Accounting Question

Indivual tax exam include topic :Wages,Income, andTaxe, FilingRequirements,QualifyingDependentsand Support: , DependentRelated FilingStatus:, EIC and ACTC, Retiremen,AdditionalIncome andAdjustmentsto Income,ItemizedDeductions,Credits,EducationProvisions, Capital Assets, Ethics,SelfEmploymentIncome,Depreciation, PassiveIncome,Special Topics, Special Topics Wages, Income, and Taxes
Question 1 of 85.
Lucca has a financial interest in a financial account in a foreign country. Where should this be
reported on his tax return?
Part I of the Schedule B (Form 1040).
Part II of the Schedule B (Form 1040).
Part III of the Schedule B (Form 1040).
Part II of Schedule 1 (Form 1040).
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Question 2 of 85.
Ricky and his wife, Sarah, are filing their tax return. Which of the following statements regarding
signing the return is NOT correct?
A joint return must be signed by both the taxpayer and the spouse.
Every taxpayer must sign their own return.
When a tax return is filed electronically, there are no signature requirements for the taxpayer.
When a taxpayer signs their tax return, they declare, under penalties of perjury, that they have
examined the return and accompanying schedules and statements, and to the best of their knowledge
and belief, they are true, correct, and complete.
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Question 3 of 85.
Sadi received interest from several different sources. Which of the following types of interest is
nontaxable on a federal return?
Interest income from municipal bonds.
Interest income earned from a certificate of deposit.
Interest income earned from a checking account.
Interest income received from a personal loan.
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Question 4 of 85.
When tax returns are filed electronically, what is one way a taxpayer can sign the return?
Taxpayers may only use a handwritten signature to sign the return.
The IRS will provide an Identity Protection Personal Identification Number (IP PIN) used to sign the
return.
There is no taxpayer signature requirement when a tax return is filed electronically.
This can be accomplished by using a personal identification number (PIN).
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Question 5 of 85.
After preparing the tax return and collecting all required signatures, the tax return has to be filed
with the IRS. How are the majority of tax returns submitted to the IRS?
Electronically.
By fax.
By mail.
Through wire transfer.
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Question 6 of 85.
Min Lee received the following items of income during the year:
•
$35,000 of wages.
•
$150 of dividends from a savings account at her credit union.
•
$200 of interest from a U.S. Savings Bond.
•
$250 of interest from a Treasury bill.
What amount will be reported on Min’s Form 1040, line 2b?
$350
$400
$450
$600
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Question 7 of 85.
To avoid the risk of penalties, tax preparers must abide by rules regarding preparer tax
identification numbers (PTINs). Which of the following statements is TRUE regarding PTINs?
A PTIN is required semi-annually for anyone who prepares or assists in preparing federal tax returns for
compensation.
If a tax preparer does not have a PTIN, they can still prepare tax returns for compensation.
The IRS may provide a PTIN to taxpayers who are victims of identity theft.
The preparer must enter their PTIN on the tax return in the space provided.
Question 8 of 85.
Michael and Amina are married and lived in a community property state the entire year. Michael
earned $40,000 in wages, and Amina earned $60,000. If Michael and Amina file separate returns,
how much income will be reported on their returns?
Michael: $20,000; Amina: $30,000.
Michael: $40,000; Amina: $60,000.
Michael: $50,000; Amina: $50,000.
Michael: $100,000; Amina: $0.
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Question 9 of 85.
Jeremy and Veronica were married. Jeremy died on May 1, 2022. On November 1, 2022, Veronica
married David. Veronica and David will file a joint return.
What is Jeremy’s correct and most favorable 2022 filing status?
Single.
Married filing jointly.
Married filing separately.
Head of household.
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Question 10 of 85.
The IRS requires paid tax preparers to keep a completed copy of returns or claim for refund; or
retain some type of record, or list, which includes the taxpayer’s name, identification number,
and tax year. How long must these records be retained and available for inspection?
Two years following the close of the tax return period in which the claim for refund was requested.
Three years following the close of the tax return period in which the claim for refund was requested.
Seven years following the close of the tax return period in which the claim for refund was requested.
There is no limit to how long these records are kept.
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Question 11 of 85.
What are the three factors needed to determine the filing requirement for a nondependent?
Dependent taxpayer test, joint return test, and citizen test.
Filing status, age, and income.
Marital status, filing status, and income.
Unearned income, earned income, and gross income.
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Question 12 of 85.
For 2022, what is the gross income test for a taxpayer claiming a qualifying relative?
The potential dependent’s gross income must be less than:
$1,150
$4,300
$4,400
$12,950
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Question 13 of 85.
