H&R Block Income Tax Course Test Questions
And Answers Verified 100% Correct
Exceptions to the Early Withdrawal Penalty - ANSWER- 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.
Form 5329 - ANSWER- Additional Taxes on Qualified Plans and Other Tax-Favored
Accounts
401(k) Plan - ANSWER- 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.
403(b) Plan - ANSWER- Deferred compensation plan available to employees of many
public educational institutions and non-profit organizations.
457 Plan - ANSWER- Deferred compensation plan available to employees of many
government entities.
Roth IRA - ANSWER- A type of individual arrangement in which contributions are not
tax deductible, earnings grow tax deferred, and qualified withdrawals are tax free.
Traditional IRA - ANSWER- 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. Earnings within a
traditional IRA grow tax-deferred. Distributions from a traditional IRA are taxable except
to the extent they represent nondeductible contributions.
Qualified Plan - ANSWER- A plan which is eligible for favorable tax treatment because it
meets the requirements of both the following: IRC 401(a); the Employment Retirement
Income Security Act of 1974.
Nonqualified Plan - ANSWER- A plan that does not meet the requirements of IRC
401(a) and ERISA and do not qualify for favorable tax treatment.
403(b) Plans - ANSWER- A tax-advantaged retirement savings plan available for
employees of: public education organizations; some non-profit organizations;
cooperative hospital service organizations.
Contribution - ANSWER- When a taxpayer puts money into an IRA.
Rollover - ANSWER- When a taxpayer moves money from one IRA to another.
Three Sets of Rules for IRAs - ANSWER- Taxpayers who are active participants in
employer-maintained retirement plans at any time during the year; taxpayers who are
not active participants, including joint filers whose spouses are not active participants;
joint filers who are not active participants, but whose spouses are active participants.
American Opportunity Credit (AOC) - ANSWER- Credit for qualifying education
expenses available for tax years 2009 through 2012. The AOC may be partially
refundable.
Credits - ANSWER- Reductions of tax liability allowed for various purposes to taxpayers
who meet the qualifications. Some credits are refundable; that is, the IRS will send the
taxpayer a refund for any amount in excess of the tax liability. Some credits are
nonrefundable; that is, they can only reduce tax liability to zero. Some credits may be
carried to other tax years.
Lifetime Learning Credit - ANSWER- A nonrefundable credit equal to 20% of the first
$10,000 of qualified higher education tuition and fees paid during the year on behalf of
the taxpayer, his spouse, or his dependents.
Nonrefundable Credit - ANSWER- A credit which cannot exceed the taxpayer's tax
liability.
Refundable Credit - ANSWER- A credit for which the IRS will send the taxpayer a
refund for any amount in excess of the taxpayer's tax liability.
,Tuition and Fees Deduction - ANSWER- An above-the-line deduction of up to $4,000
per tax return for qualified tuition and course-related expenses.
Requirements to Claim the AOC - ANSWER- The taxpayer pays qualified education
expenses of higher education; the qualified education expenses are paid for an eligible
student; the eligible student is the taxpayer, spouse, or dependent for whom the
taxpayer actually claims an exemption.
Modified Adjusted Gross Income (MAGI) - ANSWER- AGI plus foreign earned income
exclusion, foreign housing exclusion, foreign housing deduction, income excluded by
residents of Puerto Rico and American Samoa.
Eligible Educational Institution - ANSWER- Any college, university, vocational school, or
other postsecondary educational institution eligible to participate in a student aid
program administered by the US Department of Education.
Reduction of Qualified Educational Expenses - ANSWER- Qualified expenses must be
reduced by any nontaxable: scholarships; grants; veteran's or military educational
benefits; any other nontaxable benefits.
Eligible Student - ANSWER- The student has not claimed an AOC in any four earlier tax
years; the student had not completed the first four years of postsecondary education
before 2011; the student was enrolled at least half-time in a program leading to a
degree for at least one academic period beginning in 2011; the student had not been
convicted of any federal or state felony for possessing or distributing a controlled
substance as of the end of 2011.
Calculating the AOC - ANSWER- The amount of the AOC is the sum of: 100% of the
first $2,000 of qualified education expenses paid for the eligible student; 25% of the next
$2,000 of qualified education expenses.
Form 1098-T - ANSWER- Tuition Statement
Amount of the Lifetime Learning Credit - ANSWER- 20% of the total qualified expenses
for all eligible students on the tax return.
