Reference no: EM132711729

Questions -

Q1) Assuming that a 2019 tax return is being completed (filed in 2020), answer this question: Bobbi's total adjusted gross income is $50,000. She has gambling losses of $2000, unreimbursed employee expenses of $500, and qualifying safety deposit box rental fees of $50. Bobbi is itemizing expenses on Schedule A. Calculate the amount of her net miscellaneous expense deduction on Schedule A.

a. $2,000.00

b. $2,550.00

c. $0.00

d. $1,000.00

Q2) Nina Nguyen is a 34-year-old taxpayer. On March 1 of the tax year, a tornado damaged her vehicle. Because of the tornado, the area was declared a presidentially declared disaster area. On March 3 (just two days later) her home was burglarized and jewelry was stolen. Neither the vehicle nor the jewelry was insured. With the TCJA changes for 2018 through 2025 tax years, which of these events will qualify as a casualty loss if you itemize expenses on your tax return?

a. Both of these events qualify

b. Only the tornado damage may qualify

c. Only the theft of the jewelry may qualify

d. Neither event will qualify

Q3) Which of the following statements, related to payroll / self-employement taxes, is false?

a. Employees are responsible for paying their share of Social Security and Medicare taxes.

b. The Federal Unemployment Tax (FUTA) is a shared responsibility tax - the employer pays 50% and the employee pays 50% of this tax.

c. Self-employment tax must be calculated and paid using Schedule SE.

d. Employers generally must withhold federal income tax from employees' wages. To figure out how much tax to withhold, use the employee's Form W-4 and withholding tables which can be found in Publication 15, Employer's Tax Guide.

Q4) Which of the following expenses can be deducted as charitable contributions?

a. Miles driven in an individual's vehicle between homes of seniors, delivering hot meals

b. The value of an individual's time spent attending board meetings for a nonprofit organization

c. The value placed on financial reports that an individual prepared

d. All of the above can be expensed

Q5) Under TCJA, when determining the annual limit on the total contributions that you can deduct on Schedule A, the "60% limit" as related to charitable contributions is defined as:

a. Your deductions for charitable contributions cannot be more than 60% of your adjusted gross income for the year.

b. Your deductions for charitable contributions cannot exceed 60% of your total itemized deductions.

c. Your deductions for charitable contributions cannot exceed 60% of your taxable income.

d. The TCJA has eliminated the annual limit to contributions that you can deduct in any given year.

Q6) Which of the following statements below is false?

a. The taxpayer may be required to pay a penalty for underpayment of taxes even if he/she was found to have made an honest mistake (negligent).

b. When careless errors occur, if signs of fraud are absent, the IRS will usually assume that it was an honest mistake rather than the willful evasion of the tax code.

c. Income tax fraud is the willful attempt to evade tax law or defraud the IRS.

d. All of the answers above are true statements.

Q7) Which of the following is a true statement regarding the paying of estimated taxes?

a. The taxpayer expects to owe at least $100.00 in tax for the tax year, after subtracting any tax withholdings and refundable credits

b. Estimated tax payments can only be made annually when Form 1040 is filed

c. If you are subject to tax withholdings by an employer you will never need to make estimated tax payments

d. All of the above statements are false.

Q8) Regarding the student loan interest deduction, which of the following statements regarding dependents is true?

a. An individual can be a taxpayer's dependent unless the individual is a dependent of another taxpayer

b. An individual can be a dependent unless the individual files a joint return with a spouse.

c. An individual can be the taxpayer's dependent even if the individual had gross income for the year that was equal to or more than the income exemption amount for the year

d. All of the statements are false.

Q9) Grace entered a divorce agreement on March 2, 2019. Grace Newbury received $4,000.00 in alimony payments and $6,000.00 in child support payments during the tax year. What is the total amount of taxable income from these two sources?

a. $4,000.00

b. $10,000.00

c. $6,000.00

d. $0.00

Q10) A taxpayer may be able to deduct the amount paid for health insurance for _________, if the taxpayer or spouse was self-employed and had a net profit for the year.

a. Him/herself

b. His/her spouse

c. His/her dependents

d. All of the above

Q11) A tax refund from state and local government entities may be taxable in the year it is received. Which of the following statements is correct?

a. If a taxpayer claimed the standard deduction on the prior year federal tax return the state tax refund is not taxable

b. If deductions were itemized on the federal tax return from the prior year and a deduction for State and Local Taxes was taken, then the taxpayer needs to determine if any portion of the refund will be taxable in the current year

c. Both A and B are correct

d. Whether or not the tax refund will be taxable has nothing to do with taking the standard deduction or itemizing deductions, therefore both statements are false

Q12) Max and Lynn Nguyen used their home in Michigan for personal purposes during the tax year but also rented it for one week at a fair rental price during the holiday season when they took a trip to Hawaii. How is the rental income collected recorded for tax purposes?

a. The rental income collected is not recorded for tax purposes

b. The rental income is not reported but the rental expenses incurred are recorded for tax purposes

c. The rental income collected is reported on Schedule E

d. The rental income is not recorded because their home was rented for less than 15 days

e. Both A and D are correct

Q13) David Ross files as head of household. His income from rentals units was $39,000. How much of his social security benefits may be subject to tax?