Vincent lives with his daughter, June. Vincent received $5,500 in social security benefits. He
used $2,400 for rent, $1,000 for food, $1,500 for recreation, $500 for the doctor, and $100 for
eyeglasses. What amount of support must June pay to claim Vincent as a qualifying relative?
Less than $5,500.
More than $2,400.
More than $2,750.
More than $5,500.
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Question 14 of 85.
Kennedy is a qualifying child to three taxpayers:
•
Her grandfather, whose AGI is $6,789.
•
Her father, whose AGI is $26,123.
•
Her uncle, whose AGI is $64,456.
Which taxpayer is entitled to claim Kennedy, if all three wish to do so?
Father.
Grandfather.
Uncle.
No one is entitled to claim Kennedy.
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Question 15 of 85.
Which taxpayer has a potential qualifying child that meets the relationship test?
Albert (27) and his brother, Conner (20), lived together all year. Conner is unmarried and a full-time
student. Conner had no income, and did not provide more than half of his own support.
Chase (32) lived with his mother, Willa (61), all year. Willa is unmarried; she earned $14,100, all from
wages, and had no other income.
Nadia (28) and Brandy (18) are cousins. Both are unmarried and lived in the same home all year.
Brandy earned $4,100, all from wages, and she did not provide more than half of her own support.
Tanner (29) and his girlfriend, Nora (29), lived in the same home all year. Nora’s daughter (from a
previous marriage), Serena (7), also lived in the home all year. Nora and Serena had no income and did
not provide more than half of their own support.
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Question 16 of 85.
In 2022, Rich (28) lived with his daughter, Ava (4), his brother, Joe (18), and his fiancée, Linda
(30) for the entire year. Rich’s adjusted gross income is $36,555, Joe’s gross income is $4,100,
Linda’s gross income is $5,900, and Ava has no income. None of the individuals in the
household were disabled or students during the year. Neither Joe, nor Linda, nor Ava provided
over half of their own support. Rich qualifies for and files as head of household in 2022. How
many qualifying dependents can Rich claim on his return?
One.
Two.
Three.
Four.
Question 17 of 85.
Which of the following taxpayers may file as a Qualifying surviving spouse for 2022?
Austin and Carla were married for five years before Carla’s passing in 2022. Austin has not remarried.
Austin paid all of the cost of maintaining a home for himself and his son, Joshua (age 10). Joshua lived
with Austin for all of 2022 and is his qualifying child dependent.
Dale and Maggie were married for three years before Dale’s passing in 2020. Maggie has not
remarried. Maggie paid all of the costs of maintaining a home for herself and her dependent son, Lionel
(age 18). Lionel moved out of her home permanently in November of 2022. He did not pay more than
half of his own support for the year. Maggie filed a joint return for 2020.
Neil and Debbie were married for five years when Debbie died unexpectedly in 2020. Neil remarried in
2022. Neil paid over half of the cost of maintaining a home for himself, his wife, and his dependent son,
Liam (age 6). Liam lived with Neil for all of 2022 and is his qualifying child dependent. Neil filed a joint
return for 2020.
Ryan and Becky were married for ten years before Ryan’s death in 2021. Becky has not remarried.
Becky paid over half of the cost of maintaining a home for herself and her dependent daughter, Ella (age
3). Ella lived with Becky for all of 2022 and is her qualifying child dependent. Becky filed a joint return for
2021.
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Question 18 of 85.
Ling (53) is unmarried and pays 75% of the cost of maintaining a home for her father, Tao (79),
who had no taxable income and did not live with Ling. Tao is Ling’s qualifying
relative dependent, and she will claim him on her tax return in 2022. What is Ling’s correct and
most favorable filing status for 2022?
Single.
Married filing separately.
Head of household.
Qualifying surviving spouse.
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Question 19 of 85.
Tami and her daughter, Jade (5), lived all year with Tami’s mother, Yasmin. Yasmin paid the
entire cost of keeping up the home. Tami’s adjusted gross income (AGI) was $12,000, and
Yasmin’s AGI was $30,000. Jade meets the requirements of a qualifying child dependent for both
Tami and Yasmin. Yasmin would like to claim her granddaughter, Jade. As Yasmin’s tax
preparer, what information would you share with Yasmin?
As long as Yasmin files before Tami, she may claim Jade since Jade meets the requirements of
a qualifying child for Yasmin.
If Tami and Yasmin each filed their tax returns claiming Jade as their qualifying child, Tami would
receive the dependency benefits, since the first tiebreaker rule states the parent has a higher claim than
a non-parent.
Only Yasmin may claim Jade since her adjusted gross income is the highest.
