HR BLOCK Final Test Review (ITC 2022)
Questions & Answers
Which of the following is a requirement for all taxpayers who want to claim the EIC?
Live in the U.S. for more than half a year.
Have a valid social security number.
Have a qualifying child dependent.
Have AGI less than $21,430 ($27,380 MFJ). - ANSWERHave a valid social security
number.
A combined due diligence penalty of $2,180 would indicate a penalty for which of the
following?
EIC, CTC/ODC/ACTC, and head of household.
EIC, AOTC, and CTC/ODC/ACTC.
EIC, AOTC, CTC/ODC/ACTC, and head of household.
EIC, PTC, CTC/ODC/ACTC, and head of household. - ANSWEREIC, AOTC,
CTC/ODC/ACTC, and head of household.
When dependent care benefits are withheld from a taxpayer's income, where are they
reported by the employer?
Form 2441.
Form 1040.
Box 10 of Form W-2.
The employer is not required to report them. - ANSWERBox 10 of Form W-2.
All of the following are due diligence requirements a tax preparer must meet for EIC,
AOTC, CTC/ODC/ACTC, and HOH, EXCEPT:
Investigate and verify the accuracy of information the taxpayer provides to show
eligibility for EIC, AOTC, CTC/ODC/ACTC, and HOH.
Complete all worksheets used to compute the credits. If the worksheet is completed by
hand, keep a copy in the taxpayer's client file.
Maintain a copy of documents provided by the taxpayer that the tax preparer relied on
when determining credit eligibility. Then record the date the information was obtained
and the name of who provided the information.
When information provided by the taxpayer appears to be incorrect, inconsistent, or
incomplete, the tax preparer must make additional inquiries to determine if the taxpayer
,is eligible for the benefit. Then document both the questions asked and responses
provided. - ANSWERInvestigate and verify the accuracy of information the taxpayer
provides to show eligibility for EIC, AOTC, CTC/ODC/ACTC, and HOH.
When a taxpayer receives Form 1099-R with no amount entered in box 2a and code 7
entered in box 7, the entire distribution:
Could be partly or entirely taxable.
Is never taxable.
Is an early distribution and taxable.
Has been rolled into a traditional IRA or into another qualified plan. - ANSWERIs never
taxable.
What is the maximum amount of the American Opportunity Tax Credit a taxpayer could
receive per student?
$1,650
$1,800
$2,000
$2,500 - ANSWER$2,500
Which test for a qualifying child does NOT need to be met in order for the child to be a
qualifying person for purposes of Earned Income Credit (EIC)?
Age.
Relationship.
Residency.
Support. - ANSWERSupport.
Which of the following expenses qualifies for an education credit in 2021?
Tuition payments. The taxpayer didn't receive scholarships, grants, or other nontaxable
benefits.
Fees for an optional student activity.
Cost of student medical fees.
Tuition payments. The taxpayer received a nontaxable grant, which covered the entire
tuition expense. - ANSWER
Employer-provided dependent care assistance:
May be used for the Child and Dependent Care Credit.
Is subtracted from the total expenses for child or dependent care on Form 2441.
Is included in wages on Form W-2.
Is not reported to the IRS. - ANSWER
Which of the following is NOT a percentage of social security benefits subject to federal
tax? Up to __________.
0%
50%
85%
, 100% - ANSWER100%
What is the maximum amount of the lifetime learning credit?
$1,100 per return.
$1,650 per return.
$2,000 per return.
$2,500 per return. - ANSWER$2,000 per return.
Employer-provided dependent care assistance:
It may be used for the Child and Dependent Care Credit.
It is subtracted from the total expenses for the child or dependent care on Form 2441.
It is included in wages on Form W-2.
It is not reported to the IRS. - ANSWER
Earned Income - ANSWERAny income (wages/salary) that is generated by working
Unearned Income - ANSWERinclude 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? - ANSWERIf
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? -
ANSWERNo. 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? - ANSWERNo, the federal
government does not tax municipal bond interest.
How is interest income reported to the taxpayer? - ANSWERInterest 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? - ANSWER
For tax purposes, when is a person's marital status determined? - ANSWEROn the last
day of the tax year, or the date of death.
