In which of the following scenarios does the taxpayer fail to meet the residency test for EIC purposes?

Question 4

In which of the following scenarios does the taxpayer fail to meet the residency test for EIC purposes?

Select one:

a. A taxpayer who is 64 years old and lived in the United States for more than half of the year

This answer is incorrect.  A taxpayer who is 64 years old and lived in the United States for more than half of the year meets the residency test for EIC purposes.

b. A taxpayer whose child lived with him all year.  He and his spouse separated on May 29.

c. A taxpayer whose child lived with him for 5 months and 28 days

d. A taxpayer whose eligible foster child lived with him all year

Question 8

Lucy had the following income in tax year 2019:  Wages $25,900, interest income of $1,300 and strike benefits paid by the union of $1,700.  For purposes of EIC, how much is considered earned income?

Select one:

a. $25,900

b. $30,200

This answer is incorrect.  All items of income listed are not earned income for EIC.

c. $27,200

d. $27,600

Question 9

Which of the following correctly identifies a condition of eligibility for purposes of earned income credit?

Select one:

a. The taxpayer is not required to have a qualifying child.

b. The taxpayer must have only earned income.

This answer is incorrect.  To be eligible to receive EIC, the taxpayer must have earned income; however, may have had sourse of earned income as well.

c. The taxpayer must have wages.

d. The taxpayer’s qualifying children must be under 25 years old.

Question 10

Which of the following meets the age test for purposes of EIC?

Select one:

a. Stuart’s son is 23 years old and lived with him all year.  His son was a full-time student and attends an online school.

b. Micheal’s son turned 19 years old on March 31st of the tax year and is living with his parents.  Michael’s son does not have a job and does not plan to attend college.

This answer is incorrect.  Michael’s son was not under the age of 19 at the end of the year.

c. Jacob is 22 years old.  His 23 year brother has lived with him since Jacob started living on his own two years ago.  Jabob’s brother is a full-time student and works odd jobs to help with his support.

d. Natasha’s 30 year old daughter is permantly and totally disabled.  Natasha’s daughter lived with her all year.

Question 11

Which of the following situations meets the residency test requirements for purposes of EIC?

Select one:

a. Melissa is 18 years old and a full-time student.  Melissa lived with her grandmother until May.  She then moved in with her aunt and lived there until August, when she left and moved in with her father for the remainder of the year.

b. Orlando is 17 years old and lived with his mother until June 28th, when he went to live with his father until December 1st.  Orlando then moved in with a friend.

This answer is incorrect.  Orlando lived with his mother and father for for less than 6 months of the year.

c. Alex is 16 years old and lived with his parent’s until May.  In May he was sent to a juvenile detention facility where he stayed through the remainder of the year.

d. Sterling is 18 years old, a full-time student and lived with her grandmother until June 10th, when she rented an apartment and moved out on her own.

Question 12

Wilson and Zoey live together and are not married.  Jason, their 4-year old son lives with them.  Also living with them the entire year is Wilson’s sister Evie (age 12), Zoey’s daughter, Belle (age 8) and Zoey’s mother (age 64).  Wilson’s AGI is  $30,300 and Zoey’s AGI is $29,950.  Who would be a qualifying child for Wilson

Select one:

a. Jason and Evie

b. Jason and Belle

This answer is incorrect.  While one child meets the relationship test, the other does not.

c. Jason, Evie, and Belle

d. Jason

Question 13

Fiona and her daughter (age 2) lived with Fiona’s grandmother during the year.  Fiona is 23 years old and is a full-time student.  Fiona worked part-time and earned $9,450.  Fiona’s grandmother received Social Security benefits of $22,600 and interest income of $800.  Fiona plans to file a tax return; however, her grandmother is not required to file a return.  Which of the following statements is most accurate?

Select one:

a. Fiona meets the relationship, age, residency, and joint return tests for EIC.  Fiona is a qualifying child of her grandmother.

b. Since Fiona’s grandmother is not required to file a return, Fiona can file a return and claim EIC for herself; however cannot claim EIC for her daughter because her daughter is a qualifying child of her grandmother.

c. Fiona and her daughter meet all the tests for EIC.  Fiona and her daughter are qualifying children of her grandmother.