Yasmin and Tami may agree to each claim Jade, since she meets the requirements of a qualifying
child for both Tami and Yasmin.
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Question 20 of 85.
Ladonna and Gabe are divorced and have one child. Ladonna is the custodial parent. For 2022,
Ladonna signed Form 8332, Release/Revocation of Release of Claim to Exemption for Child by
Custodial Parent, and gave the child’s exemption to Gabe. Assuming all other requirements are
met, which benefits may Ladonna claim for this dependent?
Ladonna may claim the Earned Income Credit, any Child and Dependent Care Credit, the Child Tax
Credit, and any Additional Child Tax Credit.
Ladonna may use the head of household filing status, claim the dependency, and any Child and
Dependent Care Credit.
Ladonna may use the head of household filing status, claim the Earned Income Credit, and any Child
and Dependent Care Credit.
Ladonna may use the head of household filing status, claim the Earned Income Credit, any Child and
Dependent Care Credit, the Child Tax Credit, and any Additional Child Tax Credit.
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Question 21 of 85.
Kaden and Cherie were divorced in 2019. The divorce decree granted them joint custody of their
son, Bryce.
Bryce, now age 15, lived with Cherie until June 20. On June 21, Bryce went to stay with Kaden
and lived there the remainder of the year. Bryce did not provide more than half of his own
support.
Bryce stayed with Cherie 171 nights and with Kaden 194 nights during the year. Which statement
is correct?
Cherie is entitled to claim Bryce as a qualifying child dependent.
Kaden is entitled to claim Bryce as a qualifying child dependent.
Kaden and Cherie must split all dependency benefits for Bryce.
Neither Kaden nor Cherie are entitled to claim Bryce as a qualifying child dependent.
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EIC and ACTC
Question 22 of 85.
If a taxpayer’s Earned Income Credit is disallowed due to reckless or intentional disregard of the
rules, there is a waiting period after the disallowance. How long is the waiting period?
Sixty to ninety days.
Six months to one year.
Two to ten years.
Fifteen to twenty years.
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Question 23 of 85.
If a taxpayer’s Earned Income Credit (EIC) was disallowed, what additional step must the
taxpayer take the next time they claim the EIC?
Amend the previous year’s tax return.
Complete Form 8812 (Form 1040).
File a grievance with the IRS.
File Form 8862.
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Retirement
Question 24 of 85.
A taxpayer may qualify for one of several exceptions to the additional tax on early distributions.
Which of these would be an exception?
A 401(k) distribution made to an alternate payee under a qualified domestic relations order (QDRO).
A 401(k) distribution of $10,000 to pay qualified first-time homebuyer expenses.
A 401(k) distribution used to pay higher education costs.
An IRA distribution to pay off credit card debt.
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Question 25 of 85.
As part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) of 2020,
legislation provided for expanded distribution options and favorable tax treatment to COVID-19related distributions from retirement plans or IRAs during 2020. All of the following statements
regarding these distributions are true, EXCEPT:
Eligible individuals included those diagnosed with COVID-19 or individuals whose spouse or dependent
was diagnosed with the illness.
Eligible taxpayers could take penalty-free COVID-19-related distributions of up to $100,000 from
retirement plans or IRAs during 2020.
Taxpayers who took COVID-19-related distributions from a retirement plan (including IRAs) in 2020
could have elected to include taxable amounts in their income ratably over a three-year period.
Taxpayers who took COVID-19-related distributions from a retirement plan (including IRAs) in 2020
were subject to a 10% penalty for early distribution.
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Question 26 of 85.
Harry (71), a single taxpayer, began receiving a pension of $3,500 per month for life on May 1,
2009. He has after-tax contributions in the plan. His 2022 Form 1099-R is shown below. Box 2a is
blank. Which of the following statements is CORRECT?
Answer choices are below the image.
$42,000 is taxable.
Harry is subject to a 10% additional tax.
None of Harry’s distribution is taxable.
The taxable distribution is figured using the Simplified Method Worksheet.
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Question 27 of 85.
Effective January 1, 2023, the SECURE 2.0 Act of 2022, Section 107, increased the age at which
individuals must begin taking required minimum distributions (RMDs) from traditional IRAs and
workplace retirement plans. The age has been increased from age 72 to which age?
73
74
75
76
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Question 28 of 85.
Mario is a fireman at your local fire department. He contributes to his employer’s retirement
savings plan through regular payroll deductions. His contributions are tax-deferred, and so are
his earnings in the plan. Mario most likely participates in which of the following types of
employer-sponsored retirement plans?
401(k) plan.
403(b) plan.
457 plan.
IRA.
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Question 29 of 85.
