1. Filing Requirement

Question 1

How can using a prior year’s return for comparison help a tax return preparer?

Answer 1

It can prevent gross mathematical errors and identify significant changes.

Question 2

If there were no significant changes between the current and prior year’s return, then the current-year return should result in

Answer 2

A similar amount of tax liability or refund as the previous year.

Question 3

A taxpayer’s personal information (e.g., date of birth, age, marital status, dependents) is used to verify the identity of

Answer 3

The taxpayer and related dependents.

Question 4

How can an individual’s age be relevant to a tax return?

Answer 4

The age of an individual determines if (s)he qualifies for additional deductions (65 and over), retirement distributions, dependency, etc.

Question 5

If a taxpayer is an alien (not a U.S. citizen), (s)he is considered a nonresident alien unless either of which two tests is met?

Answer 5

1.The green card test
2.The substantial presence test

Question 6

Which expenses are not deductible on a tax return?

Answer 6

A personal, living, or family expense is not deductible unless the Code specifically provides otherwise. Nondeductible expenses include
1.Rent and insurance premiums paid for the taxpayer’s own dwelling;
2.Life insurance premiums paid by the insured;
3.Upkeep of an automobile;
4.Personal interest; and
5.Payments for food, clothing, or domestic help.

Question 7

What are some items from the prior-year return that may be needed to complete the current-year return?

Answer 7

1.State income tax refund
2.AMT for credit
3.Gain or loss carryover
4.Charitable gift carryover
5.Schedule D
6.Form 8801

Question 8

What are the reporting requirements for individuals who do business in the U.S. but have an ownership interest in a foreign account of over $10,000?

Answer 8

Generally, any U.S. citizen, resident, or person doing business in the United States who has an ownership interest in a financial account in a foreign country with an aggregate value in excess of $10,000 at any time during the calendar year must file a Form FinCEN Report 114, Report of Foreign Bank and Financial Accounts (FBAR), reporting certain information with respect to that account by April 15 of the subsequent year or the extension due date of October 15.

Question 9

Individuals with specified foreign financial assets with an aggregate value greater than $50,000 at the last day of the year or more than $75,000 at any time during the tax year must file using

Answer 9

Form 8938.

Question 10

Two individuals are treated as legally married for the entire year if, on the last day of the tax year, they are

Answer 10

1.Legally married and cohabiting as spouses,
2.Legally married and living apart but not separated pursuant to a valid divorce decree or separate maintenance agreement, or
3.Separated under a valid divorce decree that is not yet final.

Question 11

If a spouse dies, when is the status for each spouse determined?

Answer 11

Unless the surviving spouse remarries before the end of the tax year (in which case the decedent files married filing separate) status is determined when the spouse dies.

Question 12

Under what circumstance may a joint return be filed if one of the spouses is a nonresident alien at any time during the tax year?

Answer 12

A joint return is not allowed if one spouse was a nonresident alien (NRA) at any time during the tax year unless the U.S. citizen and the NRA spouse so elect and agree to be taxed on their worldwide income.

Question 13

If one spouse files separately, can the other spouse file jointly?

Answer 13

No. If one spouse files separately, so must the other.

Question 14

If a joint return has been filed for the year and the time for filing the return of either spouse has expired, may the spouses amend their returns to file separately?

Answer 14

No, they may not amend their returns to file separately.

Question 15

May married individuals who filed separate returns later file a joint (amended) return?

Answer 15

Yes, and payment of the entire joint tax liability is not required at the time the amended return is filed.

Question 16

If an individual obtains a marriage annulment (no valid marriage ever existed), what is required?

Answer 16

The individuals must file amended returns claiming a filing status of single or head of household, whichever applies. All prior tax years not closed by the statute of limitations must be amended.

Question 17

When a joint return is signed by both spouses, is one spouse generally liable for the entire amount of the tax due and any interest and penalties?

Answer 17

Generally, the spouses are jointly and severally liable for the tax due and any interest and penalties. This means that each spouse is individually liable for the entire amount of the tax due and any interest and penalties. One spouse may be relieved of joint and several liability under the “innocent spouse” provisions in very limited circumstances.