a. Up to 50 percent

b. Up to 85 percent

c. Up to 30 percent

d. They will not be taxed at all

Q14) David was not feeling well and contacted his employer to inform her that he would not be in to work. David would have earned $150.00 for the full day of work. His employer pays him the $150.00 he would have earned and notated the payment as sick pay on David's pay stub. David feels better the following day and returns to work. How should David account for the one day of sick pay he received when he files his tax return?

a. The full amount of sick pay will not be reported on his tax return because sick pay is not taxable

b. The full amount of sick pay will be reported as taxable income and will be included with his regular wages

c. David may need to report a portion of the sick pay as taxable income if the employer designated any portion of the payment as a disability payment

d. David will report the sick pay as "miscellaneous income" on his tax return, separate from any wages that will be reported

e. None of the above are correct statements

Q15) Which of the statements below best describe a Traditional or Regular IRA?

a. A Traditional IRA is an Individual Retirement Account to which you contribute pre-tax or after-tax dollars, and which allows your money to grow tax-deferred. When you make withdrawals after age 59½, they're treated as long-term capital gains.

b. A Traditional IRA is an Individual Retirement Account to which you contribute pre-tax or after-tax dollars, and which allows your money to grow tax-deferred. When you make withdrawals after age 59½, they're treated as current income.

c. A Traditional IRA is an Individual Retirement Account to which you contribute after-tax dollars (but not pre-tax dollars), and which allows your money to grow tax-deferred. When you make withdrawals after age 59½, they're treated as current income.

d. A Traditional IRA is an Individual Retirement Account to which you contribute pre-tax or after-tax dollars, and which allows your money to grow tax-free. When you make withdrawals after age 59½, the withdrawals are not taxed.

Q16) Which of the following statements is false with regards to a Roth IRA?

a. Qualified distributions are tax free

b. Contributions can be made to a Roth IRA past the age of 70 1/2 .

c. Mandatory distributions from a Roth IRA must start no later than the year the taxpayer reaches the age of 75 1/2.

d. All of the above are true

Q17) Mindy May paid the following during the tax year: $1,000 interest on a new auto loan, $500 interest on department store charge card outstanding balances, and $5,000 interest on a mortgage loan used to purchase her primary residence What is Mindy's itemized deduction for interest expense on Schedule A?

a. $6,500

b. $5,000

c. $5,500

d. $1,500

Q18) Which of the following are valid accounting periods?

a. The calendar year period which is the 12 month period ending on the last day of any month other than December

b. The calendar year period which is the 12 month period ending December 31

c. The fiscal year period which is a 12 month period ending December 31

d. Both A and C are correct

Q19) Which of the following test(s) must be met for a taxpayer to be able to deduct any tax on Schedule A?

a. The tax must be imposed on the individual

b. An individual must pay the tax during the tax year

c. The tax must be more than 2% of an individual's adjusted gross income (AGI)

d. A and B are correct.

e. All of the above are correct

Q20) Jamie is donating her used car to a charity. The car has a claimed value of $3,000, what does she need to make sure to obtain from the donee organization?

a. IRS Form 8283

b. A contemporaneous written acknowledgment

c. A signature on Line 14a of Form 8283 with a date no later than 30 days after the date of the sale

d. A signature on Line 14a of IRS Form 1098-C with a date no later than 30 days after the date of the sale

Q21) Which of the following statements is true concerning the tax filing requirements if a taxpayer owes Alternative Minimum Tax (AMT)?

a. They can calculate their AMT directly on their personal income tax return, Form 1040

b. They can file Form 6251 without having to file a personal income tax return

c. An individual must always complete Form 6251 and file the form with their personal tax return Form 1040, whether or not they actually owe any AMT

d. An individual must complete Form 6251 separate from their personal income tax return and attach Form 6251 to the tax return Form 1040

Q22) Elton is an employer, which of the following taxes he pays can he deduct as business expenses:

a. Federal Unemployment taxes (FUTA)

b. Social Security (FICA)

c. Medicare and State Disability Insurance (SDI)

d. All of the above can be deducted as business expenses.

Q23) Jill Suk is retired and 68 years old. She is covered by social security and is enrolled in both Medicare A and Medicare B. She pays $450.00 payroll tax for the A portion and a premium of $1,100 for the B portion, annually. How much of these expenses can Jill list on Schedule A as medical and dental expenses?

a. $1,550.00

b. $1,100.00

c. -0-

d. $450.00

Q24) What percentage of Social Security and Medicare tax must an individual who is self-employed pay?

a. They do not have to pay Social Security and Medicare tax

b. 75%

c. 50%

d. 100%

Q25) To figure if you held a capital asset longer than 1 year, The day you disposed of the property is part of your holding period.

a. start counting on the day before the day you acquired the property.

b. start counting on the day following the day you acquired the property.

c. start counting on the day you acquired the property.

d. start counting two business days following the day you acquired the property.