H&R Block Income Tax Course Exam
Study Guide with complete Solutions
Latest Updated 2023/2024 Circular 230 - Correct Answer Regulations governing the practice of attorneys, certified public accountants, enrolled agents, enrolled actuaries, and appraisers before the IRS.
Disclosure - Correct Answer The release of tax information by an IRS employee.
Due Diligence - Correct Answer Requirements that tax professionals must follow when preparing income tax returns.
Noncompliance - Correct Answer Failure or refusal to comply with the tax code.
Privilege - Correct Answer Protection from being required to disclose confidential communications between two parties, such as attorney and client.
Estimated Tax - Correct Answer The amount of tax a taxpayer expects to owe for the year after subtracting expected amounts withheld and certain refundable credits.
Estimated Tax Voucher - Correct Answer A statement by an individual of (1) the amount
of income tax he estimates he will incur during the current taxable year on income that is not subject to withholding, (2) the excess amount over that withheld on income which is subject to withholding, and (3) his estimated self-employment tax.
Exemption from Withholding - Correct Answer Status claimed on Form W-4 directing the
employer not to withhold federal income taxes from the employee.
Underpayment Penalty - Correct Answer If a taxpayer did not pay enough tax on a timely basis during the year, he may be required to pay an underpayment penalty.
Withholding Allowances - Correct Answer An increase by which income tax withholding on certain income is reduced.
Two Ways to Pay as You Go - Correct Answer Withholding and Estimated Tax Payments
Form W-4 - Correct Answer Employee's Withholding Allowance Certificate
Form 8815 - Correct Answer Exclusion of Interest From Series EE and I U.S. Savings Bonds Issued After 1989
Form 2210 - Correct Answer Underpayment of Estimated Tax by Individuals, Estates, and Trusts Form 4868 - Correct Answer Application for Automatic Extension of Time To File U.S. Individual Income Tax Return
Form 8888 - Correct Answer Allocation of Refund
Form 9465 - Correct Answer Installment Agreement Request
Amended Return - Correct Answer A tax return filed on Form 1040X after the original return has been filed.
Closed Year - Correct Answer A tax year for which the statute of limitations has expired.
Open Year - Correct Answer A taxable year for which the statute of limitations has not yet expired.
Failure-to-File Penalty - Correct Answer Generally 5% for each month or part of a month
the return is late, but not more than 25% of the tax not paid.
Failure to File - Correct Answer Taxpayer fails to file the return by the due date, and there is a balance due.
Failure to Pay - Correct Answer Taxpayer fails to pay the tax owed by the due date.
Failure-to-Pay Penalty - Correct Answer 0.5% of the unpaid taxes for each month or part of a month after the due date, but not more than 25%.
Negligence or Intentional Disregard - Correct Answer Taxpayer shows negligence or disregard of the rules or regulations causing an underpayment.
Negligence-or-Intentional-Disregard Penalty - Correct Answer 20% of the underpayment.
Substantial Understatment - Correct Answer Taxpayer understates their tax by the larger of $5,000 or 10% of the correct tax.
Substantial-Understatement Penalty - Correct Answer 20% of the underpayment.
Form 1040X - Correct Answer Amended U.S. Individual Income Tax Return
When can an amended return be filed? - Correct Answer Within three years of the date the original return was filed, or within two years of the date the tax was paid, whichever is later.
Can the 1040X be e-filed? - Correct Answer No. Household Employee - Correct Answer An individual who performs nonbusiness services in a taxpayer's home.
Active Income and Losses - Correct Answer Those for which a taxpayer performs services.
Partnership - Correct Answer A form of business in which two or more persons join their
money and skills in conducting the business as co-owners.
Passive Income and Losses - Correct Answer Those from business activities in which the taxpayer does not materially participate, and all rental activities.
Portfolio Income and Losses - Correct Answer Those from such sources as dividends, interest, capital gains and losses, and royalties.
Rental Income - Correct Answer Income received by the taxpayer for allowing another person's use of the taxpayer's property.
Royalty - Correct Answer (1) A payment received for the right to exploit a taxpayer's ownership of natural resources or a taxpayer's literary, musical, or artistic creation. (2) An interest in the oil and gas in place that entitles the holder to a specified fraction, in kind or in value, of the total production from the property, free of any expenses of development and operation.
S Corporation - Correct Answer A qualified small business corporation that has elected special tax treatment under subchapter S of the Internal Revenue Code. S corporations pass income, losses, and deductions through to shareholders to report on their individual returns.
Trust - Correct Answer A tax entity that distributes all or part of its income to beneficiaries as instructed by the trust agreement.
Requirements for a Real Estate Professional - Correct Answer 1. More than half of the personal services performed by the taxpayer in all trades or businesses during the tax year were performed in real property trades or businesses in which the taxpayer materially participated.
2. The taxpayer performed more than 750 hours of services during the year in real property trades or businesses in which the taxpayer materially participated.
Trade or Business Activities - Correct Answer Any activity that: Involves the conduct of a trade or business; is conducted in anticipation of starting a trade or business; Involves
research or experimental expenditures that are deductible under IRS Code 174.
Nonpassive Income - Correct Answer Income derived from activities that are not passive. Types of Nonpassive Income - Correct Answer Portfolio income; personal service income; other income.
Portfolio Income - Correct Answer Includes interest, dividends, annuities, and royalties not derived in the ordinary course of business.
Personal Service Income - Correct Answer Salaries, wages, commissions, self-
employment income from trade or business in which the taxpayer materially participates, deferred compensation, taxable social security and other retirement benefits, and payments from partnerships to partners for personal services.
Rent - Correct Answer Income received for the use of property.
Is rent earned or unearned income? - Correct Answer Unearned.
Schedule E - Correct Answer Supplemental Income and Loss
Deductible Maintenance and Repairs - Correct Answer Those that do not appreciably add to the value or useful life of the property.
Is the value of the owner's labor deductible when it comes to rental property? - Correct Answer No.
Rental Property Depreciable Basis - Correct Answer Basis MINUS land value TIMES the rental use percentage.
Vacation home - Correct Answer A dwelling unit and may be a house, apartment, condominium, mobile home, boat, or any other property that provides normal living accomodations.
Used as a Residence - Correct Answer A dwelling unit is used for personal purposes during the year for whichever is greater: more than 14 days; more than 10% of the days the house is rented at fair rental value.
Royalty - Correct Answer Payments received for the right to extract natural resources from the taxpayer's property or to use a taxpayer's literary, musical, or artistic creation.
Economic Interest - Correct Answer One acquired by investment, the return on which is dependent upon the extraction of the natural deposit or cutting of the timber.
Two Methods of Computing Depletion - Correct Answer Cost and Percentage
What tax form must estates and trusts file? - Correct Answer Form 1041
What tax form must partnerships file? - Correct Answer Form 1065
