Unit 4: Exemptions and Dependents

Question 0

A spouse is never considered the __ of the other spouse.

Answer 0

Dependent

Question 1

Taxpayers are allowed to take an exemption for __ and for their __.
The 2012 exemption amount is $__ per person.

Answer 1

Themselves; dependents

$3800

Question 2

The personal exemption is just like a __.

Answer 2

Tax deduction.

Question 3

If a taxpayer can claim another person as a dependent, the dependent cannot take a __ on his own tax return.

Answer 3

Personal exemption

Question 4

Dependency Test #1-Citizenship or Residency Test: Dependent must be a __ or __ of __, __, or __. There is also an exception for __ adopted children.

Answer 4

Citizen; Resident
US, Canada, Mexico
Foreign-born

Question 5

Dependency Test #2-Joint Return Test: A dependent cannot file a joint return with his __. If they file a joint return, they cannot be taken as a __ by another __. Exception: This rule doesn’t apply if the joint return is filed by the dependent only to claim a __ and no __ exists for either spouse.

Answer 5

Spouse; dependent; taxpayer

Refund; tax liability

Question 6

Dependency Test #3-Qualifying Child of More Than One Person: Only __ can claim the dependent on his tax return.

Answer 6

One person

Question 7

Dependency Test #4-Dependent Taxpayer Test: If a person can be claimed as a dependent by another taxpayer, that person can’t __.

Answer 7

Claim anyone as a dependent on their tax return.

Question 8

Once the preparer determines that a dependent may be claimed on a taxpayer’s return, they must decide the type of dependency. Two types of dependents: __ and __

Answer 8

Qualifying child

Qualifying relative

Question 9

A __ entitles a taxpayer to numerous tax credits, including the __ and the __. A __ does not qualify a taxpayer for the __.

Answer 9

Qualifying child; Earned Income Credit; Child Tax Credit.

Qualifying relative; EIC

Question 10

Qualifying Child Test #1-Relationship Test: The QC must be related to the taxpayer by __, __, or __.

Answer 10

Blood, marriage, legal adoption

Question 11

Qualifying Child Test #2-Age Test: The QC must be either:

• Under the age of __ at EOY
• Under the age of __ and a __
• ______

Answer 11

19
24, full-time student
Permanently and totally disabled at any time during the year (of any age)

Question 12

Qualifying children include:

5

Answer 12

A child or step child
An adopted child
A sibling or step sibling
A descendant of one of the above
An eligible foster child

Question 13

A QC is considered a full-time student of he attends a qualified educational institution full-time at least __ of the year

Answer 13

5 months

Question 14

Qualifying Child Test #3-Support Test: A QC cannot provide more than __ of his own support. __ are not included but __ are.

Answer 14

One-half

Scholarships; foster care payments

Question 20

Qualifying Child Test #4-Residence Test: A QC must live with taxpayer for __. Exceptions apply for __, __, __, and __.

Answer 20

More than 1/2 the year.
Children of divorced parents, kidnapped children, temporary absences, children who were born or died during the year.
(A temporary absence includes illness, college, vacation, military service, incarceration in a juvenile facility)

Question 21

Qualifying Child Test #5-The Tie-Breaker Test: If more than one person attempts to claim the same child, the order of who it goes to is: (6)

Answer 21

1) The parents, if they file a joint return
2) The parent, only if one of the persons is the child’s parent
3) The parent with whom the child loved the longest during the year
4) If same amount, parent with highest AGI
5) Person with highest AGI if no parent can claim the child
6) Person with higher AGI than any parent who can claim child but does not.

Question 22

Qualifying Relative Test #1 - Relationship Test (or Member of Household): Which family members do NOT have to live with the taxpayer to meet this test?
OR the dependent (can be unrelated) must have lived with the taxpayer ____.

Answer 22

• Child, stepchild, foster child or any descendant
• Sibling, step sibling, half sibling
• Parent, grandparent, stepparent, or other direct ancestor (not including foster parents)
• Niece, nephew, son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, sister-in-law

The entire tax year

Question 23

Qualifying Relative Test #2 - Gross Income Test: A qualifying relative cannot earn more than the __, which in 2012 is $__.

Answer 23

Personal exemption amount; $3800

Question 24

Qualifying Relative Test #3 - Total Support Test: Taxpayer must provide ___ the QR’s support during the year. “Total support” includes ___, but doesn’t include __.

Answer 24

More than half

Social security and welfare payments; Nontaxable scholarships

Question 25

QR Test #3 - Total Support Test - Multiple Support: When 2 or more ppl agree to provide a person’s support, together they must pay __ of the person’s total support, but no one person may pay __. Taxpayer who claims the dependent must provide __ of the person’s support.

Answer 25

More than half; more than half

More than 10%

Question 26

Qualifying Relative Test #4 - Joint Return Test: If the dependent is married, he cannot ___, unless the return is filed solely to __.

Answer 26

File a joint return with his spouse; Obtain a refund or withheld income taxes.

Question 27

Qualifying Relative Test #5 - Citizenship or Residency Test: A QR must be a citizen of resident alien of: ___,___,___

Answer 27

USA, Canada, Mexico

Question 28

Special rule for children of divorced or separated parents: The custodial parent may still allow the noncustodial parent to claim ___ even if the child ___. The noncustodial parent must attach IRS Form ___ to claim the ___.

Answer 28

Dependency exemption; did not live with them.
8832 (Release/Revocation of Release of Claim
to Exemption for Child by Custodial Parent); Dependency exemption.

Question 29

A taxpayer may NOT claim a dependency exemption for a ___, such as a ___, even if they lived with the taxpayer.

Answer 29

Household employee; nanny

Question 30

Nanny Tax: If a taxpayer pays a household employee $__ or more in 2012, he must withhold and pay __. If they pay $__ or more in any one quarter in 2012, they must pay __. Taxpayers who pay household income taxes must file a __ along with their 1040.

Answer 30

$1800; Social security and medicare taxes.
$1000; Federal unemployment tax
Schedule H

Question 31

Kiddie Tax: Part of a child’s investment income may be taxed at the parent’s rate if:
-More than $__ in 2012
-Child is under age of __ or a __ under the age of __
-Child is required to file a __ for the tax year
Child does not file a __ for the tax year

Answer 31

$1900
19; full-time college student; 24
Tax return
Tax return

Question 32

Kiddie Tax: For 2012, the first $__ of __ a child or college student earns is offset by the ___, and the next $__ is taxed at the __. All unearned income in excess of $__ is taxed at the __.

Answer 32

$950; unearned income; $950 standard deduction for dependents.
$950; child’s rate
$1,900; parent’s rate