FINAL Exam Questions for 2024 Latest Update.
1). What is the difference between earned income and unearned income?
Ans: Earned income is received for services performed. Examples are wages
commissions, tips and generally farming and other business income . Taxable income
other than that received for services performed. Unearned Income includes money
received ro the investment of money or other property, such as interest, dividends, and
royalties. It also includes pensions alimony, unemployment compensation and other
income that is not earned
2). If an employee thinks their form w2 is incorrect, what should they do?
Ans: Employee should discuss with employer who issued the document and request a
W2C. If no help from employer, notify IRS. Tax prepaper can then file a substitute.
3). What information do you need to know to determine whether a taxpayer is required to file a
return?
Ans: Gross income, filing status, age and if they are a dependent
4). For tax purposes, when is a person's marital status determined?
Ans: On the last day of the tax year
5). Where on the tax form can you find the regular standard deduction amounts?
Ans: Line 22 on 1040A, In the left margin at the top of the page 2 of forms 1040 and
1040A. Look at actual form to look for line
6). How much is added to the standard deduction if the taxpayer (or spouse is age 65 or older,
or blind?
Ans: $1550 if unmarried, $1250 if married
PaperStoc.com Page 1 of 40
, 7). What is the personal exemption amount for 2016?
Ans: $4,050
8). What two amounts are combined to make up the gross income filing requirments for most
taxpayers?
Ans: The standard deduction and the personal exemption amounts
9). Under what circumstances might a taxpayer be required to file a return even though they
do not meet the gross income filing requirements?
Ans: 1. Has net employment of $400 or more net self employment 2. You had
unemployment income you owe medicare Advantage MSA, receive HAS, Archer, MSA 3.
Reeived an Advanced Premium Tax credit even if they didn't otherwise have a filing
requirment for the year *Tips, HSA, SE $400, PTC
10). What is the difference between injured spouse allocation and innocent spouse relief?
Ans: The difference between injured spouse and innocent spouse is significant in the
eyes of the IRS. Both release you from an income tax liability arising from a "married
filing jointly" return but different outcomes. Innocent spouse filed a joint return byt was
unaware that their spouse deliberately under reported tax liability. Injured spouse seeks
to protect his or her share of the refund in case it gets seized or offset due to the other
spouse's debts or unpaid obligations
11). Chapter 3: dependent exemptions and support
Ans:
12). What four requirements must be met for an individual to be claimed as a dependent
Ans: Must pass the dependent test, joint return test, citizenship, qualifying child or
relative
13). What are the five tests for a qualifying child?
Ans: 1. Relationship 2. Age 3. Residency 4. Support 5. Joint Return
14). How can a married individual meet the joint return test to remain a qualifying child?
PaperStoc.com Page 2 of 40
, Ans: They can meet this test by not filing a joint return with their spouse or they can
file a joint return with their spouse if they are filing only to claim a refund on any taxes
withheld
15). How can you determine who paid more than half of a person's support?
Ans: Total support is determined and reduced by the funds received by and for the
person from all sources other than the taxpaer. The remaining support is considered to
be provided by the taxpayer. Other sources might include government support
Worksheet for Determining Support
16). What happens if an individual is a qualifying child of more than one taxpayer?
Ans: Generally, the custodial parent is the one in which the child spent the most nights
17). What happens when more than one taxpayer claims the same qualifying child?
Ans: Tie Breaker Rules apply : 1. The parent, if only one of the persons is the childs
parent 2. The parent with whom the child lived the longest during the tax 3. The parents
with the highest AGI if no parent can claim the child as a qualifying child
18). What four tests must be met for an individual to be considered a qualifying relative?
Ans: 1. Not be a qualifying child, the person cannot be the taxpayers qualifying child
or the qualifying child of another taxpayer 2. Relationship: Child, brother, sister, step
sister, step brother, step father , step mother, in-laws 3. Gross Income: gross income
must be less than $4050 4. Support: Taxpayer must provide more than half the support
19). How can the gross income for a qualifying relative test be satisfied?
Ans: Gross income must be less than $4050 (Do not include tax exempt income)
20). What is the purpose of form 2120 multiple support declaration?
Ans: You only need 2120 multiple support declaration if you are claiming someone
other than a qualifying child as a dependent and there are two or more people including
yourself who provide support for the dependent
PaperStoc.com Page 3 of 40
, 21). How much is the child tax credit worth?
Ans: $1,000
22). What additional requirements must be met for a taxpayer to be eligible to claim the child
tax credit for the qualifying child?
Ans: 1. Taxpayer 2. Child must be under17 at the end of the year 3. Qualifying child
must be claimed on tax payer returns 4. Qualifying child must be US Citizen US National
or resident of US
23). Is the child tax credit refundable or nonrefundable
Ans: CTC is nonrefundable the The additional child tax credit is refundable
24). How much is the penalty if a paid prepaerer fails to meet the child tax credit due diligence
requirements
Ans: $510 for each failure, for each credit on each return Total Penalty max for return
is $1530
25). What is the first due diligence requirement for the eitc, ctc,actc, aotc and how does a paid
preparer meet this requirement?
Ans: Complete and submit the form 8867. 1. Complete the form thoroughly and
conscientously read the form carefully 2. submit the form on every claim for eitc, ctc/
actc and aotc
26). Chapter 4: dependent-related filing status
Ans:
27). What filing statuses are available to taxpayers who are unmarried
Ans: 1. Single 2. Head of Household 3. Qualifying widow(er)
28). How may a married taxpayer qualify as unmarried for tax purposes?
Ans: Must be legally seperated under a decree of divorce or separate maintenance or
meet these requirements: 1. must file a separate return 2. must have provided more than
PaperStoc.com Page 4 of 40
1). What is the difference between earned income and unearned income?
