HRB-27 Final Exam Review COMPLETE QUESTIONS AND ANSWERS
HRB-27 Final Exam Review
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1. What income report- Form 1099-MISC (15.6)
ing form should an
independent contrac-
tor sometimes re-
ceive from the person
who paid him for his
services?
2. Schedule C, Line F • Under the accrual method, total sales and total charges for services are
asks for the account- included in income even though payment may be received in another tax
ing method used in year.
the business. • Under the cash method, only income actually received or expenses
What is the differ- actually paid during the year are included. (15.5)
ence between the
cash method and the
accrual method of ac-
counting?
3. What does it mean if a He is active in running the business in a substantial way on a day-to-day
proprietor "material- basis. (15.5)
ly participates" in the
business?
4. Why is it important to If the proprietor does not materially participate, any loss from the business
know whether or not is a passive loss and generally may be currently deducted only against
the proprietor mate- passive income. (15.6)
rially participates?
5. What are returns and • Amounts that were refunded to customers who returned merchandise for
allowances? refund or partial refund.
• These amounts are subtracted from gross receipts. (15.6)
6.
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How is cost of goods Beginning inventory plus purchases, plus labor, supplies, depreciation, etc.
sold determined? attributable to product manufacture or preparation for sale, minus ending
inventory. (15.7)
7. If the client has • Provide a Form 1099-MISC to any independent contractor who worked
contract labor, what and earned $600 or more. (15.9)
should you remind
the client that they
should do?
8. What is the pur- To pay social security and medicare taxes. (15.14)
pose of self-employ-
ment tax?
9. What amounts does Amounts invested in the business plus any business debts for which the
a proprietor have "at proprietor is personally liable. (15.16)
risk"?
10. What difference does Only amounts at risk may be used to determine the actual loss on Schedule
it make if the propri- C. (15.16)
etor is "at risk" or not?
11. How does a Tax • Tax Professionals fulfill due diligence requirements by making every effort
Professional meet to prepare accurate and complete returns.
due diligence require- • Tax Professionals must have knowledge of tax law, and apply a reason-
ments? ability check to the information provided by their clients. (26.1)
12. What is a thorough in- A thorough interview consists of asking general information questions, then
terview? asking additional questions whenever information is incomplete or seems
inaccurate or inconsistent. (26.2)
13. What is a conflict of A conflict of interest is when one's situation might benefit at the expense of
interest? another's situation. (26.3)
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14. What actions can re- A conflict of interest is resolved when it is acknowledged, disclosed to all
solve a conflict of in- parties, and the parties have consented to waiving the conflict. (26.3)
terest?
15. What client informa- Any information that could potentially identify the client is confidential.
tion is confidential? Information includes (but is not limited to):
• Name
• Address and phone number
• Social security numbers
• Place of employment
• Any information from a tax return (26.4)
16. Is it acceptable for • Tax Professionals must have prior consent from the client to leave phone
a Tax Professional messages related to their tax return.
to leave a detailed • The fact that a taxpayer is the client of a Tax Professional or tax preparation
phone message for business is confidential information that must not be disclosed. (26.5)
a client, letting them
know their tax return
is complete?
17. What is a Tax Profes- A Tax Professional must advise the client of the noncompliance and the
sional's responsibility consequences for not correcting the situation. (26.7)
upon finding out that
a client has not com-
plied with any tax
law?
18. What action should a A Tax Professional should never prepare a return that contains inaccurate
Tax Professional take information. (26.7)
if a client insists on re-
porting information
that is inaccurate?
HRB-27 Final Exam Review
ALREADY PASSED | 2025 LATEST!!
Study online at https://quizlet.com/_1rll3m
1. What income report- Form 1099-MISC (15.6)
ing form should an
independent contrac-
tor sometimes re-
ceive from the person
who paid him for his
services?
2. Schedule C, Line F • Under the accrual method, total sales and total charges for services are
asks for the account- included in income even though payment may be received in another tax
ing method used in year.
the business. • Under the cash method, only income actually received or expenses
What is the differ- actually paid during the year are included. (15.5)
ence between the
cash method and the
accrual method of ac-
counting?
3. What does it mean if a He is active in running the business in a substantial way on a day-to-day
proprietor "material- basis. (15.5)
ly participates" in the
business?
4. Why is it important to If the proprietor does not materially participate, any loss from the business
know whether or not is a passive loss and generally may be currently deducted only against
the proprietor mate- passive income. (15.6)
rially participates?
5. What are returns and • Amounts that were refunded to customers who returned merchandise for
allowances? refund or partial refund.
• These amounts are subtracted from gross receipts. (15.6)
6.
, HRB-27 Final Exam Review
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How is cost of goods Beginning inventory plus purchases, plus labor, supplies, depreciation, etc.
sold determined? attributable to product manufacture or preparation for sale, minus ending
inventory. (15.7)
7. If the client has • Provide a Form 1099-MISC to any independent contractor who worked
contract labor, what and earned $600 or more. (15.9)
should you remind
the client that they
should do?
8. What is the pur- To pay social security and medicare taxes. (15.14)
pose of self-employ-
ment tax?
9. What amounts does Amounts invested in the business plus any business debts for which the
a proprietor have "at proprietor is personally liable. (15.16)
risk"?
10. What difference does Only amounts at risk may be used to determine the actual loss on Schedule
it make if the propri- C. (15.16)
etor is "at risk" or not?
11. How does a Tax • Tax Professionals fulfill due diligence requirements by making every effort
Professional meet to prepare accurate and complete returns.
due diligence require- • Tax Professionals must have knowledge of tax law, and apply a reason-
ments? ability check to the information provided by their clients. (26.1)
12. What is a thorough in- A thorough interview consists of asking general information questions, then
terview? asking additional questions whenever information is incomplete or seems
inaccurate or inconsistent. (26.2)
13. What is a conflict of A conflict of interest is when one's situation might benefit at the expense of
interest? another's situation. (26.3)
, HRB-27 Final Exam Review
Study online at https://quizlet.com/_1rll3m
14. What actions can re- A conflict of interest is resolved when it is acknowledged, disclosed to all
solve a conflict of in- parties, and the parties have consented to waiving the conflict. (26.3)
terest?
15. What client informa- Any information that could potentially identify the client is confidential.
tion is confidential? Information includes (but is not limited to):
• Name
• Address and phone number
• Social security numbers
• Place of employment
• Any information from a tax return (26.4)
16. Is it acceptable for • Tax Professionals must have prior consent from the client to leave phone
a Tax Professional messages related to their tax return.
to leave a detailed • The fact that a taxpayer is the client of a Tax Professional or tax preparation
phone message for business is confidential information that must not be disclosed. (26.5)
a client, letting them
know their tax return
is complete?
17. What is a Tax Profes- A Tax Professional must advise the client of the noncompliance and the
sional's responsibility consequences for not correcting the situation. (26.7)
upon finding out that
a client has not com-
plied with any tax
law?
18. What action should a A Tax Professional should never prepare a return that contains inaccurate
Tax Professional take information. (26.7)
if a client insists on re-
porting information
that is inaccurate?