The SECURE 2.0 Act of 2022, Section 307, allows a taxpayer who wants to make a charitable
contribution from their IRA, to make a one-time rollover to an eligible split interest entity. What is
the maximum amount allowed to be contributed?
$5,000
$10,000
$25,500
$50,000
Question 30 of 85.
Kailani has a bank account at Lending Bank. She received Form 1099-INT, Interest Income,
shown below. She has no other interest or dividends to report. Where should this income be
reported on Kailani’s tax return? Answer choices are below the image.
$45 on line 2a, $640 on line 2b, of Form 1040.
$410 on line 2a, $230 on line 2b of Form 1040, and $45 on line 18 of Schedule 1 (Form 1040).
$640 on Part I of Schedule B, and $45 on line 18 of Schedule 1 (Form 1040).
$640 on line 2b of Form 1040, and $45 on line 18 of Schedule 1 (Form 1040).
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Question 31 of 85.
Which of the following is an example of taxable alimony?
A cash or check payment made under a decree of divorce or separation. The marriage settlement
agreement was signed before December 31, 2018.
Child support payments.
A property transfer made within one year of a divorce.
Voluntary payments made outside of an agreement or a court decree of divorce or separation.
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Question 32 of 85.
Which of the following individuals is an eligible educator and may deduct up to $300 of qualified
educator expenses? (None of them received any reimbursements.)
Mr. Francis is a teacher’s aide at the local high school. He taught part-time. He worked 600 hours
during the year and spent $400 on teaching supplies used in his classroom.
Mr. Chang is a fourth-grade teacher. He taught full-time in a classroom and worked more than 900
hours during the school year. He spent $750 on teaching supplies used in his classroom.
Mrs. Sullivan is a professor at the local community college. She taught full-time during the entire school
year. She spent $500 on teaching supplies used in her classroom.
Ms. Rowling homeschools her three children. She spent $950 on books, computer software, and
classroom supplies.
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temized Deductions
Question 33 of 85.
Soledad is single. He borrowed $900,000 and purchased a new main home in March of 2020.
Soledad will be itemizing his deductions. On what portion of the acquisition debt will interest be
deductible on Soledad’s tax return for 2022?
$375,000
$500,000
$750,000
$900,000
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Question 34 of 85.
Which of the following statements is CORRECT regarding the married filing separately filing
status? When a couple decides to file married filing separately:
Both spouses must take the standard deduction.
If one spouse itemizes, the other spouse must itemize and could have a deduction smaller than the
standard deduction.
One spouse may take the standard deduction and the other spouse must itemize.
The standard deduction for taxpayers using the married filing separately status is different from the
single filing status.
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Question 35 of 85.
Robert is single. He purchased a new main home in March of 2017 for $900,000. Robert will be
itemizing his deductions. On what portion of the acquisition debt will interest be deductible on
Robert’s tax return for 2022?
$375,000
$500,000
$750,000
$900,000
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Question 36 of 85.
On the Schedule A (Form 1040), Itemized Deductions, the deduction for state and local income
taxes is limited to what amount?
$10,000 ($5,000 if MFS).
$50,000 ($25,000 if MFS).
$100,000 ($50,000 if MFS).
There is no limit on the deduction of state and local income taxes.
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Question 37 of 85.
If a taxpayer’s total deduction for all noncash contributions for the year is over $500, which form
must be filed?
Form 2106.
Form 4684.
Form 8283.
Schedule 1 (Form 1040).
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Question 38 of 85.
Manuel drove his car 400 miles in 2022 to perform volunteer work. He did not keep records of the
actual cost for gas or oil. How much can he deduct as a charitable contribution on his Schedule
A (Form 1040), Itemized Deductions?
$0
$56
$72
$234
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Question 39 of 85.
Justin won $1,000 at Lucky Casino and $1,350 at Riverboat Casino. His losses for the year at
Lucky Casino were $2,000 and his losses at Riverboat were $800. He also spent $100 for lottery
tickets without winning anything. How much can he deduct on Schedule A (Form 1040), Itemized
Deductions, for gambling losses?
$0
$2,350
$2,800
$2,900
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Question 40 of 85.
Viola (45) is single. Her 2021 federal itemized deductions totaled $15,400, of which she claimed
$1,000 of state income taxes paid in 2021. She filed her tax return on April 14, 2022, and on May
1, 2022, she received a $1,000 state income tax refund. How much of her 2021 state income tax
refund is taxable on her 2022 federal return?
$0
$500
$1,000
$2,000
Credits
Question 41 of 85.
Joshua purchased a qualified plug-in electric motor vehicle on June 2, 2022. He qualifies for the
Qualified Plug-in Electric Drive Motor Vehicle Credit. Joshua may qualify for a credit of what
amount?