Form 8863 - ANSWER- Education Credits
Form 8917 - ANSWER- Tuition and Fees Deduction
Adoption Credit - ANSWER- A nonrefundable credit for qualified adoption expenses
incurred for each eligible child. The credit cannot exceed $13,360 per child. The limit is
, a per-child limit, not an annual limit, and can be carried forward for up to five years or
until used.
Cafeteria Plan - ANSWER- A plan wherein an employer offers a choice of nontaxable
fringe benefits from which participating employers may select. The plan may be funded
with employer contributions, employee contributions, or a combination of both.
Child and Dependent Care Credit - ANSWER- A nonrefundable tax credit of 20-35% of
employment-related child and dependent care expenses for amounts of up to $6,000,
available to individuals who are employed and have a qualifying child or disabled
spouse or dependent.
Credits - ANSWER- Reductions of tax liability allowed for various purposes to taxpayers
who meet the qualifications.
Nonrefundable Credit - ANSWER- A credit which cannot exceed the taxpayer's tax
liability.
Refundable Credit - ANSWER- A credit for which the IRS will send the taxpayer a
refund for any amount in excess of the taxpayer's tax liability.
Special-Needs Child - ANSWER- For the adoption credit, a child determined by the
state to be difficult to adopt due to factors such as racial or ethnic background, age, a
condition that requires special care, or whether the child has siblings.
Deductions - ANSWER- These lower the tax by reducing the amount of income that
would otherwise be taxable.
Requirements to Claim the Child and Dependent Care Credit - ANSWER- Married
taxpayers must file a joint return; the care must have been provided so the taxpayer
could work or look for work; the taxpayer must have some earned income; the taxpayer
and the person for whom the care was provided must have lived in the same home; the
person who provided the care must not be someone the taxpayer can claim as a
dependent.
Qualified Child or Dependent Care Expenses - ANSWER- Those incurred for the
primary purpose of assuring the well-being and protection of a qualifying person while
the taxpayer works or looks for work.
Computing the Child Care Credit - ANSWER- A percentage of the smallest of the
following: the amount of qualified expenses incurred and paid during the year; $3,000
for one qualifying individual or $6,000 for two or more; the taxpayer's earned income for
the year.
And Answers Verified 100% Correct
Exceptions to the Early Withdrawal Penalty - ANSWER- 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.
Form 5329 - ANSWER- Additional Taxes on Qualified Plans and Other Tax-Favored
Accounts
401(k) Plan - ANSWER- 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.
403(b) Plan - ANSWER- Deferred compensation plan available to employees of many
public educational institutions and non-profit organizations.
457 Plan - ANSWER- Deferred compensation plan available to employees of many
government entities.
Roth IRA - ANSWER- A type of individual arrangement in which contributions are not
tax deductible, earnings grow tax deferred, and qualified withdrawals are tax free.
Traditional IRA - ANSWER- 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. Earnings within a
traditional IRA grow tax-deferred. Distributions from a traditional IRA are taxable except
to the extent they represent nondeductible contributions.
Qualified Plan - ANSWER- A plan which is eligible for favorable tax treatment because it
meets the requirements of both the following: IRC 401(a); the Employment Retirement
Income Security Act of 1974.
Nonqualified Plan - ANSWER- A plan that does not meet the requirements of IRC
401(a) and ERISA and do not qualify for favorable tax treatment.
403(b) Plans - ANSWER- A tax-advantaged retirement savings plan available for
employees of: public education organizations; some non-profit organizations;
cooperative hospital service organizations.
Contribution - ANSWER- When a taxpayer puts money into an IRA.
Rollover - ANSWER- When a taxpayer moves money from one IRA to another.
Three Sets of Rules for IRAs - ANSWER- Taxpayers who are active participants in
employer-maintained retirement plans at any time during the year; taxpayers who are
not active participants, including joint filers whose spouses are not active participants;
joint filers who are not active participants, but whose spouses are active participants.
American Opportunity Credit (AOC) - ANSWER- Credit for qualifying education
expenses available for tax years 2009 through 2012. The AOC may be partially
refundable.
Credits - ANSWER- Reductions of tax liability allowed for various purposes to taxpayers
who meet the qualifications. Some credits are refundable; that is, the IRS will send the
taxpayer a refund for any amount in excess of the tax liability. Some credits are
nonrefundable; that is, they can only reduce tax liability to zero. Some credits may be
carried to other tax years.