This answer is incorrect.  While it is true that Fiona and her daughter are qualifying children of her grandmother, other facts cause this answer to be incorrect. 

d. Since Fiona’s grandmother is not required to file a return, Fiona can file a return claiming her daughter as a qualifying child.  Since all EIC test requirements have been met, Fiona is eligible to receive the EIC for her daughter.

Question 14

Tyler is a qualifying widower and has 10-year old twin boys.  Tyler had the following income for the year:

· Wages                           $28,750

· Interest income                $390

· Raffle winnings               1,500

Assuming all EIC requirements are met, what amount of EIC is Tyler eligible to receive?

Select one:

a. $3,702

b. $3,386

c. $3,776

d. $3,460

This answer is incorrect

Question 16

Fred prepared his tax return last year.  This year, Fred decided to have his tax return prepared by a professional.  During the interview process, Fred’s tax preparer realized Fred needs to repay the education credit he took for his son last year.  For which of the following reasons would a taxpayer be required to repay an education credit?

Select one:

a. The taxpayer received tax-free educational assistance for an expense used to calculate a higher education credit on their return.

b. The taxpayer received a refund of transportation expenses.

This answer is incorrect.  Transportation expenses aren’t deductible when calculating the education credit; therefore, there is no requirement to report a refund.

c. The taxpayer received a refund of personal living expenses.

d. The taxpayer received a gift from a relative to help pay lodging expenses.

Question 17

Amy and Hobbes are married and file a joint return.  Their three children are 7, 9, and 18 years old.  Their modified AGI is $58,000, and their tax liability on Form 1040, line 12a is $3,647.  They have no other tax credits for the tax year.  What is the amount of their child tax credit/credit for other dependents on Form 1040, line 13a?

Select one:

a. $4,000

This answer is incorrect.  $4,000 is the maximum amount of CTC with two qualifying children under age 17 and no tax liability limitation.

b. $3,647

c. $6,000

d. $4,500

Question 18

Tony purchased a house in 2019 and received a mortgage credit certificate (MCC) issued by the local government.  The original amount of the mortgage is $150,000, the certified indebtedness amount on the MCC is $100,000, and the mortgage interest paid during the year is $6,500.  Determine the interest paid on the certified indebtedness amount.

Select one:

a. $9,750

b. $6,500

c. $2,167

This answer is incorrect.  $2,167 is not the amount of interest allocated to the certified indebtedness amount.

d. $4,333

Question 19

Bob had two jobs in 2019, earning a total of $139,850 in taxable wages.  He paid Social Security taxes of $7,492.70 from his primary job and $1,178.00 from his second job.  What is the amount, if any, of Bob’s excess SST?

Select one:

a. $       0.00

This answer is incorrect.  Bob is entitled to the credit because he had Social Security tax withheld from wages for more than one job, and the total exceeded the limit for the year.

b. $1,178.00

c. $   709.90

d. $   430.90

Question 20

Ellen and her husband separated in June, are still legally married and will be filing separate returns.  She wants to be able to claim the child and dependent care credit for her 6-year-old son, who lives with her.  All of the following are conditions that Ellen must meet to be considered unmarried and eligible to claim the child and dependent care credit except:

Select one:

a. Ellen did not live with her husband during the last six months of the year.

This answer is incorrect.  The taxpayer must meet this condition to be eligible to take the child and dependent care credit.

b. Ellen paid more than half the cost of keeping up her home for the year.

c. Ellen’s husband must sign a release to allow her to claim the dependent care credit.

d. Ellen’s home was the home of the qualifying individual for more than half the year.

Question 21

Judy’s expenses for her third year at a university include the following: $3,000 for tuition, $500 for books, $2,500 for her dormitory room, and $2,200 for food.  What amount of the expenses will qualify for the American Opportunity Credit?

Select one:

a. $8,200

b. $6,000

This answer is incorrect.  Some of the expenses are not qualified education expenses for the American Opportunity Credit.

c. $3,500

d. $3,000

Question 23

Tom and Darla are married and have three children, ages 5, 11, and 18 years old.  Their modified AGI is $68,000, and their tax liability on Form 1040, line 12a is $4,847.  They claim $1,200 of education credits on Schedule 3 (Form 1040), lines 3.  What is the amount of their child tax credit/credit for other dependents?

