H&R Block Income Tax Course Test Questions Answered Correctly Graded A+
Due Diligence - Answers Requirements that tax professionals must follow when preparing income tax
returns.
Estimated Tax - Answers The amount of tax a taxpayer expects to owe for the year after subtracting
expected amounts withheld and certain refundable credits.
Estimated Tax Voucher - Answers A statement by an individual of (1) the amount of income tax he
estimates he will incur during the current taxable year on income that is not subject to withholding, (2)
the excess amount over that withheld on income which is subject to withholding, and (3) his estimated
self-employment tax.
Exemption from Withholding - Answers Status claimed on Form W-4 directing the employer not to
withhold federal income taxes from the employee.
Underpayment Penalty - Answers If a taxpayer did not pay enough tax on a timely basis during the year,
he may be required to pay an underpayment penalty.
Two Ways to Pay as You Go - Answers Withholding and Estimated Tax Payments
Form W-4 - Answers Employee's Withholding Allowance Certificate
Form 4868 - Answers Application for Automatic Extension of Time To File U.S. Individual Income Tax
Return
Amended Return - Answers A tax return filed on Form 1040X after the original return has been filed.
Closed Year - Answers A tax year for which the statute of limitations has expired.
Open Year - Answers A taxable year for which the statute of limitations has not yet expired.
Failure-to-File Penalty - Answers Generally 5% for each month or part of a month the return is late, but
not more than 25% of the tax not paid.
Failure to File - Answers Taxpayer fails to file the return by the due date, and there is a balance due.
Form 1040X - Answers Amended U.S. Individual Income Tax Return
When can an amended return be filed? - Answers Within three years of the date the original return was
filed, or within two years of the date the tax was paid, whichever is later.
Can the 1040X be e-filed? - Answers No.
Portfolio Income and Losses - Answers Those from such sources as dividends, interest, capital gains and
losses, and royalties.
,Schedule E - Answers Supplemental Income and Loss
Royalty - Answers Payments received for the right to extract natural resources from the taxpayer's
property or to use a taxpayer's literary, musical, or artistic creation.
Annuity - Answers A series of payments under a contract made at regular intervals over a period of more
than one year.
Beneficiary - Answers The owner or recipient of funds in an account, such as an IRA, or from an
insurance policy or will.
Contribution - Answers When a person puts money into a retirement plan.
Defined Benefit Plan - Answers An employee benefit plan that provides determinable benefits not based
on employer profits.
Defined Contribution Plan - Answers An employee benefit plan that provides a separate account for
each person covered and pays benefits based on account earnings.
Disability Pension - Answers A taxable pension from an employer-funded disability plan or a disability
provision of a retirement plan.
Distribution - Answers When a person takes or receives money from a retirement plan.
Pension - Answers Generally a series of definitely determinable payments made to a taxpayer after
retirement from work.
Rollover - Answers A qualified transfer of funds from one tax-favored account to another, usually of the
same type.
Roth IRA - Answers A type of individual retirement arrangement in which contributions are not tax
deductible, earnings grow tax deferred, and qualified withdrawals are tax free.
Traditional IRA - Answers An individual retirement arrangement, contributions to which may or may not
be deductible depending on the taxpayer's AGI and whether or not he is covered under an employer-
sponsored retirement plan.
What is the full retirement age? - Answers For workers born before 1938, it is 65. For those born after it
is gradually being increased to 67.
How much of a client's social security and equivalent tier 1 RR benefits may be taxable? - Answers Up to
85%.
Form SSA-1099 - Answers Social Security Benefits
Form RRB-1099 - Answers Railroad Retirement Benefits
, None of Social Security Benefits Taxable - Answers Single, Head of Household, Qualified Widow - $0-
$25,000; Married Filing Jointly - $0-$32,000
Up to 50% of Social Security Benefits Taxable - Answers Single, Head of Household, Qualified Widow -
$25,001-$34,000; Married Filing Jointly - $32,001-$44,000
Up to 85% of Social Security Benefits Taxable - Answers Single, Head of Household, Qualified Widow -
$34,001+; Married Filing Jointly - $44,001+; Married Filing Single - $1+
Fully Taxable Pension - Answers Pensions to which the taxpayer did not make after-tax contributions or
from which all pre-tax amounts have been recovered in previous years.
Partly Taxable Pensions - Answers Those pensions funded through employer plans to which the
employee contributed some after-tax money.
Form 1099-R - Answers Distributions from Pensions, Annuities, Retirement, or Profit-Sharing Plans, IRAs,
Insurance Contracts, Etc.
Exceptions to the Early Withdrawal Penalty - Answers 01 - The distribution was made to an employee
who separated from service during or after the year in which they reached age 55.
02 - The distribution is part of a series of substantially equal periodic payments, made at least annually
for the life of the participant or the life expenctancy of the participant.
03 - The distribution was made due to permanent and total disability.
04 - The distribution was made due to the death of the employee.
05 - The distribution was made in a year that the taxpayer's medical expenses exceeds 7.5% of AGI.
06 - The distribution was made to an alternate payee under a qualified domestic relations order.
07 - The distribution was made in a year an unemployed taxpayer paid health insurance premiums.
08 - The distribution was made to pay qualified higher education expenses for the taxpayer, spouse,
their child, or their grandchild.
09 - The distribution was made to pay qualified first-time, home-buying expenses.
10 - The distribution was made due to an IRS levy of the qualified plan.
11 - The distribution was made to a reservist while serving on active duty for at least 180 days.
12 - Other.
401(k) Plan - Answers Deferred compensation plan available through a wide range of employers.
Contributions to a 401(k) plan are tax deferred to the employee. Distributions from the plan are taxed as
ordinary income to the recipient when received.
