Tax Preparation Exam UPDATED ACTUAL QUESTIONS AND
CORRECT Answers
Name and briefly describe the various categories of The reading assignment describes income taxes (based on the income a
taxes discussed in this lesson. person receives), estate and inheritance taxes (based on cash or property left
to an heir), gift taxes, sales taxes, and property, or ad valorem, taxes. This
program focuses on the calculation, reporting, and payment of federal income
taxes, supplemented with information about state income taxes, plus other
taxes listed above as they affect the calculation of income taxes.
Name the elements that make up the body of federal The elements that make up federal tax law are the Internal Revenue Code,
tax law and identify where those laws originate. passed by the U.S. Congress; Treasury regulations, written by the Internal
Revenue Commission; and Rulings, handed down by the IRS Commissioner and
the federal courts.
Describe the tax responsibilities of corporations, A regular corporation must pay its own income tax if a profit is realized. When a
partnerships, and sole proprietorships. corporation distributes cash or property to its shareholders, that distribution is
taxable to the shareholders. This isn't the case with businesses that operate as
partnerships or sole proprietorships. Income from these two types of
businesses is taxable on the owners' tax returns. Partnerships must file an
information return that shows the total earnings and deductions of the
partnership and how the partners divided those earnings and deductions
among themselves.
Briefly describe some typical tax preparers. Businesses sometimes have their own accounting personnel complete their tax
returns, or they may pay a licensed Certified Public Accountant (CPA) to
prepare the tax returns. Many taxpayers in the United States turn to firms such
as H&R Block or Liberty Tax Services to prepare their returns.
What are the tests to determine if you qualify for head The tests used to determine if you qualify for head of household are as follows:
of household status? You're unmarried or treated as unmarried at the end of the year. b. You paid
more than half of the year's maintenance costs for the home of a qualifying
person. A qualifying person other than your parent must livewith you in the
same house for over half the year, disregarding temporary absences. A
qualifying parent doesn't need to live with you. Temporary absences are
ignored if they're due to an illness, being away at school, on a business trip, on
vacation, serving in the military, or staying with a parent under a child custody
agreement.
Describe some of the most common sources of gross Gross income includes employee compensation, such as wages, salaries,
income. bonuses, commissions, and tips; business income; retirement income such as
pensions; investment income, such as interest and dividends; and gambling
winnings, whether legal or illegal. Even illegal income is taxable—criminal
charges for tax evasion arising from the failure to report illegal income are
sometimes the most easily proved charges against notorious organized crime
figures.
CORRECT Answers
Name and briefly describe the various categories of The reading assignment describes income taxes (based on the income a
taxes discussed in this lesson. person receives), estate and inheritance taxes (based on cash or property left
to an heir), gift taxes, sales taxes, and property, or ad valorem, taxes. This
program focuses on the calculation, reporting, and payment of federal income
taxes, supplemented with information about state income taxes, plus other
taxes listed above as they affect the calculation of income taxes.
Name the elements that make up the body of federal The elements that make up federal tax law are the Internal Revenue Code,
tax law and identify where those laws originate. passed by the U.S. Congress; Treasury regulations, written by the Internal
Revenue Commission; and Rulings, handed down by the IRS Commissioner and
the federal courts.
Describe the tax responsibilities of corporations, A regular corporation must pay its own income tax if a profit is realized. When a
partnerships, and sole proprietorships. corporation distributes cash or property to its shareholders, that distribution is
taxable to the shareholders. This isn't the case with businesses that operate as
partnerships or sole proprietorships. Income from these two types of
businesses is taxable on the owners' tax returns. Partnerships must file an
information return that shows the total earnings and deductions of the
partnership and how the partners divided those earnings and deductions
among themselves.
Briefly describe some typical tax preparers. Businesses sometimes have their own accounting personnel complete their tax
returns, or they may pay a licensed Certified Public Accountant (CPA) to
prepare the tax returns. Many taxpayers in the United States turn to firms such
as H&R Block or Liberty Tax Services to prepare their returns.
What are the tests to determine if you qualify for head The tests used to determine if you qualify for head of household are as follows:
of household status? You're unmarried or treated as unmarried at the end of the year. b. You paid
more than half of the year's maintenance costs for the home of a qualifying
person. A qualifying person other than your parent must livewith you in the
same house for over half the year, disregarding temporary absences. A
qualifying parent doesn't need to live with you. Temporary absences are
ignored if they're due to an illness, being away at school, on a business trip, on
vacation, serving in the military, or staying with a parent under a child custody
agreement.
Describe some of the most common sources of gross Gross income includes employee compensation, such as wages, salaries,
income. bonuses, commissions, and tips; business income; retirement income such as
pensions; investment income, such as interest and dividends; and gambling
winnings, whether legal or illegal. Even illegal income is taxable—criminal
charges for tax evasion arising from the failure to report illegal income are
sometimes the most easily proved charges against notorious organized crime
figures.