10% of the purchase price of the vehicle.
$8,000 per qualifying vehicle.
The credit ranges from $2,500 to $7,500, depending on battery capacity and other factors.
The credit ranges from $2,500 to $7,500, depending on the purchase price of the vehicle.
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Question 42 of 85.
Josef has two daughters, Paige, age 4, and Natalie, age 10. Josef paid a local day care provider
$6,000 for Paige from January through December and $4,000 for Natalie from January through
June. Josef’s earned income is $70,000. Assuming all other requirements are met, how much
expense can be used to calculate Josef’s 2022 Child and Dependent Care Credit?
$3,000
$6,000
$8,000
$10,000
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Question 43 of 85.
Desiree is single. Her modified adjusted gross income is $70,000. She purchased a previouslyowned electric vehicle on January 15, 2023 for $20,000 from a dealer. The vehicle meets all the
requirements for the Previously-Owned Clean Vehicle Credit. What is the maximum credit
amount Desiree may qualify for on her 2023 tax return?
$1,000
$4,000
$6,000
$7,500
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Education Provisions
Question 44 of 85.
Barry is a junior at the University of Phoenix. For 2022, he received a Form 1098-T, Tuition
Statement, showing his tuition and scholarship amounts. Assuming all requirements are met,
what is the maximum amount Barry could claim for the American Opportunity Tax Credit?
$1,500
$2,000
$2,500
$4,000
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Question 45 of 85.
Which of the following statements is TRUE regarding nontaxable employer-provided tuition
reimbursements? Nontaxable employer-provided tuition reimbursements:
Are tax-free and cannot be used to claim any education credit.
May be used to claim the American Opportunity Tax Credit and the lifetime learning credit.
May be used to claim the American Opportunity Tax Credit, but not the lifetime learning credit.
May be used to claim the lifetime learning credit, but not the American Opportunity Tax Credit.
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Capital Assets
Question 46 of 85.
Lindsey inherited a gold necklace from her grandfather. The original cost of the necklace was
$3,000 and the fair market value when her grandfather died was $4,000. What is Lindsey’s basis
for the necklace?
$0
$1,000
$3,000
$4,000
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Question 47 of 85.
Uri and Autry are married and will file a joint return. They purchased their first home in 2016. The
home served as their primary residence until June 2022, when they sold the home. They had a
long-term capital gain of $600,000. Uri and Autry meet the ownership and use tests. How much of
the long-term gain can they exclude from income on their return?
$0
$250,000
$500,000
$600,000
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Question 48 of 85.
Donna owned a house for which she paid $300,000. She added a new room at a cost of $10,000.
She later sold the house for $350,000 and paid a $20,000 sales commission. What is Donna’s
gain or loss?
$20,000 gain.
$20,000 loss.
$40,000 gain.
$50,000 gain.
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Question 49 of 85.
Mike is filing single. He purchased 100 shares of BTL stock in 2020. He sold the shares for a net
gain of $2,000 in 2022. Mike’s 2022 taxable income is $53,500. His gain on the stock sale will be
taxed at what rate?
0%
15%
20%
22%
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Question 50 of 85.
Which of the following will decrease the original basis of property to determine the adjusted
basis?
Assessments for local improvements.
Capital improvements.
Casualty loss deductions.
Legal fees.
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Question 51 of 85.
Rhianna purchased a home for $650,000. She added a swimming pool at a cost of $25,000 and a
patio deck for $8,000. What is Rhianna’s adjusted basis for this property?
$650,000
$658,000
$675,000
$683,000
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Question 52 of 85.
On October 1, 2021, Sara purchased 80 shares of JEP stock for $2,000. On September 30, 2022,
she sold the 80 shares for $1,500. What is Sara’s gain or loss?
A long-term gain of $500.
A long-term loss of $500.
A short-term gain of $500.
A short-term loss of $500.
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Question 53 of 85.
What is the federal tax treatment of exempt-interest dividends reported on Form 1099DIV, Dividends and Distributions?
Exempt-interest dividends are:
Not taxable at the federal level and are not reported on the federal tax return.
Not taxable at the federal level. However, taxpayers are still required to report the income on their tax
return.
Taxable as long-term capital gains on the federal return.
Taxable as ordinary income on the federal return.
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Ethics
Question 54 of 85.
Generally, a tax preparer must never provide a taxpayer’s confidential information to any other
party. However, there are some exceptions allowing for limited disclosure. Which of the
following are valid exceptions?
The co-habitation exception and the written consent exception.
The related party exception and the shared child exception.
The related party exception and the written consent exception.
