HRB Final Exam Study Guide | 100% Correct
Answers | Verified | Latest 2024 Version
What is the difference between earned income and unearned income? - ✔✔Earned income is received
for services performed. Some examples of earned income include wages, commissions, tips, farming,
and other business income.
Unearned income is taxable income that does not meet the definition of earned income. Examples of
unearned income include interest income, dividends, rents and royalties, pensions, alimony, and
unemployment income.
If an employee thinks their Form W-2 is incorrect, what should they do? - ✔✔If the taxpayer's name,
social security number, or earnings or withholdings are incorrect, the taxpayer should notify their
employer and request a corrected Form W-2. The employee should request that the employer update
their records and verify that the earnings were properly credited with the Social Security Administration.
However, the taxpayer is still responsible for filing a timely tax return. If the employee's attempts to
obtain a corrected Form W-2 from their employer are not successful, the taxpayer should notify the IRS.
It may be necessary to prepare a substitute Form W-2.
What information do you need to know to determine whether a taxpayer is required to file a return? -
✔✔The taxpayer's marital status, age at the end of the tax year, gross income for the year, and if the
taxpayer is a dependent.
For tax purposes, when is a person's marital status determined? - ✔✔On the last day of the tax year.
Where on the tax form can you find the regular standard deduction amounts? - ✔✔In the left-hand
margin at the top of page 2 of Form 1040. They are: single and married filing separately, $12,000;
married filing jointly and qualifying widow(er), $24,000; and head of household, $18,000.
How much is added to the standard deduction if the taxpayer (or spouse) is age 65 or older, or blind? -
✔✔$1,300 for married taxpayers and qualifying widow(er)s, or $1,600 for all other unmarried taxpayers,
is added for each condition.
,What is the personal exemption amount for 2018? - ✔✔There is no personal exemption for 2018. A
personal exemption was an amount previously allowed by law to reduce income that would otherwise
be taxed. The Tax Cuts and Jobs Act of 2017 repealed this deduction beginning in 2018.
How is the gross income filing requirement determined for most taxpayers? - ✔✔The taxpayer's
standard deduction, including the additional amounts for age and blindness. However, for MFS, the
amount is $5.
What is the difference between injured spouse allocation and innocent spouse relief? - ✔✔The IRS
provides an injured spouse allocation for the taxpayer to protect their portion of a refund from a
spouse's past-due federal income tax, unpaid student loans, or unpaid child and spousal support, state
income tax, or state unemployment compensation.
The IRS provides innocent spouse relief to taxpayers who file a joint return and later learn that their
spouse has underestimated income (or overstated a credit or deduction) on the return.
What four requirements must be met for an individual to be claimed as a dependent? - ✔✔The
dependent must be a qualifying child or qualifying relative; they must be a U.S. citizen or a resident of
the United States, Canada, or Mexico; they cannot file a joint return (unless solely to claim a refund of
taxes paid); and the taxpayer claiming the dependent must not be a dependent of another taxpayer.
What are the five tests for a qualifying child? - ✔✔1. Relationship test.
2. Age test.
3. Residency test.
4. Support test.
5. Joint return test.
How can a married individual meet the joint return test to remain a qualifying child? - ✔✔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 of any taxes withheld.
How can you determine who paid more than half of a person's support? - ✔✔Total support is
determined and reduced by the funds received for the person from all sources other than the taxpayer.
Other sources of support might include relatives, government programs, and the dependent's own
income.
, What happens if an individual is a qualifying child of more than one taxpayer? - ✔✔If more than one
taxpayer claims the dependent, the IRS will apply the tiebreaker rules to award the qualifying child to
one of the taxpayers.
What four tests must be met for an individual to be considered a qualifying relative? - ✔✔1. Relationship
or member of the household for the entire year.
2. Gross income.
3. Support.
4. Not a qualifying child of someone else.
How can the gross income test for a qualifying relative be satisfied? - ✔✔The qualifying relative's gross
income must be less than $4,150. When determining the gross income, tax-exempt income, such as
certain social security benefits, is not included.
What is the purpose of Form 2120, Multiple Support Declaration? - ✔✔If two or more persons combined
provided over one-half of a person's support, they may together agree to allow any one of them who
contributed at least 10% of the support to claim the exemption. A statement waiving the right to claim
the dependency exemption should be signed by each contributor who is not claiming the exemption,
and retained by the one who is. Form 2120 is attached to the return of the taxpayer claiming the
exemption.
How much is the Child Tax Credit worth? - ✔✔Up to $2,000 per qualifying child.
What additional requirements must be met for a taxpayer to be eligible to claim the Child Tax Credit for
their qualifying child? - ✔✔The child must:
-Be a qualifying child who is the taxpayer's dependent and who has not reached their 17th birthday by
the end of the year.
- Have a social security valid for employment before the due date of the return.
- Be a citizen, national, or resident of the United States.
Is the Child Tax Credit refundable or nonrefundable? - ✔✔The Child Tax Credit is nonrefundable.
However, certain taxpayers may qualify for the Additional Child Tax Credit, which is refundable.
