HRB COMPREHENSIVE EXAM UPDATED QUESTIONS
AND ANSWERS GRADED A+
✔✔Here is a helpful rule to think about the "tax benefit" hierarchy of education benefits:
Nontaxable benefits (for example, Pell Grants).
Refundable credits.
Nonrefundable credits. Tax benefit hierarchy of education benefits - ✔✔Tax benefit
hierarchy of education benefits
✔✔Leo and Sue, who file jointly, have qualified education expenses for their daughter,
Lisa, who they claim as a dependent on their return. Their daughter attends college less
than half-time. American Opportunity credit? Lifetime learning credit? - ✔✔No, Yes
✔✔Megan's tuition at trade school is $3,600. She received a Pell Grant of $2,400 and a
nontaxable tuition scholarship of $1,200. Megan graduated from high school last spring.
She is a dependent on her parents' tax return. American Opportunity credit? Lifetime
learning credit? - ✔✔No, No
✔✔In some circumstances, taxpayers may take a distribution from an IRA before
reaching age 59½ and not have to pay the 10% additional tax on early withdrawals. The
exception to the 10% additional tax applies if, for the year of the distribution, the
taxpayer pays qualified education expenses for:
The taxpayer.
The taxpayer's spouse.
The taxpayer or spouse's child, foster child, adopted child, or descendant of any of
them. - ✔✔Education exception to IRS early distribution penalty
✔✔Phil paid $3,000 in qualified expenses for his dependent daughter's tuition for her
freshman year of college at an eligible educational institution. He claims his daughter as
his dependent on his return. He does not qualify to be considered unmarried for tax
purposes, and his filing status is MFS. American Opportunity credit? Lifetime learning
credit? - ✔✔No, No
✔✔Taxpayers who cash in certain savings bonds under an education savings bond
program are allowed to exclude the interest from income. - ✔✔Education Savings Bond
Exclusion
✔✔June is a half-time student at an eligible educational institution where she paid
$5,000 in tuition. She had enough credit hours to become a sophomore in the spring of
2018. She claimed the AOTC credit on her 2017 tax return. Her filing status is single,
and she is not eligible to be claimed as anyone's dependent. American Opportunity
credit? Lifetime learning credit? - ✔✔Yes, Yes
, ✔✔How much tax-free educational assistance may an employer make available to
employees and how is it reported?
a. An employer may offer up to $5,150 in tax-free education assistance to employees,
and it is reported on Form 1099-MISC, box 7.
b. An employer may offer up to $5,250 in tax-free education assistance to employees,
and it is often reported on Form W-2, box 14.
c. An employer may offer up to $5,250 in tax-free education assistance to employees,
and it is reported on Form 1098-T.
d. An employer may offer up to $6,250 in tax-free education assistance to employees,
and it is reported on Form W-2, box 1. - ✔✔b. An employer may offer up to $5,250 in
tax-free education assistance to employees, and it is often reported on Form W-2, box
14.
✔✔Frank and Maggie, who file jointly, paid $1,500 in tuition for their dependent son.
The tuition was for their son's first year at an eligible educational institution where he
has been a full-time student since September 2018, pursuing an undergraduate degree.
The AOTC has never been claimed for their son. American Opportunity credit? Lifetime
learning credit? - ✔✔Yes, Yes
✔✔Employers may offer up to $5,250 as a tax-free education benefit. A 1099-MISC is
used to report non-employee compensation, which would be taxable, not tax-free. T or
F? - ✔✔T
✔✔Employers may offer up to $5,250 as a tax-free education benefit. Form W-2, box 1,
is used to report wages, which would be taxable, not tax-free. Form W-2, box 14, is
used to report tax-free education benefits. T or F? - ✔✔T
✔✔Henry paid his $2,500 in qualified expenses with student loans. He is pursuing an
undergraduate degree full-time. His parents are eligible to claim him as a dependent on
their return, but chose not to do so. This is Henry's second year in college, and he has
never claimed the AOTC. American Opportunity credit? Lifetime learning credit? -
✔✔Yes, Yes
✔✔Taxpayers who pay for higher education for themselves and/or other students may
qualify for one or more education provisions. - ✔✔AOTC and Lifetime learning
✔✔The AOTC is available for degree candidates who have not completed their first four
years of postsecondary education as of the beginning of the tax year. T or F? - ✔✔True
✔✔The lifetime learning credit is available for all years of higher education for degree
candidates and students taking college courses to maintain or improve their current job
skills. T or F? - ✔✔True
AND ANSWERS GRADED A+
✔✔Here is a helpful rule to think about the "tax benefit" hierarchy of education benefits:
Nontaxable benefits (for example, Pell Grants).