Ans: Earned income is received for services performed. Examples are wages
commissions, tips and generally farming and other business income . Taxable income
other than that received for services performed. Unearned Income includes money
received ro the investment of money or other property, such as interest, dividends, and
royalties. It also includes pensions alimony, unemployment compensation and other
income that is not earned
2). If an employee thinks their form w2 is incorrect, what should they do?
Ans: Employee should discuss with employer who issued the document and request a
W2C. If no help from employer, notify IRS. Tax prepaper can then file a substitute.
3). What information do you need to know to determine whether a taxpayer is required to file a
return?
Ans: Gross income, filing status, age and if they are a dependent
4). For tax purposes, when is a person's marital status determined?
Ans: On the last day of the tax year
5). Where on the tax form can you find the regular standard deduction amounts?
Ans: Line 22 on 1040A, In the left margin at the top of the page 2 of forms 1040 and
1040A. Look at actual form to look for line
6). How much is added to the standard deduction if the taxpayer (or spouse is age 65 or older,
or blind?
Ans: $1550 if unmarried, $1250 if married
PaperStoc.com Page 1 of 40
, 7). What is the personal exemption amount for 2016?
Ans: $4,050
8). What two amounts are combined to make up the gross income filing requirments for most
taxpayers?
Ans: The standard deduction and the personal exemption amounts
9). Under what circumstances might a taxpayer be required to file a return even though they
do not meet the gross income filing requirements?
Ans: 1. Has net employment of $400 or more net self employment 2. You had
unemployment income you owe medicare Advantage MSA, receive HAS, Archer, MSA 3.
Reeived an Advanced Premium Tax credit even if they didn't otherwise have a filing
requirment for the year *Tips, HSA, SE $400, PTC
10). What is the difference between injured spouse allocation and innocent spouse relief?
Ans: The difference between injured spouse and innocent spouse is significant in the
eyes of the IRS. Both release you from an income tax liability arising from a "married
filing jointly" return but different outcomes. Innocent spouse filed a joint return byt was
unaware that their spouse deliberately under reported tax liability. Injured spouse seeks
to protect his or her share of the refund in case it gets seized or offset due to the other
spouse's debts or unpaid obligations
11). Chapter 3: dependent exemptions and support
Ans:
12). What four requirements must be met for an individual to be claimed as a dependent
Ans: Must pass the dependent test, joint return test, citizenship, qualifying child or
relative
13). What are the five tests for a qualifying child?
Ans: 1. Relationship 2. Age 3. Residency 4. Support 5. Joint Return
14). How can a married individual meet the joint return test to remain a qualifying child?
PaperStoc.com Page 2 of 40
, Ans: They can meet this test by not filing a joint return with their spouse or they can
file a joint return with their spouse if they are filing only to claim a refund on any taxes
withheld
15). How can you determine who paid more than half of a person's support?
Ans: Total support is determined and reduced by the funds received by and for the
person from all sources other than the taxpaer. The remaining support is considered to
be provided by the taxpayer. Other sources might include government support
Worksheet for Determining Support
16). What happens if an individual is a qualifying child of more than one taxpayer?
Ans: Generally, the custodial parent is the one in which the child spent the most nights
17). What happens when more than one taxpayer claims the same qualifying child?
Ans: Tie Breaker Rules apply : 1. The parent, if only one of the persons is the childs
parent 2. The parent with whom the child lived the longest during the tax 3. The parents
with the highest AGI if no parent can claim the child as a qualifying child
18). What four tests must be met for an individual to be considered a qualifying relative?
Ans: 1. Not be a qualifying child, the person cannot be the taxpayers qualifying child
or the qualifying child of another taxpayer 2. Relationship: Child, brother, sister, step
sister, step brother, step father , step mother, in-laws 3. Gross Income: gross income
must be less than $4050 4. Support: Taxpayer must provide more than half the support
19). How can the gross income for a qualifying relative test be satisfied?
Ans: Gross income must be less than $4050 (Do not include tax exempt income)
20). What is the purpose of form 2120 multiple support declaration?
Ans: You only need 2120 multiple support declaration if you are claiming someone
other than a qualifying child as a dependent and there are two or more people including
yourself who provide support for the dependent
PaperStoc.com Page 3 of 40
, 21). How much is the child tax credit worth?
Ans: $1,000
22). What additional requirements must be met for a taxpayer to be eligible to claim the child
tax credit for the qualifying child?
Ans: 1. Taxpayer 2. Child must be under17 at the end of the year 3. Qualifying child
must be claimed on tax payer returns 4. Qualifying child must be US Citizen US National
or resident of US
23). Is the child tax credit refundable or nonrefundable
Ans: CTC is nonrefundable the The additional child tax credit is refundable
24). How much is the penalty if a paid prepaerer fails to meet the child tax credit due diligence
requirements
Ans: $510 for each failure, for each credit on each return Total Penalty max for return
is $1530
25). What is the first due diligence requirement for the eitc, ctc,actc, aotc and how does a paid
preparer meet this requirement?
Ans: Complete and submit the form 8867. 1. Complete the form thoroughly and
conscientously read the form carefully 2. submit the form on every claim for eitc, ctc/
actc and aotc
26). Chapter 4: dependent-related filing status
Ans:
27). What filing statuses are available to taxpayers who are unmarried
Ans: 1. Single 2. Head of Household 3. Qualifying widow(er)
28). How may a married taxpayer qualify as unmarried for tax purposes?
Ans: Must be legally seperated under a decree of divorce or separate maintenance or
meet these requirements: 1. must file a separate return 2. must have provided more than
PaperStoc.com Page 4 of 40