Question 18

What filing status should married individuals who account for their items of income, deduction, and credit in the aggregate use?

Answer 18

The married filing jointly status.

Question 19

May spouses with different tax years file a joint return?

Answer 19

No. However, a joint return is allowed when spouses use different accounting methods.

Question 20

To be considered an injured spouse, the taxpayer must

Answer 20

1.File a joint return,
2.Have reported income (e.g., wages, interest, etc.),
3.Have made and reported tax payments or claimed the Earned Income Credit or other refundable credit,
4.Not be required to pay a past-due amount, and
5.File Form 8379.

Question 20

To be considered an injured spouse, the taxpayer must

Answer 20

1.File a joint return,
2.Have reported income (e.g., wages, interest, etc.),
3.Have made and reported tax payments or claimed the Earned Income Credit or other refundable credit,
4.Not be required to pay a past-due amount, and
5.File Form 8379.

Question 21

How long is the surviving spouse filing status available?

Answer 21

This status is available for 2 years following the year of death of the spouse and may be elected if
1.The surviving spouse did not remarry during the tax year,
2.The surviving spouse qualified for married filing a joint return status for the tax year of the death of the spouse, and
3.The surviving spouse maintained a household for a dependent child for the taxable year.

Question 22

How long is the surviving spouse filing status available?

Answer 22

This status is available for 2 years following the year of death of the spouse and may be elected if
1.The surviving spouse did not remarry during the tax year,
2.The surviving spouse qualified for married filing a joint return status for the tax year of the death of the spouse, and
3.The surviving spouse maintained a household for a dependent child for the taxable year.

Question 23

For the purposes of the qualifying widow(er) filing status, for whom must the surviving spouse maintain the household?

Answer 23

The household must be the principal place of abode of a qualifying dependent of the surviving spouse. The spouse must be entitled to claim a dependency exemption amount for the dependent who must be a son/daughter, stepson/stepdaughter, or adopted child. This does not include a foster child.

Question 23

For the purposes of the qualifying widow(er) filing status, for whom must the surviving spouse maintain the household?

Answer 23

The household must be the principal place of abode of a qualifying dependent of the surviving spouse. The spouse must be entitled to claim a dependency exemption amount for the dependent who must be a son/daughter, stepson/stepdaughter, or adopted child. This does not include a foster child.

Question 24

A surviving spouse can file what kind of return for the tax year of the death of the spouse?

Answer 24

The surviving spouse can file a joint return.

Question 25

In order for an individual to qualify for head of household filing status, (s)he must

Answer 25

1.Not file as a surviving spouse, 2.Not be a married person, and 3.Maintain a household that is the principal place of abode for a qualifying individual.

Question 26

In order for an individual to qualify for head of household filing status, (s)he must

Answer 26

1.Not file as a surviving spouse, 2.Not be a married person, and 3.Maintain a household that is the principal place of abode for a qualifying individual.

Question 27

To maintain a household for federal filing status purposes, an individual must furnish

Answer 27

More than 50% of the mutual benefit costs of maintaining the household during the tax year.

Question 28

Some expenses that qualify as household maintenance include

Answer 28

Property tax, Mortgage interest, Rent, Utilities, Upkeep, Repairs, Property insurance, and Food consumed in-home.

Question 29

Some expenses that do not qualify as household maintenance include

Answer 29

Clothing, Education, Medical treatment, Life insurance, Transportation, Vacations, Services by the taxpayer, and Services by the dependent.

Question 30

A married individual who lives with a dependent apart from the spouse will be considered unmarried and qualify for head of household status if, for the tax year,

Answer 30

1.(S)he files separately; 2.(S)he pays more than 50% toward maintaining the household; 3.The spouse is not a member of the household for the last 6 months; 4.The household is the principal home of the individual’s child, stepchild, or qualified foster child for more than half of the year; and 5.The individual can claim the child as a dependent.

Question 31

When must an individual file as single?

