MARYLAND Tax Preparer Exam Questions with 100%
Correct Answers | Latest Version (2026) Expert
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What income reporting form should an independent contractor sometimes
receive from the person who paid him for his services? - SELECTED ANSWER
👀** 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? - SELECTED ANSWER 👀** • 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? -
SELECTED ANSWER 👀** 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?
- SELECTED ANSWER 👀** 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? - SELECTED ANSWER 👀** • 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? - SELECTED ANSWER 👀** 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? - SELECTED ANSWER 👀** • 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? - SELECTED ANSWER 👀** To
pay social security and medicare taxes. (15.14)
What amounts does a proprietor have "at risk"? - SELECTED ANSWER 👀**
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? - SELECTED
ANSWER 👀** 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? - SELECTED
ANSWER 👀** • 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? - SELECTED ANSWER 👀** 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? - SELECTED ANSWER 👀** A conflict of interest
is when one's situation might benefit at the expense of another's situation. (26.3)
What actions can resolve a conflict of interest? - SELECTED ANSWER 👀** A
conflict of interest is resolved when it is acknowledged, disclosed to all parties,
and the parties have consented to waiving the conflict. (26.3)
What client information is confidential? - SELECTED ANSWER 👀** Any
information that could potentially identify the client is confidential.
Information includes (but is not limited to):
• Name
• Address and phone number
• Social security numbers
• Place of employment
Correct Answers | Latest Version (2026) Expert
Verified | Instant Pdf Download
What income reporting form should an independent contractor sometimes
receive from the person who paid him for his services? - SELECTED ANSWER
👀** 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? - SELECTED ANSWER 👀** • 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? -
SELECTED ANSWER 👀** 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?
- SELECTED ANSWER 👀** 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? - SELECTED ANSWER 👀** • 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? - SELECTED ANSWER 👀** 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? - SELECTED ANSWER 👀** • 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? - SELECTED ANSWER 👀** To
pay social security and medicare taxes. (15.14)
What amounts does a proprietor have "at risk"? - SELECTED ANSWER 👀**
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? - SELECTED
ANSWER 👀** 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? - SELECTED
ANSWER 👀** • 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? - SELECTED ANSWER 👀** 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? - SELECTED ANSWER 👀** A conflict of interest
is when one's situation might benefit at the expense of another's situation. (26.3)
What actions can resolve a conflict of interest? - SELECTED ANSWER 👀** A
conflict of interest is resolved when it is acknowledged, disclosed to all parties,
and the parties have consented to waiving the conflict. (26.3)
What client information is confidential? - SELECTED ANSWER 👀** Any
information that could potentially identify the client is confidential.
Information includes (but is not limited to):
• Name
• Address and phone number
• Social security numbers
• Place of employment