Select one:

a. $2,800

This answer is incorrect.  $2,800 amount is the CTC with two qualifying children minus the other nonrefundable tax credits ($4,000 – $1,200 = $2,800).

b. $3,647

c. $3,300

d. $4,500

Question 24

Sophia is a single mom with a 17-year-old daughter whom she claims as a dependent on her tax return.  Sophia’s AGI is $35,000, and her tax liability is $1,724.  She has no other nonrefundable credits.  What is the amount of her child tax credit/credit for other dependents?

Select one:

a. $1,771

b. $   500

c. $2,000

d. $       0

This answer is incorrect.  Sophia is eligible for the CTC/ODC.

Question 25

Mia and Noah have four children, ages one month, 13, 15, and 19.  Their AGI is $96,500, and their tax liability is $8,267.  During the tax year, their 19-year-old son decided to postpone going to college and got a job instead.  He earned wages of $7,400 and provided most of his support.  They have no other nonrefundable tax credits.  What is the amount of their child tax credit/credit for other dependents?

Select one:

a. $6,000

b. $6,500

c. $4,000

This answer is incorrect.  This amount is the CTC with only two qualifying children.

d. $8,000

Question 26

John has two sons.  David is 3-year-old, and Tommy turned 13 on May 1st in 2019.  John paid a local daycare provider $12,000 for David from January through December and $3,000 for Tommy from January through June.  John’s earned income is 60,000.  What is the maximum amount of qualified expenses John can use to figure the child and dependent care credit?

Select one:

a. $  5,000

b. $  6,000

c. $  3,000

This answer is incorrect.  $3,000 is the maximum amount on which the child and depende

nt care credit can be figured for one qualifying child.

d. $15,000

Question 27

Aria and Logan Johnson have two children, Sara, age 2, and Mia, age 4.  Logan is an engineer and Aria is a homemaker.  The Johnsons paid $8,800 for Sara and Mia to attend daycare during the year.  Logan received dependent care benefits from his employer of $2,000.  Their AGI is $65,000, and their tax liability is $4,487.  How much of the childcare expenses can be used to claim the child and dependent care credit?

Select one:

a. $4,000

This answer is incorrect.  Under normal circumstances, the amount of childcare expenses that would be used to claim the dependent care credit would be $4,000.  However, Aria and Logan must meet other qualifications to claim the dependent care credit.

b. $6,000

c. $       0

d. $6,800

Question 29

Alicia’s 18-year-old son is a freshman at a local college.  She paid the required tuition and fees for her son and received a Form 1098-T.  She is wondering whether she is eligible to claim an education credit on her 2019 tax return.  Which of the following statements is correct?

Select one:

a. The phase-out amount based on the taxpayer’s AGI for the Lifetime Learning Credit is greater than for the American Opportunity Credit.

b. If the student has been convicted of a felony for possessing or distributing a controlled substance as of the end of 2019, he is not eligible for the American Opportunity Credit.

c. Both the American Opportunity Credit and the Lifetime Learning Credit are nonrefundable tax credits.

d. The Lifetime Learning Credit offers a higher maximum credit amount than the American Opportunity Credit.

This answer is incorrect.  The American Opportunity Credit offers a higher maximum credit amount than the Lifetime Learning Credit.

Question 30

Shelly, single, is a full-time elementary school teacher.  She is interested in learning the basics of information technology to improve her current job skills and enrolled in a couple of IT courses at the local college.  Shelly paid $3,500 for tuition and fees and $300 for textbooks from a local bookstore (not required by the institution).  She received a Form 1098-T.  Her AGI is $56,000 and her tax liability on Form 1040, line 12a is $5,500.  Shelly has never been convicted of a felony for possessing or distributing a controlled substance.  Which education credit is Shelly eligible to claim and for what amount?

Select one:

a. Lifetime Learning Credit; $760

b. American Opportunity Credit; $2,375

This answer is incorrect.  Shelly is not pursuing a degree or other recognized credential, which is a requirement for American Opportunity credit.

c. Lifetime Learning Credit; $700

d. American Opportunity Credit; $2,450

Question 31

Joshua is a 25-year-old graduate school student who paid $15,000 in tuition and fees to an eligible educational institution in 2019.  He received a Form 1098-T.  Joshua works part-time at a local firm and had wages of $22,500.  He has no other income or nonrefundable tax credits.  His tax liability on Form 1040, line 12a is $1,045.  What is the amount of his education credit for 2019?