Answers | Verified | Latest 2024 Version
What is the difference between earned income and unearned income? - ✔✔Earned income is received
for services performed. Some examples of earned income include wages, commissions, tips, farming,
and other business income.
Unearned income is taxable income that does not meet the definition of earned income. Examples of
unearned income include interest income, dividends, rents and royalties, pensions, alimony, and
unemployment income.
If an employee thinks their Form W-2 is incorrect, what should they do? - ✔✔If the taxpayer's name,
social security number, or earnings or withholdings are incorrect, the taxpayer should notify their
employer and request a corrected Form W-2. The employee should request that the employer update
their records and verify that the earnings were properly credited with the Social Security Administration.
However, the taxpayer is still responsible for filing a timely tax return. If the employee's attempts to
obtain a corrected Form W-2 from their employer are not successful, the taxpayer should notify the IRS.
It may be necessary to prepare a substitute Form W-2.
What information do you need to know to determine whether a taxpayer is required to file a return? -
✔✔The taxpayer's marital status, age at the end of the tax year, gross income for the year, and if the
taxpayer is a dependent.
For tax purposes, when is a person's marital status determined? - ✔✔On the last day of the tax year.
Where on the tax form can you find the regular standard deduction amounts? - ✔✔In the left-hand
margin at the top of page 2 of Form 1040. They are: single and married filing separately, $12,000;
married filing jointly and qualifying widow(er), $24,000; and head of household, $18,000.
How much is added to the standard deduction if the taxpayer (or spouse) is age 65 or older, or blind? -
✔✔$1,300 for married taxpayers and qualifying widow(er)s, or $1,600 for all other unmarried taxpayers,
is added for each condition.
,What is the personal exemption amount for 2018? - ✔✔There is no personal exemption for 2018. A
personal exemption was an amount previously allowed by law to reduce income that would otherwise
be taxed. The Tax Cuts and Jobs Act of 2017 repealed this deduction beginning in 2018.
How is the gross income filing requirement determined for most taxpayers? - ✔✔The taxpayer's
standard deduction, including the additional amounts for age and blindness. However, for MFS, the
amount is $5.
What is the difference between injured spouse allocation and innocent spouse relief? - ✔✔The IRS
provides an injured spouse allocation for the taxpayer to protect their portion of a refund from a
spouse's past-due federal income tax, unpaid student loans, or unpaid child and spousal support, state
income tax, or state unemployment compensation.
The IRS provides innocent spouse relief to taxpayers who file a joint return and later learn that their
spouse has underestimated income (or overstated a credit or deduction) on the return.
What four requirements must be met for an individual to be claimed as a dependent? - ✔✔The
dependent must be a qualifying child or qualifying relative; they must be a U.S. citizen or a resident of
the United States, Canada, or Mexico; they cannot file a joint return (unless solely to claim a refund of
taxes paid); and the taxpayer claiming the dependent must not be a dependent of another taxpayer.
What are the five tests for a qualifying child? - ✔✔1. Relationship test.
2. Age test.
3. Residency test.
4. Support test.
5. Joint return test.
How can a married individual meet the joint return test to remain a qualifying child? - ✔✔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 of any taxes withheld.
How can you determine who paid more than half of a person's support? - ✔✔Total support is
determined and reduced by the funds received for the person from all sources other than the taxpayer.
Other sources of support might include relatives, government programs, and the dependent's own
income.
, What happens if an individual is a qualifying child of more than one taxpayer? - ✔✔If more than one
taxpayer claims the dependent, the IRS will apply the tiebreaker rules to award the qualifying child to
one of the taxpayers.
What four tests must be met for an individual to be considered a qualifying relative? - ✔✔1. Relationship
or member of the household for the entire year.
2. Gross income.
3. Support.
4. Not a qualifying child of someone else.
How can the gross income test for a qualifying relative be satisfied? - ✔✔The qualifying relative's gross
income must be less than $4,150. When determining the gross income, tax-exempt income, such as
certain social security benefits, is not included.
What is the purpose of Form 2120, Multiple Support Declaration? - ✔✔If two or more persons combined
provided over one-half of a person's support, they may together agree to allow any one of them who
contributed at least 10% of the support to claim the exemption. A statement waiving the right to claim
the dependency exemption should be signed by each contributor who is not claiming the exemption,
and retained by the one who is. Form 2120 is attached to the return of the taxpayer claiming the
exemption.
How much is the Child Tax Credit worth? - ✔✔Up to $2,000 per qualifying child.
What additional requirements must be met for a taxpayer to be eligible to claim the Child Tax Credit for
their qualifying child? - ✔✔The child must:
-Be a qualifying child who is the taxpayer's dependent and who has not reached their 17th birthday by
the end of the year.
- Have a social security valid for employment before the due date of the return.
- Be a citizen, national, or resident of the United States.
Is the Child Tax Credit refundable or nonrefundable? - ✔✔The Child Tax Credit is nonrefundable.
However, certain taxpayers may qualify for the Additional Child Tax Credit, which is refundable.
