HRB-27 Final Exam (H&R Block 27 Final Exam)
Questions With Correct Answers Latest Update
2026/2027 | 100% Pass.
What income reporting form should an independent contractor sometimes receive from the
person who paid him for his services? - Answer Form 1099-MISC (15.6)
What does it mean if a proprietor "materially participates" in the business? - 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? - 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? - 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? - Answer Beginning inventory plus purchases, plus
labor, supplies, depreciation, etc. attributable to product manufacture or preparation for sale,
minus ending inventory. (15.7)
What amounts does a proprietor have "at risk"? - 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? - 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? - 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? - 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 client information is confidential? - 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
• Any information from a tax return (26.4)
If the client has contract labor, what should you remind the client that they should do? -
Answer • Provide a Form 1099-MISC to any independent contractor who worked and earned
$600 or more. (15.9)
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? -
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 is the purpose of self-employment tax? - Answer To pay social security and medicare
taxes. (15.14)
Is it acceptable for a Tax Professional to leave a detailed phone message for a client, letting
them know their tax return is complete? - Answer • Tax Professionals must have prior
consent from the client to leave phone messages related to their tax return.
• The fact that a taxpayer is the client of a Tax Professional or tax preparation business is
confidential information that must not be disclosed. (26.5)
What is a Tax Professional's responsibility upon finding out that a client has not complied
with any tax law? - Answer A Tax Professional must advise the client of the noncompliance
and the consequences for not correcting the situation. (26.7)
What action should a Tax Professional take if a client insists on reporting information that is
inaccurate? - Answer A Tax Professional should never prepare a return that contains
inaccurate information. (26.7)
, If the employee thinks his Form W-2 is not correct, what should he do? - Answer • If the
name or social security number is incorrect, the taxpayer may change it himself and need not
obtain a corrected W-2 before filing his tax return.
• The employer should be notified of the error and asked to update his records.
• Furthermore, the employee's social security number and earnings records should be verified
with the Social Security Administration to ensure that the earnings were properly credited.
(2.17)
What is the exemption amount for 2009? - Answer $3,650 with a reduction for higher-income
taxpayers of 2% for each $2,500 ($1,250 MFS) the AGI exceeds amounts:
$166,800 S
$250,200 MFJ QW
$125,100 MFS
$208,500 HH
(3.7,8)
Are early distributions from qualified retirement plans always penalized? - Answer 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)
How does a Tax Professional know if a distribution exception applies? - Answer • He can
determine that by using thorough interview questions when discussing the distribution with
the client.
• The distribution code on the 1099-R can also be helpful to the Tax Professional. (22.12)
What are the rules for changing filing status after the due date of the return? - Answer
Married couples may not change their filing status from MFJ to MFS after the due date.
(23.4)
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? - Answer Total child care expenses
must be reduced by any amounts paid by the employer. (8.11)
Where does the employer report the amount of child care expense assistance to the taxpayer?
- Answer Form W-2 Box 10 (8.11)
What is the maximum amount of contributions on which the Saver's Credit may be based? -
Answer $2,000 per individual or spouse (21.19)
What are the rates for the Saver's Credit? - Answer The rates are 10%, 20%, or 50%,
depending upon filing status and modified AGI. (21.17)
Questions With Correct Answers Latest Update
2026/2027 | 100% Pass.
What income reporting form should an independent contractor sometimes receive from the
person who paid him for his services? - Answer Form 1099-MISC (15.6)
What does it mean if a proprietor "materially participates" in the business? - 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? - 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? - 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? - Answer Beginning inventory plus purchases, plus
labor, supplies, depreciation, etc. attributable to product manufacture or preparation for sale,
minus ending inventory. (15.7)
What amounts does a proprietor have "at risk"? - 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? - 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? - 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? - 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 client information is confidential? - 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
• Any information from a tax return (26.4)
If the client has contract labor, what should you remind the client that they should do? -
Answer • Provide a Form 1099-MISC to any independent contractor who worked and earned
$600 or more. (15.9)
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? -
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 is the purpose of self-employment tax? - Answer To pay social security and medicare
taxes. (15.14)
Is it acceptable for a Tax Professional to leave a detailed phone message for a client, letting
them know their tax return is complete? - Answer • Tax Professionals must have prior
consent from the client to leave phone messages related to their tax return.
• The fact that a taxpayer is the client of a Tax Professional or tax preparation business is
confidential information that must not be disclosed. (26.5)
What is a Tax Professional's responsibility upon finding out that a client has not complied
with any tax law? - Answer A Tax Professional must advise the client of the noncompliance
and the consequences for not correcting the situation. (26.7)
What action should a Tax Professional take if a client insists on reporting information that is
inaccurate? - Answer A Tax Professional should never prepare a return that contains
inaccurate information. (26.7)
, If the employee thinks his Form W-2 is not correct, what should he do? - Answer • If the
name or social security number is incorrect, the taxpayer may change it himself and need not
obtain a corrected W-2 before filing his tax return.
• The employer should be notified of the error and asked to update his records.
• Furthermore, the employee's social security number and earnings records should be verified
with the Social Security Administration to ensure that the earnings were properly credited.
(2.17)
What is the exemption amount for 2009? - Answer $3,650 with a reduction for higher-income
taxpayers of 2% for each $2,500 ($1,250 MFS) the AGI exceeds amounts:
$166,800 S
$250,200 MFJ QW
$125,100 MFS
$208,500 HH
(3.7,8)
Are early distributions from qualified retirement plans always penalized? - Answer 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)
How does a Tax Professional know if a distribution exception applies? - Answer • He can
determine that by using thorough interview questions when discussing the distribution with
the client.
• The distribution code on the 1099-R can also be helpful to the Tax Professional. (22.12)
What are the rules for changing filing status after the due date of the return? - Answer
Married couples may not change their filing status from MFJ to MFS after the due date.
(23.4)
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? - Answer Total child care expenses
must be reduced by any amounts paid by the employer. (8.11)
Where does the employer report the amount of child care expense assistance to the taxpayer?
- Answer Form W-2 Box 10 (8.11)
What is the maximum amount of contributions on which the Saver's Credit may be based? -
Answer $2,000 per individual or spouse (21.19)
What are the rates for the Saver's Credit? - Answer The rates are 10%, 20%, or 50%,
depending upon filing status and modified AGI. (21.17)
