Lesson 1 - JustAnswer

All questions pertain to Tax Year 2016 unless noted.

Lesson 1

1. Some returns are not eligible for the Internal Revenue Service electronic filing program. Which item listed below is generally eligible to be filed through the Internal Revenue Service electronic filing program? A. Form 1040A B. Form 990T C. Tax returns for prior years D. Amended tax returns

2. Federal law requires paid tax return preparers to electronically file Federal income tax returns if they file how many combined 1040, 1040A, 1040EZ and 1041 returns during the year? A. 5 or more B. 7 or more C. 9 or more D. 11 or more

3. All of the following are true regarding the Preparer Tax Identification Number (PTIN) except: A. New regulations require all paid tax return preparers and enrolled agents to obtain a Preparer Tax Identification Number (PTIN) before preparing any Federal tax returns B. A tax preparer must renew his or her PTIN every year during the renewal season C. Failure to have a current PTIN could result in the imposition of Internal Revenue Code section 6695 penalties, injunction, and/or disciplinary action by the IRS Office of Professional Responsibility D. The PTIN is not required for CPAs if they prepare for compensation all or substantially all of a Federal tax return or claim for refund

4. As a tax preparer you work with a client named Mary on her 2016 tax return and there are no issues. However, during that process you realize Mary was due a refund in 2015 but did not file a return. Which of the following statements applies to Mary with respect to her 2015 refund? A. Mary cannot apply for a refund for the year 2015 as it is too late B. Mary has up to three years from the date the tax return was due to file a 2015 return to obtain her refund C. Mary has up to four years from the date the tax return was due to file a 2015 return to obtain her refund D. Mary has up to five years from the date the tax return was due to file a 2015 return to obtain her refund

5. In working with a client named Fred, you realize that he did not report income that he should have on a return. Fred reported $10,000 of income on the return but should have reported $13,500. What is Fred's obligation going forward regarding this incident? A. Fred must maintain records for 5 years from the year the return was filed B. Fred must maintain records for 6 years from the year the return was filed C. Fred must maintain records for 8 years from the year the return was filed D. Fred must maintain records for 10 years from the year the return was filed

6. Under the cash method, a taxpayer includes in his or her gross income all items of income actually or constructively received during the tax year. If he or she receives property and services, the taxpayer must include what amount in income? A. Fair market value (FMV) B. Purchase price C. Cost D. Adjusted basis

7. Agnes Green was a single, calendar year taxpayer. She died on March 6, 2016. Her final income tax return must be filed by which date? A. April 15, 2016 B. January 1, 2017 C. March 6, 2017 D. April 15, 2017

8. Taxpayers can make payments by electronic funds withdrawal (EFW) for all of the following except: A. Form 4868 - Application for Automatic Extension of Time to File U.S. Individual Income Tax Return B. Form 2350 - Application for Extension of Time to File U.S. Income Tax Return for Citizens and Resident Aliens Abroad Who Expect to Qualify for Special Tax Treatment C. Form 1040-ES - Estimated Tax for Individuals (Taxpayers can make up to four estimated tax payments at the time that they electronically file the Form 1040 series return) D. Form 433-F - Collection Information Statement

9. For the 2016 tax year, Michael had wages of $52,000. What amount will be withheld from his earnings for the Federal Insurance Contributions Act (FICA)? A. $3,224 B. $3,978 C. $5,408 D. $6,448

10. Captain Margaret Jones entered Afghanistan on December 1, 2014. She remained there through March 31, 2016, when she departed for the United States. She was not injured and did not return to the combat zone. What date is her 2016 tax return due if she does not file Form 4868? A. January 1, 2017 B. April 15, 2017 C. June 15, 2017 D. October 15, 2017

11. If an individual taxpayer files on a fiscal year basis (a year ending on the last day of any month except December), and his or her fiscal year ends June 30. What is the due date of the tax return? A. September 1 B. October 1 C. October 15 D. December 31

