a noncustodial parent claim a child on their tax return?
When
the noncustodial parent has the higher AGI.
Every
other year.
When
the custodial parent releases the exemption on Form 8332.
When
they pay over 50% of the support for the child.
Mark
for follow up
Question 49 of 60.
Josh, one
of your clients, gives you information that seems inconsistent. What do you do?
File
the return only after you have asked Josh questions to clarify what he has said
and you believe you now have a full understanding.
Refuse
to file the return and refer them to someone else in your office.
Refuse
to file the return until you have time to investigate what Josh has told you.
File
his return because you don’t want to lose a client.
Mark
for follow up
Question 50 of 60.
John
and Lois are filing a joint return. Their 26-year-old daughter, June, and her
daughter, Jessica, live with them the entire year. John and Lois explain that
Jessica plans to claim June, but they think they should be the ones to claim
her since she lives in their home. They would like you to prepare the tax
return. What do you do?
Prepare
and file the tax return. Explain to John and Lois that once their return is
accepted, the IRS will reject their daughter’s return if she claims Jessica.
Go
through the tie-breaker rules with John and Lois. Explain to them that that
June has the higher claim. Explain that the only way you can file the return
with them claiming Jessica is if June decides that she will not claim her.
File
the return with a preparer’s note that you don’t believe they should be
claiming Jessica.
Encourage
them to go to a different preparer and not them know that Jessica’s mother
plans to claim her.
Mark
for follow up
Question 51 of 60.
William
and Jackie Colby are filing a joint federal return. They have the following
investment income: Wells Fargo Bank CD, $720 Series HH bond interest, $521 Port
of San Francisco, California, bond interest, $375 City of Bend, Oregon, bond
interest, $64 Oak Farms dividends, $826 Craft Inc. dividends, $597 Frankfort
Mutual Fund dividends, $283 Credit Union dividends, $232 Blake Harrison,
private contract interest, $1,263 What is the amount of total taxable dividends
reported on Schedule B?
$1,455
$1,655
$1,706
$11,058
Mark
for follow up
Question 52 of 60.
There’s
is a dependent who is a qualifying child and has not reached their 13th
birthday when the care was provided. What determines when the dependent is
considered to be 13 years old?
The
day of their birthday.
The
day before their birthday.
The
last day of the year.
The
first day of the following year.
Mark
for follow up
Question 53 of 60.
Which
of these is not among the most common reasons an e-filed tax return is
rejected?
Use
of an incorrect TIN on a tax return.
The
preparer relied on nonstandard tax documents.
Mismatches
between name and TIN.
The
same TIN on more than one return.
Mark
for follow up
Question 54 of 60.
Which
of these is an exception to the penalty for early distribution of retirement
funds?
The
distribution was made from an IRA to pay qualified higher education expenses
for the taxpayer’s grandchild.
The
distribution (up to $10,000 lifetime limit) was made from a 401(k) to pay
qualified first-time homebuyer expenses.
The
distribution was made from a qualified plan in a year (and to the extent that)
an unemployed taxpayer paid health insurance premiums.
The
distribution was made from an IRA to a taxpayer who separated from service
during or after the year in which they reached age 55.
Mark
for follow up
Question 55 of 60.
How can
you determine if a taxpayer’s medical insurance premiums were paid by their
employer?
They
will receive a Form 1095-A from the employer.
They
will receive a Form 1099-C from the employer.
There
will be an entry coded “DD” in box 12 of the taxpayer’s Form W-2.
The
taxpayer will need to inform you if this is the case.
Mark
for follow up
Question 56 of 60.
Brian,
a 48-year-old single taxpayer, earned $98,000 in wages. He is not covered by an
employer-sponsored retirement plan. What is his maximum allowable contribution
to a traditional IRA for 2018?
$0
$5,500
$6,500
$18,000
Mark
for follow up
Question 57 of 60.
For
2018, the maximum rate of tax on capital gain distributions is:
0%
15%
20%
37%
Mark
for follow up
Question 58 of 60.
Which
of these is not reported on Form 1099-DIV?
Nondividend
distributions.
Capital
gain distributions.
Credit
union dividends.
Qualified
dividends.
Mark
for follow up
Question 59 of 60.
All of
the following are due diligence requirements a tax preparer must meet for EITC,
AOTC, and CTC/ACTC, EXCEPT:
Investigate
and verify the accuracy of information the taxpayer provides to show
eligibility for EITC, AOTC, or CTC/ACTC.
Complete
all worksheets used to compute the credit. 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 credit. Then document both the questions asked and
responses provided.
Mark
for follow up
Question 60 of 60.
A
qualifying widow(er) receives the same standard deduction as which other filing
status?
Single.
Married
filing jointly.
Married
filing separately.
Head
of household
Mark
for follow up
Save / Return LaterSummary
Paul, James, Ryan, and Amy pay 80% of the support for their mother. Paul pays 40%, James and Ryan pay 15% each, and Amy pays 10%. Who is eligible to claim their mother as a dependent?
The post Paul, James, Ryan, and Amy pay 80% of the support for their mother. Paul pays 40%, James and Ryan pay 15% each, and Amy pays 10%. Who is eligible to claim their mother as a dependent? appeared first on Custom University Papers.