There are no exceptions, and tax preparers must never share tax return information under any
circumstances.
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Question 55 of 85.
Enzo is preparing a client’s return. The taxpayer is claiming the Earned Income Credit (EIC),
Child Tax Credit (CTC), Additional Child Tax Credit (ACTC), and the American Opportunity Tax
Credit (AOTC). Which of the following best describes the actions Enzo must take to substantiate
the taxpayer’s eligibility for the credits?
Complete Form 8867, Paid Preparer’s Due Diligence Checklist, and submit it to the IRS with the
taxpayer’s return.
Complete and submit Form 8867, Paid Preparer’s Due Diligence Checklist. Complete and keep all
worksheets used to compute the credits. He is also expected to ask additional questions and document
the taxpayer’s answers. He must retain a copy of documents provided by the taxpayer that he relied on
when determining credit eligibility.
Complete all worksheets used to compute the credit. If the worksheet is completed by hand, keep a
hard copy in the taxpayer’s client file.
Ask additional questions and document the taxpayer’s answers to those questions. He must also retain
a copy of documents provided by the taxpayer that he relied on when determining credit eligibility.
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Question 56 of 85.
Choose the response that accurately completes the last sentence. Lila is your best friend’s 19year-old daughter. Lila has a two-year-old child. You know that Lila lived at home and was a fulltime student until she quit college at the end of September during the tax year. Your friend (Lila’s
mom) gives you Lila’s tax documents and tells you to let Lila claim herself and claim her child for
the Earned Income Credit (EIC). To meet the EIC due diligence knowledge requirement, you:
Can complete Lila’s return filing her as a single nondependent, with EIC for her child.
Can disregard information obtained through a personal relationship.
Cannot complete Lila’s return under any circumstances.
Cannot ignore the facts about Lila living with her mother for nine months of the year when she was a
full-time student.
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Question 57 of 85.
Joshua and Donna were married. Mya has been their tax preparer for many years. During a
meeting with Mya, they disclosed they recently divorced. Mya explained to both of them that a
conflict of interest has arisen in their case. They decided to waive the conflict, and both signed
separate waivers to continue with Mya as their tax preparer. What is the minimum amount of
time that Mya is required to retain the waivers?
36 days from the conclusion of service.
36 weeks from the conclusion of service.
36 months from the conclusion of service.
Four years from the conclusion of service.
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Question 58 of 85.
Choose the response that accurately completes the following sentence. A tax preparer’s high
ethical standards protect taxpayers by:
Guaranteeing their returns will not be questioned by the IRS.
Promising they will be free from IRS penalties.
Eliminating the need for preparer due diligence notes.
Providing them with an accurate return, including all tax benefits to which they are entitled.
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Question 59 of 85.
For a return filed in 2023, what is the maximum penalty the IRS can assess against a paid tax
return preparer who fails to satisfy the due diligence requirements when preparing a return for
an individual claiming the following tax benefits?
•
Earned Income Credit.
•
Child Tax Credit / Additional Child Tax Credit / Other Dependent Credit.
•
American Opportunity Tax Credit.
•
Head of household filing status.
$545 per return.
$560 per return.
$2,240 per return.
$3,360 per return.
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Question 60 of 85.
Rosemarie is a paid tax return preparer. In 2023, she filed a taxpayer’s tax return, in which the
taxpayer claimed the American Opportunity Tax Credit. However, the IRS determined that the
taxpayer did not qualify for the credit. What amount of penalty could Rosemarie be responsible
for if it is determined that she failed to exercise due diligence in the preparation of this tax
return?
$545
$560
$2,240
$5,000
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Self-Employment Income
Question 61 of 85.
Tina is a sole proprietor. She operates a sporting goods store. Her gross revenue is $95,000 for
2022. Which of the following expenses would NOT meet the definition of “ordinary and
necessary expense”?
$120 per month for a mobile phone used exclusively for the business.
$1,500 for advertising costs.
$2,000 for gifts given to four customers. Each gift is valued at $500.
$30,000 in wage expenses paid to three part-time employees.
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Question 62 of 85.
Harlo incurred $4,000 in actual expenses to operate the vehicle he uses in his consulting
business. During the year, Harlo drove the vehicle a total of 8,000 miles, 2,000 of which were
business-use. What amount of his actual expenses can he deduct as a vehicle expense on his
Schedule C (1040), line 9?
$500
$1,000
$1,120
$4,000
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Question 63 of 85.
With a qualified business income (QBI) deduction, business owners may receive a deduction of
what percent off their business income?
5%
10%
20%
25%
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Question 64 of 85.
Dajon owns and operates an online fitness training company. In 2022, her net profit on Schedule
C (Form 1040), line 31 was $84,000. What is the amount of self-employment tax she must pay?
