Comprehensive Final Exam Module 1 - Part I the income tax school all done exam solution

Comprehensive Module 1: Final Exam 1. Bob uses the cash method of accounting. During the tax year (calendar year), he had the following income and expenses: • Interest on a savings account (credited to his account on January 2 of next year) $ 68 • Dividend received from Virginia Credit Union $814 • Interest received on a 5-year certificate of deposit (left in CD account to compound) • Penalty on the early withdrawal of the 5-year certificate of deposit $910 $ 50 What is the amount of interest income Bob must report for the current tax year? a) $1,792 b) $ 910 d) $1,674 2. The Smiths are married and have filed jointly in prior years. On July 29th of the current tax year, the Smiths separated and filed for divorce. Mrs. Smith has decided to file separately this year. Which of the following statements is true? a) The taxpayers must be living apart from their spouse to file Married Filing Separately. b) The taxpayers must be living together as of December 31 to file Married Filing Separately. c) A married taxpayer can file Married Filing Separately if living together or apart. d) The taxpayers must have lived apart from their spouse for the last six months of the year. 3. Mark and Julie, married, with no dependents, have filed a joint return in previous years. Julie died in March 2018. Which filing status would be most beneficial for Mark in tax year 2018? a) Single b) Married Filing Jointly c) Head of Household d) Qualifying Widow(er) with Dependent Child 4. Which of the following pieces of information is shown/found on Form W2? a) The taxpayer’s filing status, wages, tips, and other compensation. b) The taxpayer’s wages, tips, and other compensation c) The taxpayer’s refund and amount of tax withheld. d) The taxpayer’s unreported tips along with the taxpayer’s reported tips 5. Dani is a 25-year old full-time graduate student. Following are the tax-related facts we know about Dani. • Beginning in tax year 2018, Dani is no longer a dependent on her parent’s tax return. • Dani was laid off at her job on October 15th and received a Form W-2 for earnings from January through October. • Dani received unemployment income from October 15th through December 31st after being laid off from her job. • Dani paid for her graduate school education in the current tax year and is eligible for a nonrefundable tax credit. Which Schedule(s) must Dani complete in addition to Form 1040? a) Schedules 1 and 3 b) Schedules 1 and 2 c) Schedule 6 d) Schedules 3 and 5 6. Which of the following statements is most accurate as related to the requirements of a paid tax preparer?. A paid preparer must sign the taxpayer’s tax return and provide their SSN on the return. The paid preparer must sign the taxpayer’s tax return and provide their PTIN on the tax return. c) A paid preparer must sign the taxpayer’s tax return, provide their SSN and PTIN on the tax return. d) A paid prepaprer must provide their PTIN on a taxpayer’s tax return. 7. Don, age 18, is being claimed as a dependent on his parent’s tax return. Which of the following would require Don to file a tax return? Don is married and has earned income totaling $12,000. Don also has unearned income totaling $295. b) Don is single and has earned income totaling $12,000. c) Don’s only source of income was unearned interest income totaling $1,000. d) Don has unearned interest income totaling $1,000 and earnings totaling $11,000 from a part-time job. 8. Henry and Jane are married and file jointly. Jane’s birthday is 12/31/1953 and Henry’s birthday is 1/1/1954. What is their filing requirement for 2018? a) $24,000 b) $25,300 c) $26,600 d) $28,500 9. Mary’s husband, Bob, died March 12, 2018. She married Richard on December 15, 2018. What will Bob’s filing status be? a) Single b) Married Filing Jointly c) Married Filing Separately d) Head of Household 10. Bob died March 12, 2017, leaving Mary with a two-year-old son. If Mary does not remarry, what is the most beneficial filing status Mary could use for the tax year 2018? a) Married Filing Jointly b) Married Filing Separately c) Head of Household d) Qualifying Widow(er) with Dependent Child 11. Bob died March 12, 2015, leaving Mary with a two-year-old son. In the tax year 2018, Mary has not remarried, what would be the most beneficial filing status Mary could use? a) Single b) Married Filing Jointly c) Qualifying Widow(er) with Dependent Child d) Head of Household 12. Mr. and Mrs. Collins were having marital problems and temporarily separated in May 2018. Their two young children live with Mrs. Collins. They don’t want to file a joint return. When would a taxpayer be considered unmarried and able to file as Head of Household? a) The taxpayer is married and living with his spouse as husband and wife. b) The taxpayer is living with his spouse in a common-law marriage that is recognized in the state where he now lives, or in the state where the common-law marriage began. c) The taxpayer is married and living apart from his spouse in August, but not legally separated under a decree of divorce or separate maintenance. The spouse did not live in the home at all during the last six months of the year, has a qualifying child, and is otherwise eligible to file as Head of Household. 13. Which scenario can use Form 1040 with no Schedules attached? a) Married taxpayers with W-2 income and capital gains from stock sales. b) A single teacher who deducts educator expenses. c) A married couple with interest and dividends totaling less than $1,500, two dependents, with childcare expenses. d) A single taxpayer with distributions from an IRA retirement plan, Social Security income, and interest income. 14. Mr. Simpson died on September 26, 2018. Mr. Simpson failed to file tax returns for tax years 2016 and 2017. The Simpsons divorced in 2016. Mrs. Simpson filed her tax return using the Married Filing Separate filing status. Who is responsible for filing Mr. Simpson’s final returns? a) His mother must file all returns. b) His attorney must file all returns. c) His administrator must file all returns. d) His ex-wife must file the 2016 tax return, and the administrator must file the 2017 and 2018 tax returns. 15. Allen, a fiscal year taxpayer, is try