12. When a taxpayer is using a debit or credit card for payment all of the following are true except: A. If the taxpayer made an overpayment, IRS will refund it after the return is processed B. The taxpayer can make Federal tax deposits with a debit or credit card C. Making an electronic payment eliminates the need to use a voucher D. High balance payments of $100,000 or greater may require special coordination with the service provider chosen

13. For which of the following unpaid debts may the Bureau of Fiscal Service (BFS) apply part or all of a tax refund to pay that debt? A. Past-due child support B. Federal agency non-tax debts C. State income tax obligations D. All of the above

14. The taxpayer is considered to have reasonable cause for the period covered by an automatic extension if at least what percentage of the actual tax liability is paid before the regular due date of the return through withholding, estimated tax payments, or payments made with Form 4868 - Application for Automatic Extension of Time To File U.S. Individual Income Tax Return? A. 75% B. 80% C. 85% D. 90%

15. To figure whether she should pay estimated tax for 2016, Jane determines her expected adjusted gross income (AGI) for 2016 will be $82,800. Her AGI for 2015 was $73,700. Her total tax on her 2015 return (Form 1040, line 61) was $9,001. Using the 2016 Estimated Tax Worksheet she figures her total 2016 estimated tax to be $11,015. Her tax expected to be withheld in 2016 is $10,000. She will file as head of household and expects no refundable credits in 2016. All of the following are true regarding Jane's estimated taxes except: A. She expects to owe at least $1,000 for 2016 after subtracting her withholding from her expected total tax B. She expects her income tax withholding to be at least 90% of the tax to be shown on her 2016 return C. Jane does not need to pay estimated tax D. Jane will need to pay estimated tax

16. The taxpayer will owe a penalty for any 2016 payment period for which his or her estimated tax payment plus his or her withholding for the period and overpayments for previous periods was less than what percent of his or her 2015 tax? A. 20% B. 21% C. 22.5% D. 25%

17. The taxpayer does not owe a penalty for underpayment of the estimated tax if the total tax shown on his or her return minus the amount he or she paid through withholding (including excess Social Security and tier 1 railroad retirement (RRTA) tax withholding) is less than what amount? A. $500 B. $1,000 C. $1,500 D. $2,000

18. Using the short method in Part III of Form 2210, Alvaro determines his total underpayment for 2015 was $2,000. If he meets all other conditions and the entire amount was paid on or after April 15, 2016, what is the amount of his underpayment penalty? A. $0 B. $40 C. $45 D. $52

19. If the taxpayer thinks he or she owes the estimated tax penalty, but does not want to figure it when he or she files the tax return, the taxpayer may not have to. Generally, the IRS will figure the penalty for him or her and send a bill. The taxpayer only needs to figure his or her penalty in which of the following situations? A. The taxpayer is requesting a waiver of part, but not all, of the penalty B. The taxpayer is using the annualized income installment method to figure the penalty C. The taxpayer is treating the Federal income tax withheld from his or her income as paid on the dates actually withheld D. All of the above

20. Ray, who is single and 22 years old, was unemployed for a few months during 2015. He earned $6,700 in wages before he was laid off, and he received $1,400 in unemployment compensation afterwards. He had no other income. Even though he had gross income of $8,100, he did not have to pay income tax because his gross income was less than the filing requirement for a single person under age 65. He filed a return only to have his withheld income tax refunded to him. In 2016, Ray began regular work as an independent contractor and earned $28,000. Ray made no estimated tax payments in 2016 and he did owe tax at the end of the year. What amount does Ray owe for the underpayment penalty in 2016? A. $0 B. $555 C. $558 D. $630

21. The payment transaction limit for which a taxpayer can use a debit or credit card to make a payment for a Form 1040 tax return, for the current tax year, is how many times per year? A. 1 time per year B. 2 times per year C. 3 times per year D. 4 times per year

22. What is the user fee when a taxpayer enters into a standard installment agreement or a payroll deduction agreement with the IRS allowing for periodic partial payments of taxes owed? A. $50 B. $125 C. $225 D. $300