Answer 31

An individual must file as single if (s)he neither is married nor qualifies for surviving spouse or head of household status.

Question 32

Taxable income is adjusted gross income (AGI) minus

Answer 32

The greater of itemized deductions or the standard deduction.

Question 33

When would a taxpayer elect to itemize deductions?

Answer 33

The taxpayer itemizes deductions if the total allowable itemized deductions, after all limits have been applied, is greater than the standard deduction.

Question 34

When would a taxpayer choose to take the standard deduction?

Answer 34

The taxpayer takes the standard deduction if the standard deduction is greater than the total allowable itemized deductions (after all limits have been applied).

Question 35

How does a taxpayer elect to itemize deductions?

Answer 35

Election to itemize deductions is made by filing Schedule A of Form 1040. Election in any other taxable year is not relevant.

Question 36

The standard deduction may not be used by

Answer 36

1.Persons who itemize deductions 2.Nonresident alien individuals 3.Individuals who file a “short period” return 4.A married individual who files a separate return and whose spouse itemizes 5.Partnerships, estates, and trusts

Question 37

The standard deduction may not be used by

Answer 37

1.Persons who itemize deductions 2.Nonresident alien individuals 3.Individuals who file a “short period” return 4.A married individual who files a separate return and whose spouse itemizes 5.Partnerships, estates, and trusts

Question 38

The basic standard deduction amount depends on what two factors?

Answer 38

1.Filing status and 2.Dependency status on another’s return.

Question 39

The basic standard deduction amount of a child under age 19 at the end of the year, a student under age 24 at the end of the year, or any age if permanently and totally disabled who can be claimed as a dependent on another individual’s income tax return is limited to the greater of either

Answer 39

1.$1,150 or 2.Earned income for the year plus $400 up to the applicable single standard deduction.

Question 40

Who is entitled to the additional standard deduction?

Answer 40

An individual who has attained the age of 65 or is blind is entitled to the additional standard deduction.

Question 41

What is the definition of “blind” for the purposes of claiming the additional standard deduction?

Answer 41

“Blind” in this context means no better than 20/200 vision in the better eye, even with corrective lenses.

Question 42

Can an individual ever be entitled to twice the additional standard deduction?

Answer 42

Yes, an individual who has both reached age 65 and is blind is entitled to twice the amount.

Question 43

When does an individual qualify as having reached age 65 for the purposes of claiming the additional standard deduction?

Answer 43

The individual is entitled to the amount if (s)he attains age 65 before the end of the tax year, even if (s)he dies before the end of the year (but not if (s)he dies before reaching age 65).

Question 44

When does an individual qualify as having reached age 65 for the purposes of claiming the additional standard deduction?

Answer 44

The individual is entitled to the amount if (s)he attains age 65 before the end of the tax year, even if (s)he dies before the end of the year (but not if (s)he dies before reaching age 65).

Question 45

When does an individual not qualify as having reached age 65 for the purposes of claiming the additional standard deduction?

Answer 45

An individual is not entitled to the amount if (s)he dies before attaining age 65, even if (s)he would have otherwise reached age 65 before the year’s end.

Question 46

Must a taxpayer be blind for the entire year to claim the additional standard deduction?

Answer 46

No, a person who becomes blind on or before the last day of the taxable year is entitled to the full amount.

Question 47

Is the standard deduction prorated if the taxpayer dies during a tax year?

Answer 47

No, once qualified, the standard deduction is allowed in full.

Question 48

When must an individual file a federal income tax return?

Answer 48

When any of the following conditions are met: -Gross income is above a threshold -Net earnings from self-employment is $400 or more -(S)he is a dependent with more gross income than the standard deduction -Unearned income is over $1,150

Question 49

The gross income threshold amount generally is

Answer 49

The standard deduction (excluding any amount for being blind)

Question 50

If one spouse filing separately itemizes deductions, can the other spouse filing separately include the standard deduction in the threshold computation?

Answer 50

No. If one spouse married filing separately itemizes deductions, the other is required to itemize, as well.

