Intuit Academy Tax Level 2 Practice Examination
Questions And Correct Answers
1. A taxpayer receives Form 1099-INT showing interest of $48 from a savings
account. Where is this reported on Form 1040?
A. Schedule B, then Form 1040 line 2b
B. Schedule 1 line 8z
C. Schedule D
D. Not reported if under $50
Rationale: Interest income is reported on Form 1040 line 2b; Schedule B is
required if over $1,500 or other special situations.
2. A self-employed taxpayer claims the home office deduction using the
simplified method. They use 200 square feet exclusively as an office. What is
the deduction?
A. $100
B. $1 per sq ft = $1,000
C. $5 per sq ft = $1,000
D. $10 per sq ft
Rationale: The simplified method allows $5 per square foot up to 300 square
feet.
3. Which of the following items is considered taxable income?
A. Workers’ compensation
B. Life-insurance death benefits
,C. Scholarships used for tuition
D. Gambling winnings
Rationale: Gambling winnings are taxable and must be reported.
4. A taxpayer bought stock for $4,000 and sold it for $6,500 after 3 years.
What is the gain?
A. $500
B. $1,500
C. $2,500
D. $6,500
Rationale: Gain = sale price − basis = $6,500 − $4,000.
5. Which dependent qualifies a taxpayer for Head of Household filing
status?
A. Cousin who lived with them 4 months
B. Parent who does not live with them but whom the taxpayer supports
C. Friend living all year
D. Non-resident alien child
Rationale: A parent need not live with the taxpayer if support and other tests are
met.
6. A taxpayer receives a Form 1099-NEC for $9,000. What form must be
filed with their return?
A. Schedule A
B. Schedule C
C. Schedule D
D. Schedule B
Rationale: Nonemployee compensation is reported on Schedule C.
, 7. A taxpayer contributes $3,000 to a traditional IRA but is covered by a
workplace plan. Their MAGI is too high for a deduction. What happens?
A. Contribution is prohibited
B. Contribution is taxed again
C. Contribution is nondeductible but allowed
D. Must withdraw immediately
Rationale: Nondeductible traditional IRA contributions are permitted; basis is
tracked on Form 8606.
8. Which credit is refundable?
A. Saver’s Credit
B. Lifetime Learning Credit
C. Earned Income Credit
D. Child and Dependent Care Credit
Rationale: The Earned Income Credit is refundable.
9. A taxpayer files MFS. Which credit are they automatically ineligible for?
A. Child Tax Credit
B. Earned Income Credit
C. Child and Dependent Care Credit
D. Adoption Credit
Rationale: EIC is nearly always disallowed for MFS.
10. A taxpayer has a capital loss of $6,000 for the year. How much can they
deduct currently?
A. $1,000
B. $2,000
C. $3,000
D. $6,000
Questions And Correct Answers
1. A taxpayer receives Form 1099-INT showing interest of $48 from a savings
account. Where is this reported on Form 1040?
A. Schedule B, then Form 1040 line 2b
B. Schedule 1 line 8z
C. Schedule D
D. Not reported if under $50
Rationale: Interest income is reported on Form 1040 line 2b; Schedule B is
required if over $1,500 or other special situations.
2. A self-employed taxpayer claims the home office deduction using the
simplified method. They use 200 square feet exclusively as an office. What is
the deduction?
A. $100
B. $1 per sq ft = $1,000
C. $5 per sq ft = $1,000
D. $10 per sq ft
Rationale: The simplified method allows $5 per square foot up to 300 square
feet.
3. Which of the following items is considered taxable income?
A. Workers’ compensation
B. Life-insurance death benefits
,C. Scholarships used for tuition
D. Gambling winnings
Rationale: Gambling winnings are taxable and must be reported.
4. A taxpayer bought stock for $4,000 and sold it for $6,500 after 3 years.
What is the gain?
A. $500
B. $1,500
C. $2,500
D. $6,500
Rationale: Gain = sale price − basis = $6,500 − $4,000.
5. Which dependent qualifies a taxpayer for Head of Household filing
status?
A. Cousin who lived with them 4 months
B. Parent who does not live with them but whom the taxpayer supports
C. Friend living all year
D. Non-resident alien child
Rationale: A parent need not live with the taxpayer if support and other tests are
met.
6. A taxpayer receives a Form 1099-NEC for $9,000. What form must be
filed with their return?
A. Schedule A
B. Schedule C
C. Schedule D
D. Schedule B
Rationale: Nonemployee compensation is reported on Schedule C.
, 7. A taxpayer contributes $3,000 to a traditional IRA but is covered by a
workplace plan. Their MAGI is too high for a deduction. What happens?
A. Contribution is prohibited
B. Contribution is taxed again
C. Contribution is nondeductible but allowed
D. Must withdraw immediately
Rationale: Nondeductible traditional IRA contributions are permitted; basis is
tracked on Form 8606.
8. Which credit is refundable?
A. Saver’s Credit
B. Lifetime Learning Credit
C. Earned Income Credit
D. Child and Dependent Care Credit
Rationale: The Earned Income Credit is refundable.
9. A taxpayer files MFS. Which credit are they automatically ineligible for?
A. Child Tax Credit
B. Earned Income Credit
C. Child and Dependent Care Credit
D. Adoption Credit
Rationale: EIC is nearly always disallowed for MFS.
10. A taxpayer has a capital loss of $6,000 for the year. How much can they
deduct currently?
A. $1,000
B. $2,000
C. $3,000
D. $6,000
