H&R Block
HR BLOCK FINAL EXAM QUESTIONS
WITH CORRECT ANSWERS 2025
What is the difference between earned income and unearned income? -Correct Answer
✔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? -Correct
Answer ✔If the taxpayer's name, social security number, 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.
Is interest received on U.S. Treasury obligations taxable on state and/or local returns? -
Correct Answer ✔No. Interest on U.S. Treasury obligations is exempt from state and
local tax by federal law.
Is municipal bond interest taxable on a federal return -Correct Answer ✔No, the federal
government does not tax municipal bond interest.
How is interest income reported to the taxpayer? -Correct Answer ✔Interest income is
reported to the taxpayer on Form 1099-INT or a substitute statement.
What information do you need to know to determine whether a nondependent taxpayer
is required to file a return? -Correct Answer ✔The taxpayer's filing status, age at the end
of the tax year, and gross income for the year.
For tax purposes, when is a person's marital status determined? -Correct Answer ✔On
the last day of the tax year, or the date of death.
How much is added to the standard deduction if the taxpayer (or spouse) is age 65 or
older, or blind? -Correct Answer ✔$1,350 for married taxpayers and qualifying
widow(er)s, or $1,700 for those filing single or head of household.
What is the personal exemption amount for 2021 -Correct Answer ✔There is no
personal exemption for 2021. A personal exemption was an amount previously allowed
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,H&R Block
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 nondependent
taxpayers -Correct Answer ✔The taxpayer's standard deduction, including the additional
amounts for age. However, for married filing separately, or married filing jointly when the
spouses did not live together at the end of the year, the amount is $5.
What is the difference between injured spouse allocation and innocent spouse relief? -
Correct Answer ✔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, unpaid child and spousal support, or state income tax.
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.
Is unemployment compensation taxable? -Correct Answer ✔Yes, unemployment
compensation is fully taxable.
Are scholarships and fellowships taxable? -Correct Answer ✔Sometimes. Generally,
scholarships and fellowships are excluded from income by degree-seeking candidates
to the extent that they are used to pay qualified education expenses, such as tuition and
course-related fees. However, if they are used to pay for room and board or other
expenses, they are taxable.
What document will the taxpayer receive from their employer reporting disability pension
payments? -Correct Answer ✔The income is reported on Form 1099-R
Under what circumstances can a disability pension qualify as earned income for the
EIC? -Correct Answer ✔Disability pension income received before the taxpayer attains
minimum retirement age for their company is reported as wage income. It is also
considered earned income for purposes of EIC.
What types of income must be reported on Schedule 1 (Form 1040) and then reported
on Form 1040? -Correct Answer ✔Gambling winnings, alimony, jury duty pay, canceled
debts, and hobby income are some examples of income that must be reported on
Schedule 1 (Form 1040) and then reported on Form 1040.
What are the adjustments that can be claimed on Schedule 1 (Form 1040)? -Correct
Answer ✔Some examples of adjustments that can be claimed on Schedule 1 are:
Educator expense deduction.
The health savings account (HSA) deduction.
Moving expenses for members of the military.
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, H&R Block
Self-employment tax deduction.
Self-employed health insurance deduction.
Penalty on early withdrawal of savings.
Alimony payments.
IRA deduction.
Student loan interest deduction.
How much may an eligible educator deduct for qualified classroom expenses as an
adjustment to income? -Correct Answer ✔Up to $250 per eligible educator.
Married taxpayers filing a joint return who are both eligible educators may each claim
the $250 deduction, totaling $500.
Who is an eligible educator? -Correct Answer ✔Someone who worked at least 900
hours during the school year as a teacher, teacher's aide, counselor, or principal in an
elementary or secondary school.
Where is the educator expense deduction reported -Correct Answer ✔Educator
expenses are reported on Schedule 1, Additional Income and Adjustments to Income,
line 11.
Who may not claim a student loan interest deduction? -Correct Answer ✔Someone who
is claimed as a dependent may not claim the deduction in the current tax year, nor may
someone who uses the married filing separately filing status. The amount of income a
taxpayer earns may also affect their deduction. Taxpayers whose modified AGI exceeds
a threshold amount for their filing status may not be able to claim the deduction, or they
may only be eligible to claim a reduced amount.
What is a qualified student loan? -Correct Answer ✔A loan used to pay qualified
education expenses. Credit card debt may be included, provided the card was used
exclusively to pay for qualified expenses. Money borrowed from a related person is not
a qualified student loan.
What three requirements must be met for an individual to be claimed as either a
qualifying child or a qualifying relative? -Correct Answer ✔To be either a qualifying child
or qualifying relative, they must be a U.S. citizen, U.S. resident alien, U.S. national, or a
resident of 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 -Correct Answer ✔1. Relationship test.