Question 51

Even if not required, what are some reasons a person should file a tax return?

Answer 51

1.To obtain a refund 2.To establish a record 3.To trigger the running of the statute of limitations

Question 52

How can a person obtain an automatic 6-month extension to file their tax return?

Answer 52

An automatic 6-month extension is provided for an individual who files Form 4868 or uses a credit card to make the required tax payment on or before the initial due date.

Question 53

What happens if a U.S. citizen or resident who is on military or naval duty outside the U.S. (or Puerto Rico) files Form 4868 during their automatic 2-month extension?

Answer 53

The taxpayer will be allowed another 4-month extension.

Question 54

What is the due date for a decedent’s final return?

Answer 54

The due date for a decedent’s final return is the date on which the return would have been due if death had not occurred.

Question 55

A Form 1040-NR nonresident alien’s tax return (when not subject to wage withholding) must be filed by

Answer 55

The 15th day of the sixth month after the close of the tax year (unless extended).

Question 56

A nonresident alien subject to wage withholding must file his or her tax return by

Answer 56

The 15th day of the fourth month after the close of the tax year (unless extended).

Question 57

By what date must tax liability be paid?

Answer 57

Tax liability must be paid when the return must be filed. Automatic extension for filing the return does not extend time for payment.

Question 58

When does the IRS begin charging interest on the late payment of tax liability?

Answer 58

Interest will be charged from the original due date of the tax return.

Question 59

What is the penalty for failing to file a tax return?

Answer 59

A penalty of 5% per month up to 25% of unpaid liability is assessed for failure to file a return.

Question 60

What is the penalty for failure to pay a tax liability by the due date?

Answer 60

The penalty for failure to pay is 0.5% per month of the tax not paid, up to 25%.

Question 61

If a taxpayer fails to file their tax return and fails to pay their tax liability by the due date, will the taxpayer have to pay both penalties?

Answer 61

No, a failure to pay penalty may offset a failure to file penalty.

Question 62

When an extension to file is timely requested, how may a taxpayer avoid paying a failure to pay penalty?

Answer 62

By paying an estimate of unpaid tax in conjunction with the extension request.

Question 63

How long must employers keep records on employment taxes?

Answer 63

Employers are required to keep records on employment taxes until at least 4 years after the due date of the return or payment of the tax.

Question 64

If an individual is required to report employment taxes or give tax statements to employees, what identification number must that individual have?

Answer 64

The individual must have an employer identification number (EIN).

Question 65

What is an employer identification number (EIN)?

Answer 65

An EIN is a nine-digit number the IRS issues to identify the tax accounts of employers.

Question 66

What is an identity protection personal identification number (IP PIN)?

Answer 66

An IP PIN is a six-digit number assigned to eligible taxpayers to help prevent the misuse of their Social Security numbers on federal income tax returns. The IP PIN helps the IRS verify a taxpayer’s identity and accept their electronic or paper tax return.

Question 67

What is the amount of the personal exemption for 2021?

Answer 67

From 2018 through 2025, the exemption amount is $0; in essence, the personal exemption is eliminated for these years.

Question 68

To qualify as a dependent, the individual must be

Answer 68

A qualifying child or a qualifying relative. A spouse is never considered a dependent.

Question 69

What four tests must be met to be considered a qualifying child?

Answer 69

1.Relationship 2.Age 3.Principal residence 4.Not self-supporting

Question 70

What four tests must be met to be considered a qualifying child?

Answer 70

1.Relationship 2.Age 3.Principal residence 4.Not self-supporting

Question 71

What must a child be to satisfy the relationship test for a qualifying child?

Answer 71

The child must be the taxpayer’s son, daughter, stepson, stepdaughter, brother, sister, stepbrother, stepsister, or any descendant of any such relative. Adopted individuals and eligible foster children also meet the relationship test.

Question 72

What age must a child be to satisfy the age test for a qualifying child?

Answer 72

The child must be under the age of 19 at the end of the year, a full-time student under the age of 24, or any age if permanently and totally disabled.