23. If a taxpayer files a claim for a loss from worthless securities or bad debt deduction, he or she must keep records that support items shown for how many years after the return was filed? A. 5 years B. 7 years C. 8 years D. No limit

Lesson 2

24. Which of the following Federal tax forms could a single filing taxpayer use if his or her taxable income is $175,000? A. Form 1040EZ B. Form 1040A C. Form 1040 D. All of the above

25. An individual can use Form 1040NR-EZ instead of Form 1040NR if all of the following items apply except: A. The taxpayer does not claim any dependents B. The taxpayer cannot be claimed as a dependent on another person's U.S. tax return C. The taxpayer does not claim any tax credits D. If the taxpayer was married, he or she claims an exemption for his or her spouse

26. Emily Smith files her tax return on the basis of a fiscal year. Her records show that she received income in November 2015 and February 2016 from which there was backup withholding ($100 and $50, respectively). Emily takes credit for what amount of backup withholding on her tax return for the fiscal year ending September 30, 2016? A. $0 B. $50 C. $100 D. $150

27. Andy originally reported $21,000 as his adjusted gross income on his 2015 Form 1040. He received another Form W-2 for $500 after he filed his return. Which of the following is true? A. Andy should file another Form 1040 for 2015 B. Andy should re-file Form 1040 for 2015 C. Andy should include the $500 on his 2016 Form 1040 D. Andy should use Form 1040X - Amended U.S. Individual Income Tax Return to correct the Form 1040

28. As a wage earner, the taxpayer pays Federal income tax by having it withheld from his or her pay during the year. The withholding is based on the number of allowances he or she claims when filing Form W-4 - Employee's Withholding Allowance Certificate, with an employer. All of the following are true regarding the completion of Form W-4 except: A. A taxpayer can claim any number of allowances B. If the taxpayer has not changed jobs, he or she generally does not have to give his or her employer a new Form W-4 each year C. The taxpayer should try to have his or her withholding match his or her actual tax liability D. If an employer cannot withhold enough additional tax from the taxpayer's wages, he or she may need to make estimated tax payments

29. Meg Green works in a store and earns $46,000 a year. Her husband, John, works full-time in manufacturing and earns $68,000 a year. In 2016, they will also have $184 in taxable interest and $1,000 of other taxable income. They expect to file a joint income tax return. Meg and John complete Worksheets 1, 4, and 7 of Form W-4. Line 5 of Worksheet 7 shows that they will owe an additional $4,459 after subtracting their withholding for the year. All of the following are true regarding their new Form W-4 except: A. They can divide the $4,459 any way they want B. They can enter an additional amount on either of their Forms W-4 C. They can divide the additional amount between them D. They must apply the additional withholding amount to Meg's taxable income

30. Which of the following statements regarding tip income is true? A. If the taxpayer is an indirectly tipped employee (for example, a busser or bartender) he or she is not required to report tips to an employer B. Any tips the taxpayer reported to an employer are to be included in the wages in box 1 (Wages, tips, other compensation) of his or her Form W-2 C. If the only tips a taxpayer receives in a month are charged tips (for example, credit and debit card charges) distributed to him or her by an employer, he or she not required to report these tips to the employer D. If the only tips a taxpayer receives in a month are cash tips, he or she is not required to report these tips to the employer

31. Every employer engaged in a trade or business who pays remuneration, including noncash payments of what amount or more for the year for services performed by an employee must file a Form W-2 - Wage and Tax Statement for each employee (assuming no income, Social Security, or Medicare tax was withheld)? A. $500 B. $600 C. $700 D. $800

32. In certain situations, the taxpayer will receive two W-2 forms in place of the original incorrect form. This will happen for which of the following reasons? A. The taxpayer's identification number is wrong or missing B. The taxpayer's name and address are wrong C. The taxpayer received the wrong type of form D. All of the above

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