Lifetime Learning Credit - ANSWER- A nonrefundable credit equal to 20% of the first
$10,000 of qualified higher education tuition and fees paid during the year on behalf of
the taxpayer, his spouse, or his dependents.
Nonrefundable Credit - ANSWER- A credit which cannot exceed the taxpayer's tax
liability.
Refundable Credit - ANSWER- A credit for which the IRS will send the taxpayer a
refund for any amount in excess of the taxpayer's tax liability.
,Tuition and Fees Deduction - ANSWER- An above-the-line deduction of up to $4,000
per tax return for qualified tuition and course-related expenses.
Requirements to Claim the AOC - ANSWER- The taxpayer pays qualified education
expenses of higher education; the qualified education expenses are paid for an eligible
student; the eligible student is the taxpayer, spouse, or dependent for whom the
taxpayer actually claims an exemption.
Modified Adjusted Gross Income (MAGI) - ANSWER- AGI plus foreign earned income
exclusion, foreign housing exclusion, foreign housing deduction, income excluded by
residents of Puerto Rico and American Samoa.
Eligible Educational Institution - ANSWER- Any college, university, vocational school, or
other postsecondary educational institution eligible to participate in a student aid
program administered by the US Department of Education.
Reduction of Qualified Educational Expenses - ANSWER- Qualified expenses must be
reduced by any nontaxable: scholarships; grants; veteran's or military educational
benefits; any other nontaxable benefits.
Eligible Student - ANSWER- The student has not claimed an AOC in any four earlier tax
years; the student had not completed the first four years of postsecondary education
before 2011; the student was enrolled at least half-time in a program leading to a
degree for at least one academic period beginning in 2011; the student had not been
convicted of any federal or state felony for possessing or distributing a controlled
substance as of the end of 2011.
Calculating the AOC - ANSWER- The amount of the AOC is the sum of: 100% of the
first $2,000 of qualified education expenses paid for the eligible student; 25% of the next
$2,000 of qualified education expenses.
Form 1098-T - ANSWER- Tuition Statement
Amount of the Lifetime Learning Credit - ANSWER- 20% of the total qualified expenses
for all eligible students on the tax return.
Form 8863 - ANSWER- Education Credits
Form 8917 - ANSWER- Tuition and Fees Deduction
Adoption Credit - ANSWER- A nonrefundable credit for qualified adoption expenses
incurred for each eligible child. The credit cannot exceed $13,360 per child. The limit is
, a per-child limit, not an annual limit, and can be carried forward for up to five years or
until used.
Cafeteria Plan - ANSWER- A plan wherein an employer offers a choice of nontaxable
fringe benefits from which participating employers may select. The plan may be funded
with employer contributions, employee contributions, or a combination of both.
Child and Dependent Care Credit - ANSWER- A nonrefundable tax credit of 20-35% of
employment-related child and dependent care expenses for amounts of up to $6,000,
available to individuals who are employed and have a qualifying child or disabled
spouse or dependent.
Credits - ANSWER- Reductions of tax liability allowed for various purposes to taxpayers
who meet the qualifications.
Nonrefundable Credit - ANSWER- A credit which cannot exceed the taxpayer's tax
liability.
Refundable Credit - ANSWER- A credit for which the IRS will send the taxpayer a
refund for any amount in excess of the taxpayer's tax liability.
Special-Needs Child - ANSWER- For the adoption credit, a child determined by the
state to be difficult to adopt due to factors such as racial or ethnic background, age, a
condition that requires special care, or whether the child has siblings.
Deductions - ANSWER- These lower the tax by reducing the amount of income that
would otherwise be taxable.
Requirements to Claim the Child and Dependent Care Credit - ANSWER- Married
taxpayers must file a joint return; the care must have been provided so the taxpayer
could work or look for work; the taxpayer must have some earned income; the taxpayer
and the person for whom the care was provided must have lived in the same home; the
person who provided the care must not be someone the taxpayer can claim as a
dependent.
Qualified Child or Dependent Care Expenses - ANSWER- Those incurred for the
primary purpose of assuring the well-being and protection of a qualifying person while
the taxpayer works or looks for work.
Computing the Child Care Credit - ANSWER- A percentage of the smallest of the
following: the amount of qualified expenses incurred and paid during the year; $3,000
for one qualifying individual or $6,000 for two or more; the taxpayer's earned income for
the year.