2. Age test.
3. Residency test.
4. Support test.
5. Joint return test.
H&R Block
HR BLOCK FINAL EXAM QUESTIONS
WITH CORRECT ANSWERS 2025
What is the difference between earned income and unearned income? -Correct Answer
✔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? -Correct
Answer ✔If the taxpayer's name, social security number, 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.
Is interest received on U.S. Treasury obligations taxable on state and/or local returns? -
Correct Answer ✔No. Interest on U.S. Treasury obligations is exempt from state and
local tax by federal law.
Is municipal bond interest taxable on a federal return -Correct Answer ✔No, the federal
government does not tax municipal bond interest.
How is interest income reported to the taxpayer? -Correct Answer ✔Interest income is
reported to the taxpayer on Form 1099-INT or a substitute statement.
What information do you need to know to determine whether a nondependent taxpayer
is required to file a return? -Correct Answer ✔The taxpayer's filing status, age at the end
of the tax year, and gross income for the year.
For tax purposes, when is a person's marital status determined? -Correct Answer ✔On
the last day of the tax year, or the date of death.
How much is added to the standard deduction if the taxpayer (or spouse) is age 65 or
older, or blind? -Correct Answer ✔$1,350 for married taxpayers and qualifying
widow(er)s, or $1,700 for those filing single or head of household.
What is the personal exemption amount for 2021 -Correct Answer ✔There is no
personal exemption for 2021. A personal exemption was an amount previously allowed
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,H&R Block
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 nondependent
taxpayers -Correct Answer ✔The taxpayer's standard deduction, including the additional
amounts for age. However, for married filing separately, or married filing jointly when the
spouses did not live together at the end of the year, the amount is $5.
What is the difference between injured spouse allocation and innocent spouse relief? -
Correct Answer ✔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, unpaid child and spousal support, or state income tax.
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.
Is unemployment compensation taxable? -Correct Answer ✔Yes, unemployment
compensation is fully taxable.
Are scholarships and fellowships taxable? -Correct Answer ✔Sometimes. Generally,
scholarships and fellowships are excluded from income by degree-seeking candidates
to the extent that they are used to pay qualified education expenses, such as tuition and
course-related fees. However, if they are used to pay for room and board or other
expenses, they are taxable.
What document will the taxpayer receive from their employer reporting disability pension
payments? -Correct Answer ✔The income is reported on Form 1099-R
Under what circumstances can a disability pension qualify as earned income for the
EIC? -Correct Answer ✔Disability pension income received before the taxpayer attains
minimum retirement age for their company is reported as wage income. It is also
considered earned income for purposes of EIC.
What types of income must be reported on Schedule 1 (Form 1040) and then reported
on Form 1040? -Correct Answer ✔Gambling winnings, alimony, jury duty pay, canceled
debts, and hobby income are some examples of income that must be reported on
Schedule 1 (Form 1040) and then reported on Form 1040.
What are the adjustments that can be claimed on Schedule 1 (Form 1040)? -Correct
Answer ✔Some examples of adjustments that can be claimed on Schedule 1 are:
Educator expense deduction.
The health savings account (HSA) deduction.
Moving expenses for members of the military.
H&R Block
, H&R Block
Self-employment tax deduction.
Self-employed health insurance deduction.
Penalty on early withdrawal of savings.
Alimony payments.
IRA deduction.
Student loan interest deduction.
How much may an eligible educator deduct for qualified classroom expenses as an
adjustment to income? -Correct Answer ✔Up to $250 per eligible educator.
Married taxpayers filing a joint return who are both eligible educators may each claim
the $250 deduction, totaling $500.
Who is an eligible educator? -Correct Answer ✔Someone who worked at least 900
hours during the school year as a teacher, teacher's aide, counselor, or principal in an
elementary or secondary school.
Where is the educator expense deduction reported -Correct Answer ✔Educator
expenses are reported on Schedule 1, Additional Income and Adjustments to Income,
line 11.
Who may not claim a student loan interest deduction? -Correct Answer ✔Someone who
is claimed as a dependent may not claim the deduction in the current tax year, nor may
someone who uses the married filing separately filing status. The amount of income a
taxpayer earns may also affect their deduction. Taxpayers whose modified AGI exceeds
a threshold amount for their filing status may not be able to claim the deduction, or they
may only be eligible to claim a reduced amount.
What is a qualified student loan? -Correct Answer ✔A loan used to pay qualified
education expenses. Credit card debt may be included, provided the card was used
exclusively to pay for qualified expenses. Money borrowed from a related person is not
a qualified student loan.
What three requirements must be met for an individual to be claimed as either a
qualifying child or a qualifying relative? -Correct Answer ✔To be either a qualifying child
or qualifying relative, they must be a U.S. citizen, U.S. resident alien, U.S. national, or a
resident of 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 -Correct Answer ✔1. Relationship test.
2. Age test.
3. Residency test.
4. Support test.
5. Joint return test.
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