Refundable credits.
Nonrefundable credits. Tax benefit hierarchy of education benefits - ✔✔Tax benefit
hierarchy of education benefits
✔✔Leo and Sue, who file jointly, have qualified education expenses for their daughter,
Lisa, who they claim as a dependent on their return. Their daughter attends college less
than half-time. American Opportunity credit? Lifetime learning credit? - ✔✔No, Yes
✔✔Megan's tuition at trade school is $3,600. She received a Pell Grant of $2,400 and a
nontaxable tuition scholarship of $1,200. Megan graduated from high school last spring.
She is a dependent on her parents' tax return. American Opportunity credit? Lifetime
learning credit? - ✔✔No, No
✔✔In some circumstances, taxpayers may take a distribution from an IRA before
reaching age 59½ and not have to pay the 10% additional tax on early withdrawals. The
exception to the 10% additional tax applies if, for the year of the distribution, the
taxpayer pays qualified education expenses for:
The taxpayer.
The taxpayer's spouse.
The taxpayer or spouse's child, foster child, adopted child, or descendant of any of
them. - ✔✔Education exception to IRS early distribution penalty
✔✔Phil paid $3,000 in qualified expenses for his dependent daughter's tuition for her
freshman year of college at an eligible educational institution. He claims his daughter as
his dependent on his return. He does not qualify to be considered unmarried for tax
purposes, and his filing status is MFS. American Opportunity credit? Lifetime learning
credit? - ✔✔No, No
✔✔Taxpayers who cash in certain savings bonds under an education savings bond
program are allowed to exclude the interest from income. - ✔✔Education Savings Bond
Exclusion
✔✔June is a half-time student at an eligible educational institution where she paid
$5,000 in tuition. She had enough credit hours to become a sophomore in the spring of
2018. She claimed the AOTC credit on her 2017 tax return. Her filing status is single,
and she is not eligible to be claimed as anyone's dependent. American Opportunity
credit? Lifetime learning credit? - ✔✔Yes, Yes
, ✔✔How much tax-free educational assistance may an employer make available to
employees and how is it reported?
a. An employer may offer up to $5,150 in tax-free education assistance to employees,
and it is reported on Form 1099-MISC, box 7.
b. An employer may offer up to $5,250 in tax-free education assistance to employees,
and it is often reported on Form W-2, box 14.
c. An employer may offer up to $5,250 in tax-free education assistance to employees,
and it is reported on Form 1098-T.
d. An employer may offer up to $6,250 in tax-free education assistance to employees,
and it is reported on Form W-2, box 1. - ✔✔b. An employer may offer up to $5,250 in
tax-free education assistance to employees, and it is often reported on Form W-2, box
14.
✔✔Frank and Maggie, who file jointly, paid $1,500 in tuition for their dependent son.
The tuition was for their son's first year at an eligible educational institution where he
has been a full-time student since September 2018, pursuing an undergraduate degree.
The AOTC has never been claimed for their son. American Opportunity credit? Lifetime
learning credit? - ✔✔Yes, Yes
✔✔Employers may offer up to $5,250 as a tax-free education benefit. A 1099-MISC is
used to report non-employee compensation, which would be taxable, not tax-free. T or
F? - ✔✔T
✔✔Employers may offer up to $5,250 as a tax-free education benefit. Form W-2, box 1,
is used to report wages, which would be taxable, not tax-free. Form W-2, box 14, is
used to report tax-free education benefits. T or F? - ✔✔T
✔✔Henry paid his $2,500 in qualified expenses with student loans. He is pursuing an
undergraduate degree full-time. His parents are eligible to claim him as a dependent on
their return, but chose not to do so. This is Henry's second year in college, and he has
never claimed the AOTC. American Opportunity credit? Lifetime learning credit? -
✔✔Yes, Yes
✔✔Taxpayers who pay for higher education for themselves and/or other students may
qualify for one or more education provisions. - ✔✔AOTC and Lifetime learning
✔✔The AOTC is available for degree candidates who have not completed their first four
years of postsecondary education as of the beginning of the tax year. T or F? - ✔✔True
✔✔The lifetime learning credit is available for all years of higher education for degree
candidates and students taking college courses to maintain or improve their current job
skills. T or F? - ✔✔True
