H&R BLOCK Final Test Review (ITC 2024) Latest Update 2024-2025 155 Questions and 100% Verified Correct Answers Guaranteed A+
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. - CORRECT ANSWER: EIC,
AOTC, CTC/ODC/ACTC, and head of household.
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. - CORRECT ANSWER: Investigate and verify the accuracy of information the taxpayer provides to show eligibility for EIC, AOTC, CTC/ODC/ACTC, and HOH.
Define basis. - CORRECT ANSWER: Basis is a measure of the taxpayer's investment
in property, which is used to determine gain or loss for tax purposes
Determining if a trade or business is considered a specified service trade or business (SSTB) is significant for taxpayers that have taxable income over the lowest thresholds.
What type of trades or businesses are considered SSTBs? - CORRECT ANSWER: A
specified service trade or business (SSTB) is any trade or business involving the performance of services in the fields of health, law, consulting, athletics, financial services, brokerage services or any trade or business in which the principal asset of the business is the reputation or skill of one or more of its owners or employees, or that involves the performance of services that consist of investing and investment management, trading, or dealing in securities, partnership interests, or commodities. 1 / 3
Does the fact that an employee is having income tax withheld from their paycheck mean their tax liability will be covered? - CORRECT ANSWER: Not necessarily. If a taxpayer experiences a change of circumstances with regard to their personal or financial situation, such as the loss of a dependent, or if they have substantial income that is not subject to withholding, they may owe additional taxes at the end of the year. Taxpayers with more than one job may also owe additional taxes
Earned Income - CORRECT ANSWER: Any income (wages/salary) that is generated by
working
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. - CORRECT 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. - CORRECT ANSWER:
For MACRS purposes, you need to divide real property into two categories. What are they? - CORRECT ANSWER: Land, which is not depreciated, and structures, which are depreciated.
For tax purposes, when is a person's marital status determined? - CORRECT
ANSWER: On the last day of the tax year, or the date of death.
How are deductible property expenses determined if part is strictly rental and part is strictly personal? - CORRECT ANSWER: Expenses must be divided between the rental and personal portion. This can be done by any reasonable method. The most common methods are by square footage or the number of rooms in the house. If the taxpayer itemizes deductions, the personal portions of real estate taxes, mortgage interest, and qualified casualty losses may be deducted on Schedule A.
How can a married individual meet the joint return test to remain a qualifying child? -
CORRECT ANSWER: They can meet this test by not filing a joint return with their
spouse, or they can file a joint return with their spouse if they are filing only to claim a refund of any taxes withheld.
How can the gross income test for a qualifying relative be satisfied? - CORRECT ANSWER: The qualifying relative's gross income must be less than $4,300. When 2 / 3
determining the gross income, tax-exempt income, such as certain social security benefits, is not included.
How do members of the clergy and statutory employees pay income taxes and self-
employment taxes? - CORRECT ANSWER: Generally, clergy are considered
employees of the church and receive a Form W-2; however, they are considered self- employed in regard to social security and medicare. Because of this, they must complete Schedule SE and pay self-employment taxes.
A statutory employee is an employee for social security and medicare tax purposes and self-employed for income tax purposes. They must report their wages on Schedule C.Their social security and medicare taxes are generally withheld from their paychecks, so they do not need to complete Schedule SE.
How do you determine the taxable portion of a social security distribution? - CORRECT ANSWER: The amount of a taxpayer's social security or tier 1 railroad retirement benefits subject to federal tax varies from zero to 85%, depending upon filing status and income. The level of taxability is based on MAGI increased by one-half of the net benefits received by the taxpayer (and spouse, if MFJ).The taxable portion is calculated using the Social Security Taxable Benefits Worksheet.
How do you determine whether someone is an employee or an independent contractor?
- CORRECT ANSWER: There are three main factors to look at to determine whether
someone is an employee or independent contractor.
Does the employer have a right to direct and control the behavior of the employee?Does the employer have the right to control the business portion of the work?How do the employer and employee view their relationship, as evidenced by employment agreements and similar documents?
How is cost of goods sold determined? - CORRECT ANSWER: Cost of goods sold is
beginning inventory plus purchases and other direct costs of goods minus the ending inventory. It is calculated on Schedule C, Part III, page 2.
How is income from an estate, trust, or other pass-through entity reported to a
taxpayer? - CORRECT ANSWER: On one or more Schedules K-1.
How is interest income reported to the taxpayer? - CORRECT ANSWER: Interest
income is reported to the taxpayer on Form 1099-INT or a substitute statement.
How is the gross income filing requirement determined for most nondependent
taxpayers? - CORRECT ANSWER: The taxpayer's standard deduction, including the
additional amounts for age. However, for married filing separately, or married filing jointly when the spouses did not live together at the end of the year, the amount is $5.
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