HRB FINAL EXAM QUESTIONS & ANSWERS 2024 ( A+ GRADED
100% VERIFIED)
1. 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.
2. 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.
3. 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.
4. For tax purposes, when is a person's marital status determined?: On the last day
of the tax year.
5. 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.
6. 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.
7. 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2017 repealed this deduction beginning in 2018.
8. 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.
9. 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.
10. 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.
11. 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.
12. 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.
13. 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.
14. 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.
15. 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.
16. 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.
17. 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.
18. How much is the Child Tax Credit worth?: Up to $2,000 per qualifying child.
19. 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.
20. 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.
21. How much is the penalty if a paid preparer fails to meet the Child Tax Credit
due diligence requirements?: There is a $520 penalty for failing to meet the
CTC/ODC/ACTC due diligence requirement on one taxpayer's return.
22. What is the first due diligence requirement for the EITC, CTC/ACTC, and
AOTC, and how does a paid preparer meet this requirement?: Complete and submit
Form 8867, Paid Preparer's Earned Income Credit Checklist.
The form must be completed thoroughly and conscientiously. One Form 8867 must be
submitted with every e-filed or paper-filed return (original and/or amended) that claims
the EITC, CTC/ODC/ACTC, and/or AOTC.
23. What filing statuses are available to taxpayers who are unmarried?:
Qualifying widow(er), head of household, and single.
24. How may a married taxpayer qualify as unmarried for tax purposes?: To
qualify as unmarried for the purpose of claiming the head of household filing status, a
taxpayer must meet all of the following:
- Not file a joint return with their spouse.
- Provide more than half the cost of maintaining their home.
- The home must be the main home for the taxpayer and their dependent child (or child
who would be a dependent except that the exemption was given to the noncustodial
parent) for more than six months of the tax year.
- The taxpayer's spouse must not have lived in the home during the last six months of the
year.
100% VERIFIED)
1. 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.
2. 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.
3. 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.
4. For tax purposes, when is a person's marital status determined?: On the last day
of the tax year.
5. 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.
6. 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.
7. 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.
8. 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.
9. 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.
10. 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.
11. 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.
12. 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.
13. 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.
14. 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.
15. 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.
16. 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.
17. 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.
18. How much is the Child Tax Credit worth?: Up to $2,000 per qualifying child.
19. 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.
20. 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.
21. How much is the penalty if a paid preparer fails to meet the Child Tax Credit
due diligence requirements?: There is a $520 penalty for failing to meet the
CTC/ODC/ACTC due diligence requirement on one taxpayer's return.
22. What is the first due diligence requirement for the EITC, CTC/ACTC, and
AOTC, and how does a paid preparer meet this requirement?: Complete and submit
Form 8867, Paid Preparer's Earned Income Credit Checklist.
The form must be completed thoroughly and conscientiously. One Form 8867 must be
submitted with every e-filed or paper-filed return (original and/or amended) that claims
the EITC, CTC/ODC/ACTC, and/or AOTC.
23. What filing statuses are available to taxpayers who are unmarried?:
Qualifying widow(er), head of household, and single.
24. How may a married taxpayer qualify as unmarried for tax purposes?: To
qualify as unmarried for the purpose of claiming the head of household filing status, a
taxpayer must meet all of the following:
- Not file a joint return with their spouse.
- Provide more than half the cost of maintaining their home.
- The home must be the main home for the taxpayer and their dependent child (or child
who would be a dependent except that the exemption was given to the noncustodial
parent) for more than six months of the tax year.
- The taxpayer's spouse must not have lived in the home during the last six months of the
year.