(See Schedule SE (Form 1040) for help.)
$5,934
$9,619
$11,869
$12,852
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Question 65 of 85.
Juan is self-employed. During the tax year, he had the following income and expenses:
•
Gross receipts: $80,000
•
Advertising: $1,000
•
Office expense: $300
•
Rent: $10,000
•
Liability insurance: $3,000
•
Bookkeeping fees: $500
•
Utilities: $2,000
•
Business meals purchased at restaurants: $1,000
What is Juan’s net profit (or loss) for the tax year?
$17,800
$62,200
$62,700
$80,000
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Question 66 of 85.
Samuel, an independent contractor, worked as a handyman during 2022. He earned $16,500 from
his services, but he did not receive a Form 1099-NEC, Nonemployee Compensation. How does
he report this income?
As gross receipts on Schedule C (Form 1040).
He does not have to report this income because a tax form was not issued to him.
On Form 1040, line 1h, as other earned income.
On Schedule 1 (Form 1040), Part I, line 8j, as an activity not engaged in for profit income.
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Question 67 of 85.
Arlene lives in a 700-square-foot studio apartment. Her rent is $1,300 monthly. She runs her own
catering business and cooks client meals in her kitchen. Arlene’s kitchen is 300 square feet. She
also cooks her personal meals in the kitchen.
What percentage of her rent may Arlene deduct as a business-use-of-home expense?
0%
43%
57%
100%
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Question 68 of 85.
Gen is a new sole proprietor. By the end of January 2022, she needs to issue what document to
any independent contractors to whom she paid $600 or more to do project work for her
business?
Form 1099-K, Payment Card and Third-Party Network Transactions.
Form 1099-MISC, Miscellaneous Income.
Form 1099-NEC, Nonemployee Compensation.
Form W-2, Wage and Tax Statement.
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Question 69 of 85.
Donald is a general partner in a partnership; his share of ordinary income was reported in box 14
of Schedule K-1. Which of the following statements is TRUE?
Donald is considered an employee.
The amount of income reported in this box will be taxed at the rate that applies to long-term capital
gains.
His ordinary income is not subject to self-employment tax.
His ordinary income is subject to self-employment tax.
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Depreciation
Question 70 of 85.
Frank opened a machine shop in 2022. He placed the following assets in service on June 2, 2022:
•
Milling machine
•
Drill press
•
Desk
•
File cabinet
The assets are all used 100% for business and he will depreciate the assets using MACRS
depreciation. Frank is not claiming the Section 179 deduction, the special depreciation
allowance, or the de minimis election. Where on the Form 4562, Depreciation and Amortization,
should the assets be reported?
Part III, Section B.
Part V, Section A.
Part V, Section B.
Part VI.
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Question 71 of 85.
Which taxpayer has property that is depreciable?
Jackson purchased a new camera on March 10, 2022, for his photography business. Later, he had
buyer’s remorse and sold the camera on October 1, 2022.
Kelly owns a townhouse and rents it out to tenants.
Monica purchased a new refrigerator for personal use in her home.
Valerie purchased a lot of land that she held for investment.
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Question 72 of 85.
Special limitations apply to the amount of depreciation that can be claimed for passenger
vehicles. What is the maximum amount of depreciation for a vehicle placed in service in 2022,
with no bonus depreciation claimed?
$10,200
$11,200
$18,000
$19,200
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Passive Income
Question 73 of 85.
Jonathan moved to a new main home in 2021 and converted his former main home to a rental
property. He rented his former main home for all of 2022. Where on his return should he deduct
the mortgage interest, real estate taxes, and insurance paid for the rental property?
Schedule A (Form 1040).
Schedule B (Form 1040).
Schedule C (Form 1040).
Schedule E (Form 1040).
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Question 74 of 85.
When are refundable security deposits forfeited by the tenant considered rental income?
In the year received.
In the year it was forfeited by the tenant.
In the year following forfeiture.
Refundable security deposits are never considered rental income.
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Question 75 of 85.
Carly owns a rental house. Her current tenant, Korey, signed a two-year lease and moved into
the house in January 2022. At that time, Korey paid Carly $1,500 for the first month’s rent and
$1,500 as a refundable security deposit. Korey paid the $1,500 rent in cash on the first of each
month during the year, except in November when he replaced the water heater in exchange for
his rent. The water heater would have cost Carly $1,300 to purchase and install. How much rental
income must Carly report for the tax year?
$16,500
$17,800
$18,000
$19,300
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Question 76 of 85.