Select one:

a. $3,000

b. $1,045

c. $2,000

d. $2,500

This answer is incorrect.  Joshua is not eligible for the American Opportunity Tax Credit.

Question 32

The Browns are both managers and file jointly with a modified AGI of $166,000.  Their dependent son, Gary, is a full-time college student.  During tax year 2019, they paid $10,500 in qualifying education expenses for Gary’s second year of college.  On their tax return, how will the Browns claim the tax benefit for Gary’s education expenses?

Select one:

a. They are not eligible to claim a tax benefit for the education expenses.

This answer is incorrect.  The Browns may be eligible to claim a tax benefit.

b. They can claim an adjustment to income.

c. They can claim the Lifetime Learning Credit.

d. They can claim the American Opportunity Credit.

Question 34

Geoffrey was age 23 on 12/31/19.  He was a full-time student and completed his 4th year of college in May of 2019.  His Spring semester was paid for in December of the prior year and credit on those expenses has been claimed on the prior year’s return.  After graduation, he was unable to find employment, so he moved back in with his parents and entered graduate school in the fall of 2019.  Geoffrey’s parents are claiming him as a dependent on their tax return, and they had an AGI of $57,000.  Geoffrey received a 1098-T from the college with Box 9 checked (graduate student).

Which of the following statements is correct?

Select one:

a. Geoffrey’s parents will claim him as a dependent and are eligible to take a Lifetime Learning Credit.

b. Geoffrey’s parents will claim him as a dependent and are eligible to take an American Opportunity Credit.

This answer is incorrect.  Geoffrey’s parents cannot take an American Opportunity Credit since “graduate student” was checked in Box 9 of the 1098-T.

c. Geoffrey’s parents will claim him as a dependent and may take an American Opportunity Credit for the expenses for Geoffrey’s 4th year in college and take a Lifetime Learning Credit for Geoffrey’s graduate school expenses in 2019.

d. Geoffrey’s parents will claim him as a dependent but are ineligible to claim either an American Opportunity Credit or Lifetime Learning Credit for 2019.

Question 36

The Grays’ son, Joel, graduated and received his bachelor’s degree in June 2019.  In 2019, Joel turned age 24 and provided more than half of his support.  The Grays file jointly with modified AGI of $116,000.  Joel has modified AGI of $26,000.  Who can claim a tax credit for education expenses paid by Joel during 2019?

Select one:

a. Either the Grays or Joel (but not both) can claim an education tax credit.

This answer is incorrect.  Only one of them will be eligible for an education credit.

b. Only Joel can claim the Lifetime Learning Credit or the American Opportunity Credit (if he qualifies), whichever is more beneficial.

c. Neither the Grays nor Joel can claim an education tax credit.

d. Only the Grays can claim the Lifetime Learning Credit or the American Opportunity Credit (if Joel qualifies), whichever is more beneficial.

Question 37

Linda paid her tuition and later received a Pell grant (tax-free educational assistance) covering part of the tuition.  All of the following are true except:

Select one:

a. If the Pell grant was received after Linda claimed the education credit on her return, she may have to repay all or part of the credit.

b. The Pell grant should reduce the amount of qualified expenses for the education credit.

c. Linda does not need to adjust her education credit by the Pell grant since it was received after she filed her return.

d. If Linda claimed an education credit and received a reimbursement for that same year; Linda must refigure the credit for a previous year and report the difference as an additional tax on line 12a (Form 1040).

This answer is incorrect. Linda must refigure the credit and report the difference as an additional tax on line 12a (Form 1040).

Question 38

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Question text

Madison, 18, is in her first year of college.  She lives with her parents and attends a local college.  Madison’s parents continue to claim her as a dependent since she is a full-time student and under age 24.

Madison paid the following amount for qualified tuition in 2019:

· $2,100 in March for the summer semester (2019)

Her parents paid the following amounts for qualified tuition in 2019:

· $3,500 in June for the fall semester (2019)

· $3,300 in December for the spring semester (2020)

What amount of qualified tuition will Madison be allowed to use in calculating her 2019 American Opportunity Credit on her tax return?