Due Diligence - Answers Requirements that tax professionals must follow when preparing income tax
returns.
Estimated Tax - Answers The amount of tax a taxpayer expects to owe for the year after subtracting
expected amounts withheld and certain refundable credits.
Estimated Tax Voucher - Answers A statement by an individual of (1) the amount of income tax he
estimates he will incur during the current taxable year on income that is not subject to withholding, (2)
the excess amount over that withheld on income which is subject to withholding, and (3) his estimated
self-employment tax.
Exemption from Withholding - Answers Status claimed on Form W-4 directing the employer not to
withhold federal income taxes from the employee.
Underpayment Penalty - Answers If a taxpayer did not pay enough tax on a timely basis during the year,
he may be required to pay an underpayment penalty.
Two Ways to Pay as You Go - Answers Withholding and Estimated Tax Payments
Form W-4 - Answers Employee's Withholding Allowance Certificate
Form 4868 - Answers Application for Automatic Extension of Time To File U.S. Individual Income Tax
Return
Amended Return - Answers A tax return filed on Form 1040X after the original return has been filed.
Closed Year - Answers A tax year for which the statute of limitations has expired.
Open Year - Answers A taxable year for which the statute of limitations has not yet expired.
Failure-to-File Penalty - Answers Generally 5% for each month or part of a month the return is late, but
not more than 25% of the tax not paid.
Failure to File - Answers Taxpayer fails to file the return by the due date, and there is a balance due.
Form 1040X - Answers Amended U.S. Individual Income Tax Return
When can an amended return be filed? - Answers Within three years of the date the original return was
filed, or within two years of the date the tax was paid, whichever is later.
Can the 1040X be e-filed? - Answers No.
Portfolio Income and Losses - Answers Those from such sources as dividends, interest, capital gains and
losses, and royalties.
,Schedule E - Answers Supplemental Income and Loss
Royalty - Answers Payments received for the right to extract natural resources from the taxpayer's
property or to use a taxpayer's literary, musical, or artistic creation.
Annuity - Answers A series of payments under a contract made at regular intervals over a period of more
than one year.
Beneficiary - Answers The owner or recipient of funds in an account, such as an IRA, or from an
insurance policy or will.
Contribution - Answers When a person puts money into a retirement plan.
Defined Benefit Plan - Answers An employee benefit plan that provides determinable benefits not based
on employer profits.
Defined Contribution Plan - Answers An employee benefit plan that provides a separate account for
each person covered and pays benefits based on account earnings.
Disability Pension - Answers A taxable pension from an employer-funded disability plan or a disability
provision of a retirement plan.
Distribution - Answers When a person takes or receives money from a retirement plan.
Pension - Answers Generally a series of definitely determinable payments made to a taxpayer after
retirement from work.
Rollover - Answers A qualified transfer of funds from one tax-favored account to another, usually of the
same type.
Roth IRA - Answers A type of individual retirement arrangement in which contributions are not tax
deductible, earnings grow tax deferred, and qualified withdrawals are tax free.
Traditional IRA - Answers An individual retirement arrangement, contributions to which may or may not
be deductible depending on the taxpayer's AGI and whether or not he is covered under an employer-
sponsored retirement plan.
What is the full retirement age? - Answers For workers born before 1938, it is 65. For those born after it
is gradually being increased to 67.
How much of a client's social security and equivalent tier 1 RR benefits may be taxable? - Answers Up to
85%.
Form SSA-1099 - Answers Social Security Benefits
Form RRB-1099 - Answers Railroad Retirement Benefits
, None of Social Security Benefits Taxable - Answers Single, Head of Household, Qualified Widow - $0-
$25,000; Married Filing Jointly - $0-$32,000
Up to 50% of Social Security Benefits Taxable - Answers Single, Head of Household, Qualified Widow -
$25,001-$34,000; Married Filing Jointly - $32,001-$44,000
Up to 85% of Social Security Benefits Taxable - Answers Single, Head of Household, Qualified Widow -
$34,001+; Married Filing Jointly - $44,001+; Married Filing Single - $1+
Fully Taxable Pension - Answers Pensions to which the taxpayer did not make after-tax contributions or
from which all pre-tax amounts have been recovered in previous years.
Partly Taxable Pensions - Answers Those pensions funded through employer plans to which the
employee contributed some after-tax money.
Form 1099-R - Answers Distributions from Pensions, Annuities, Retirement, or Profit-Sharing Plans, IRAs,
Insurance Contracts, Etc.
Exceptions to the Early Withdrawal Penalty - Answers 01 - The distribution was made to an employee
who separated from service during or after the year in which they reached age 55.
02 - The distribution is part of a series of substantially equal periodic payments, made at least annually
for the life of the participant or the life expenctancy of the participant.
03 - The distribution was made due to permanent and total disability.
04 - The distribution was made due to the death of the employee.
05 - The distribution was made in a year that the taxpayer's medical expenses exceeds 7.5% of AGI.
06 - The distribution was made to an alternate payee under a qualified domestic relations order.
07 - The distribution was made in a year an unemployed taxpayer paid health insurance premiums.
08 - The distribution was made to pay qualified higher education expenses for the taxpayer, spouse,
their child, or their grandchild.
09 - The distribution was made to pay qualified first-time, home-buying expenses.
10 - The distribution was made due to an IRS levy of the qualified plan.
11 - The distribution was made to a reservist while serving on active duty for at least 180 days.
12 - Other.
401(k) Plan - Answers Deferred compensation plan available through a wide range of employers.
Contributions to a 401(k) plan are tax deferred to the employee. Distributions from the plan are taxed as
ordinary income to the recipient when received.
