Tax Preparer Final Exam Review Questions With Complete
Solutions
A single self-employed taxpayer estimates that his 2009 tax will
be $7,500. His 2008 tax was $7,000. How much must he prepay
for 2009 in order to avoid an underpayment penalty? Correct
Answers $6,750; the lesser of 90% of his 2009 tax [$7,500 X
90% = $6,750] or 100% of his 2008 tax ($7,000). (24.)
A taxpayer is building a new home and had a solar water heater
installed in 2009, but the home was not ready to be occupied
until early 2010. Can they take the residential energy credit?
Correct Answers Yes, they can take the credit on their 2010 tax
return. (8.21)
A taxpayer makes his final 2008 state estimated tax payment on
January 15, 2009. Where should he report this item? Correct
Answers It is included on his 2009 Schedule A, line 5. This
payment also should have been included on the estimated
payments line of his 2008 state return.
A taxpayer wants to amend his 2006 return. He filed it April 16,
2007. The return was examined by the IRS on January 9, 2009
and $280 additional tax was paid that date. What is the latest
date on which an amended return may be filed? Correct
Answers January 9, 2011
Any refund will be limited to $280 (the tax paid within the two
years preceding the date the amended return was filed). (23.3)
A taxpayer wrote a check for a $500 donation to his mosque. Is
his cancelled check sufficient documentation to support his
,deduction? Correct Answers No. Donations of $250 or more
must have written substantiation from the donee. (12.29)
A taxpayer's employer paid $500 of a taxpayer's $2,000 child
care expenses for him. How will the employer's assistance affect
the child-care credit? Correct Answers Total child care
expenses must be reduced by any amounts paid by the employer.
(8.11)
An employee has an office where he works, but his work load
demands that he bring home work on evenings and weekends.
He uses a room of his home regularly and exclusively for his
work. May he deduct home-office expenses? Correct Answers
No, the employer provides a work office. (17.23)
Are early distributions from qualified retirement plans always
penalized? Correct Answers No.
• Does not apply to qualified disaster recovery assistance
distributions.
• Does not apply to any recovery of cost or any amount rolled
over in a timely manner.
(22.12,13)
Are scholarships and fellowships taxable? Correct Answers • If
a W-2 is received it is FULLY taxable.
• Amounts to Non-degree candidates are FULLY taxable and
reported on Line 7 marked "SCH"
• Amounts to Degree candidates spent for qualified expenses are
NOT taxable. (18.5)
, At what amount must interest income be reported on Form 1040,
Schedule B? Correct Answers When the total taxable interest
exceeds $1,500 (6.2)
Carol has a home office. When she is not using the office, she
lets her children play video games on an old television she keeps
there. Can Carol deduct home-office expenses? Correct
Answers No. The space must be used exclusively for the
business. (17.21)
Define basis. Correct Answers A measure of the taxpayer's
investment in property for tax purposes. (20.4)
For MACRS purposes, we need to divide real property into two
categories. What are they? Correct Answers Residential and
Nonresidential (16.7)
For tax purposes, when is a person's marital status determined?
Correct Answers On the last day of the tax year. (3.2)
Ho do we determine the MACRS recovery period of a piece of
personal property? Correct Answers By using the Table of
Asset Class Lives and Recovery Periods (16.3)
How can a disability pension qualify as earned income for the
EIC? We've learned pensions are not earned income. Correct
Answers Before the taxpayer reaches minimum retirement age,
it's considered earned income (18.11)
How can a married individual meet the joint return test to
remain a qualifying child? Correct Answers They can meet this
Solutions
A single self-employed taxpayer estimates that his 2009 tax will
be $7,500. His 2008 tax was $7,000. How much must he prepay
for 2009 in order to avoid an underpayment penalty? Correct
Answers $6,750; the lesser of 90% of his 2009 tax [$7,500 X
90% = $6,750] or 100% of his 2008 tax ($7,000). (24.)
A taxpayer is building a new home and had a solar water heater
installed in 2009, but the home was not ready to be occupied
until early 2010. Can they take the residential energy credit?
Correct Answers Yes, they can take the credit on their 2010 tax
return. (8.21)
A taxpayer makes his final 2008 state estimated tax payment on
January 15, 2009. Where should he report this item? Correct
Answers It is included on his 2009 Schedule A, line 5. This
payment also should have been included on the estimated
payments line of his 2008 state return.
A taxpayer wants to amend his 2006 return. He filed it April 16,
2007. The return was examined by the IRS on January 9, 2009
and $280 additional tax was paid that date. What is the latest
date on which an amended return may be filed? Correct
Answers January 9, 2011
Any refund will be limited to $280 (the tax paid within the two
years preceding the date the amended return was filed). (23.3)
A taxpayer wrote a check for a $500 donation to his mosque. Is
his cancelled check sufficient documentation to support his
,deduction? Correct Answers No. Donations of $250 or more
must have written substantiation from the donee. (12.29)
A taxpayer's employer paid $500 of a taxpayer's $2,000 child
care expenses for him. How will the employer's assistance affect
the child-care credit? Correct Answers Total child care
expenses must be reduced by any amounts paid by the employer.
(8.11)
An employee has an office where he works, but his work load
demands that he bring home work on evenings and weekends.
He uses a room of his home regularly and exclusively for his
work. May he deduct home-office expenses? Correct Answers
No, the employer provides a work office. (17.23)
Are early distributions from qualified retirement plans always
penalized? Correct Answers No.
• Does not apply to qualified disaster recovery assistance
distributions.
• Does not apply to any recovery of cost or any amount rolled
over in a timely manner.
(22.12,13)
Are scholarships and fellowships taxable? Correct Answers • If
a W-2 is received it is FULLY taxable.
• Amounts to Non-degree candidates are FULLY taxable and
reported on Line 7 marked "SCH"
• Amounts to Degree candidates spent for qualified expenses are
NOT taxable. (18.5)
, At what amount must interest income be reported on Form 1040,
Schedule B? Correct Answers When the total taxable interest
exceeds $1,500 (6.2)
Carol has a home office. When she is not using the office, she
lets her children play video games on an old television she keeps
there. Can Carol deduct home-office expenses? Correct
Answers No. The space must be used exclusively for the
business. (17.21)
Define basis. Correct Answers A measure of the taxpayer's
investment in property for tax purposes. (20.4)
For MACRS purposes, we need to divide real property into two
categories. What are they? Correct Answers Residential and
Nonresidential (16.7)
For tax purposes, when is a person's marital status determined?
Correct Answers On the last day of the tax year. (3.2)
Ho do we determine the MACRS recovery period of a piece of
personal property? Correct Answers By using the Table of
Asset Class Lives and Recovery Periods (16.3)
How can a disability pension qualify as earned income for the
EIC? We've learned pensions are not earned income. Correct
Answers Before the taxpayer reaches minimum retirement age,
it's considered earned income (18.11)
How can a married individual meet the joint return test to
remain a qualifying child? Correct Answers They can meet this