Erin is the landlord of a single-family home, which she leased to Carlos in February 2022. Prior
to moving in, Carlos paid $1,000 for the first month’s rent and an additional $1,000 for the last
month’s rent (for a total of $2,000 advance rent). He then paid $10,000 in rent during the
remainder of the tax year. What amount does Erin include in gross rental income for this
property in 2022?
$2,000
$10,000
$11,000
$12,000
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Special Topics
Question 77 of 85.
Andrew is self-employed and knows he will have a balance due on his 2022 return, but he is
unsure how much. Andrew cannot file his tax return by the original due date because he needs
more time to locate and organize his tax records. Which of the following actions is most
appropriate for Andrew?
Andrew must calculate an estimated balance due. He should then complete and file Form
4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, and
include the payment for the estimated balance due no later than April 18th. After April 18th, he should
file his return no later than the extension deadline of October 16th.
Andrew should estimate what his income and expenses are, file his return, pay the balance due by the
original due date of April 18th, and amend the return later.
Andrew should file Form 4868 by April 18th to extend his return until October 16th. After April 18th, he
should file his return and pay his balance due no later than the extension deadline of October 16th.
Since extensions are automatic, Andrew is not required to do anything. He can simply file his tax return
and pay his balance due by October 16th.
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Question 78 of 85.
If a taxpayer has a balance due, the tax preparer may need to determine if estimated payments
will be necessary for the next year. If they are necessary, what steps should the tax preparer
take?
Calculate the payment amounts and provide federal Form 1040-ES, Estimated Tax for Individuals, and
the state equivalent for the taxpayer.
Have the taxpayer file Form 4868, Application for Automatic Extension of Time to File U.S. Individual
Income Tax Return, and pay any balances six months later.
File Form 1040-X, Amended U.S. Individual Income Tax Return, for the taxpayer.
File Form 9465, Installment Agreement Request, for the taxpayer.
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Question 79 of 85.
Rohan qualified for an exemption from withholding in 2022. He also qualifies for an exemption
from withholding for 2023. How does he inform his employer?
He can inform his employer by letter of his exemption.
He will complete Step 1 only of Form W-4, Employee’s Withholding Certificate.
He will submit Form W-4, Employee’s Withholding Certificate, and write “Exempt” on the form in the
space below Step 4(c) and complete Steps 1(a), 1(b), and Step 5.
Since he already qualified in 2022, no further action is required on his part.
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Question 80 of 85.
In which of the following situations should an employee provide a new Form W-4, Employee’s
Withholding Certificate, to their employer?
Hunter does not anticipate any changes to his income next year, and his withholding closely matches
his last year’s tax liability.
Mark and Samantha are getting married and having a baby this year.
Natasha estimated her tax return will result in a $50 refund. She is happy she does not owe and she
wants to keep as much money in her pocket as possible.
Vera has worked at the same job for five years and has had no change in income.
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Question 81 of 85.
Which of the following statements is correct regarding amended tax returns?
Amended tax returns are never eligible for IRS e-file
Do not attach any form, schedule, or statement that changed to Form 1040-X when filing.
Form 1040-X, Amended U.S. Individual Income Tax Return, is used to correct errors or omissions on
an original federal return.
Married couples can change their filing status from married filing jointly to married filing separately after
the due date of the return.
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Special Topics 2
Question 82 of 85.
Mei Liu expects to have a tax liability of $8,000. She will have $5,000 withheld from her wages,
and she knows that she will not be eligible for any available tax credits. Her estimated tax is
$3,000. Generally, by what date should she make her first estimated payment?
April 15th.
June 15th.
September 15th.
January 15th of the following year.
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Question 83 of 85.
Sergio filed a tax return that later the IRS determined had an underpayment of tax due to fraud.
What is the penalty for fraud?
20% of the underpayment attributable to fraud.
75% of the underpayment attributable to fraud.
There is a $2,500 penalty imposed for fraudulent returns.
There is a $5,000 penalty imposed for fraudulent returns.
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Question 84 of 85.
What form is used to calculate the penalty if estimated payments were required, but not paid?
Form W-4.
Form 1040.
Form 1040-ES.
Form 2210.
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Question 85 of 85.
For Tax Year 2022, what is the amount employers are required to withhold from an employee’s
gross pay for social security tax and medicare tax?
1.45% social security tax up to a maximum base amount of $147,000, and 6.2% medicare tax with no
maximum.
6.2% social security tax up to a maximum base amount of $147,000, and 1.45% medicare tax with no
maximum.
7.65% social security tax up to a maximum base amount of $147,000, and .09% medicare tax with no
maximum.
12.4% social security tax up to a maximum base amount of $147,000, and 2.9% medicare tax with no
maximum.
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