Question 73

Where must a child reside to satisfy the principal residence test for a qualifying child?

Answer 73

The child must have the same principal place of abode as the taxpayer for more than half of the year.

Question 74

What condition must a child meet in order to satisfy the not self-supporting test for a qualifying child?

Answer 74

The child must not have provided over half of his or her own support.

Question 75

What four requirements must an individual meet to be considered a qualifying relative?

Answer 75

1.Relationship or residence 2.Gross income 3.Support 4.Not be a qualifying child of the taxpayer or any other taxpayer

Question 76

What four requirements must an individual meet to be considered a qualifying relative?

Answer 76

1.Relationship or residence 2.Gross income 3.Support 4.Not be a qualifying child of the taxpayer or any other taxpayer

Question 77

To satisfy the residence requirement for a qualifying relative, an individual must

Answer 77

Merely reside with a potential claimant (of the dependent) for the entire tax year.

Question 78

To satisfy the relationship requirement for a qualifying relative, there must be

Answer 78

Existence of an extended (by blood) or immediate (by blood, adoption, or marriage) relationship.

Question 79

To satisfy the gross income requirement for a qualifying relative, the gross income of the individual (to be claimed as a dependent) must be

Answer 79

Less than $4,400 for 2022.

Question 80

What is included in gross income for the gross income dependency requirement?

Answer 80

All income received that is not exempt from tax is included.

Question 81

What is included in gross income for the gross income dependency requirement?

Answer 81

All income received that is not exempt from tax is included.

Question 82

To satisfy the support requirement for a qualifying relative, the person who claims an individual as a dependent must

Answer 82

Provide more than 50% of the (economic) support of the individual for the year.

Question 83

To qualify as a dependent as a citizen or resident, an individual must be, for any part of the year,

Answer 83

1.A U.S. citizen, resident, or national; 2.A Canadian resident; or 3.A Mexican resident.

Question 84

What is the standard deduction for a dependent with unearned income?

Answer 84

The standard deduction for a dependent with unearned income is limited to the greater of $1,150 or the amount of earned income plus $400.

Question 85

What is the “Kiddie Tax?”

Answer 85

Net unearned income (NUI) of a dependent under 19 (under 24 for full-time students) at the close of the tax year is taxed to the dependent at the parent’s marginal rate. This is referred to as the “Kiddie Tax.”

Question 86

When is a taxpayer considered a dual-status alien?

Answer 86

A taxpayer is considered a dual-status alien if the taxpayer was both a nonresident and resident alien during the year.

Question 87

Generally, when is a taxpayer considered a resident alien?

Answer 87

Generally, a taxpayer is considered a resident alien if either the green card test or the substantial presence test is met.

Question 88

When is a taxpayer considered a resident for tax purposes?

Answer 88

A taxpayer is a resident for tax purposes if (s)he was a lawful permanent resident (immigrant) of the United States at any time during the year.

Question 89

How long must a taxpayer be physically present in the United States to be considered a U.S. resident?

Answer 89

The taxpayer must have been physically present for 31 days during 2022 and 183 days during 2022, 2021, and 2020, counting all days of physical presence in 2022 but only 1/3 the number of days of presence in 2021 and only 1/6 the number of days in 2020.

Question 90

Under what circumstance may a nonresident alien file a joint return?

Answer 90

A nonresident alien may file a joint return if (s)he is married to a U.S. citizen or resident at the end of the year.

Question 91

What income is a nonresident alien taxpayer and his or her spouse taxed on if that taxpayer chooses to be treated as a U.S. resident?

Answer 91

If a taxpayer chooses to be treated as a U.S. resident, both spouses are taxed on worldwide income.

Question 92

If a taxpayer is a nonresident alien who is married to a U.S. citizen or resident at the end of the year and chooses to be treated as a U.S. resident, can (s)he take the standard deduction?

Answer 92

Yes, (s)he can take the standard deduction.

Question 93

What is the tax rate for most types of U.S. source income received by a foreign taxpayer?

Answer 93

The tax rate is 30%.