H&R Block Income Tax Course Questions
and Answers 100% Correct
Circular 230 - correct Answers ✔✔ -Regulations governing the practice of attorneys, certified public
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accountants, enrolled agents, enrolled actuaries, and appraisers before the IRS.
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Disclosure - correct Answers ✔✔ -The release of tax information by an IRS employee.
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Due Diligence - correct Answers ✔✔ -Requirements that tax professionals must follow when preparing
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income tax returns.
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Noncompliance - correct Answers ✔✔ -Failure or refusal to comply with the tax code. oy oy oy oy oy oy oy oy oy oy oy oy oy
Privilege - correct Answers ✔✔ -Protection from being required to disclose confidential
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communications between two parties, such as attorney and client.
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Estimated Tax - correct Answers ✔✔ -The amount of tax a taxpayer expects to owe for the year after
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subtracting expected amounts withheld and certain refundable credits.
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Estimated Tax Voucher - correct Answers ✔✔ -A statement by an individual of (1) the amount of
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income tax he estimates he will incur during the current taxable year on income that is not subject to
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withholding, (2) the excess amount over that withheld on income which is subject to withholding, and
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(3) his estimated self-employment tax.
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Exemption from Withholding - correct Answers ✔✔ -Status claimed on Form W-4 directing the
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employer not to withhold federal income taxes from the employee.
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Underpayment Penalty - correct Answers ✔✔ -If a taxpayer did not pay enough tax on a timely basis
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during the year, he may be required to pay an underpayment penalty.
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Withholding Allowances - correct Answers ✔✔ -An increase by which income tax withholding on certain
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income is reduced.
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Two Ways to Pay as You Go - correct Answers ✔✔ -Withholding and Estimated Tax Payments
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Form W-4 - correct Answers ✔✔ -Employee's Withholding Allowance Certificate
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Form 8815 - correct Answers ✔✔ -Exclusion of Interest From Series EE and I U.S. Savings Bonds Issued
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After 1989
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,Form 2210 - correct Answers ✔✔ -Underpayment of Estimated Tax by Individuals, Estates, and Trusts
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Form 4868 - correct Answers ✔✔ -Application for Automatic Extension of Time To File U.S. Individual
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Income Tax Return
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Form 8888 - correct Answers ✔✔ -Allocation of Refund
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Form 9465 - correct Answers ✔✔ -Installment Agreement Request
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Amended Return - correct Answers ✔✔ -A tax return filed on Form 1040X after the original return has
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been filed.
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Closed Year - correct Answers ✔✔ -A tax year for which the statute of limitations has expired.
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Open Year - correct Answers ✔✔ -A taxable year for which the statute of limitations has not yet
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expired.
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Failure-to-File Penalty - correct Answers ✔✔ -Generally 5% for each month or part of a month the
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return is late, but not more than 25% of the tax not paid.
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Failure to File - correct Answers ✔✔ -Taxpayer fails to file the return by the due date, and there is a
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balance due.
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Failure to Pay - correct Answers ✔✔ -Taxpayer fails to pay the tax owed by the due date.
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Failure-to-Pay Penalty - correct Answers ✔✔ -0.5% of the unpaid taxes for each month or part of a
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month after the due date, but not more than 25%.
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Negligence or Intentional Disregard - correct Answers ✔✔ -Taxpayer shows negligence or disregard of
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the rules or regulations causing an underpayment.
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Negligence-or-Intentional-Disregard Penalty - correct Answers ✔✔ -20% of the underpayment. oy oy oy oy oy oy oy oy oy
Substantial Understatment - correct Answers ✔✔ -Taxpayer understates their tax by the larger of
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$5,000 or 10% of the correct tax.
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Substantial-Understatement Penalty - correct Answers ✔✔ -20% of the underpayment. oy oy oy oy oy oy oy oy oy
Form 1040X - correct Answers ✔✔ -Amended U.S. Individual Income Tax Return
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When can an amended return be filed? - correct Answers ✔✔ -Within three years of the date the
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original return was filed, or within two years of the date the tax was paid, whichever is later.
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Can the 1040X be e-filed? - correct Answers ✔✔ -No.
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Household Employee - correct Answers ✔✔ -An individual who performs nonbusiness services in a
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taxpayer's home.
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,Active Income and Losses - correct Answers ✔✔ -Those for which a taxpayer performs services.
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Partnership - correct Answers ✔✔ -A form of business in which two or more persons join their money
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and skills in conducting the business as co-owners.
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Passive Income and Losses - correct Answers ✔✔ -Those from business activities in which the taxpayer
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does not materially participate, and all rental activities.
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Portfolio Income and Losses - correct Answers ✔✔ -Those from such sources as dividends, interest,
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capital gains and losses, and royalties.
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Rental Income - correct Answers ✔✔ -Income received by the taxpayer for allowing another person's
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use of the taxpayer's property.
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Royalty - correct Answers ✔✔ -(1) A payment received for the right to exploit a taxpayer's ownership of
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natural resources or a taxpayer's literary, musical, or artistic creation. (2) An interest in the oil and gas in
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place that entitles the holder to a specified fraction, in kind or in value, of the total production from the
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property, free of any expenses of development and operation.
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S Corporation - correct Answers ✔✔ -A qualified small business corporation that has elected special tax
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treatment under subchapter S of the Internal Revenue Code. S corporations pass income, losses, and
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deductions through to shareholders to report on their individual returns.
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Trust - correct Answers ✔✔ -A tax entity that distributes all or part of its income to beneficiaries as
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instructed by the trust agreement.
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Requirements for a Real Estate Professional - correct Answers ✔✔ -1. More than half of the personal
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services performed by the taxpayer in all trades or businesses during the tax year were performed in
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real property trades or businesses in which the taxpayer materially participated.
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2. The taxpayer performed more than 750 hours of services during the year in real property trades or
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businesses in which the taxpayer materially participated.
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Trade or Business Activities - correct Answers ✔✔ -Any activity that: Involves the conduct of a trade or
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business; is conducted in anticipation of starting a trade or business; Involves research or experimental
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expenditures that are deductible under IRS Code 174.
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Nonpassive Income - correct Answers ✔✔ -Income derived from activities that are not passive.
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Types of Nonpassive Income - correct Answers ✔✔ -Portfolio income; personal service income; other
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income.
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Portfolio Income - correct Answers ✔✔ -Includes interest, dividends, annuities, and royalties not
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derived in the ordinary course of business.
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, Personal Service Income - correct Answers ✔✔ -Salaries, wages, commissions, self-employment income
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from trade or business in which the taxpayer materially participates, deferred compensation, taxable
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social security and other retirement benefits, and payments from partnerships to partners for personal
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services.
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Rent - correct Answers ✔✔ -Income received for the use of property.
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Is rent earned or unearned income? - correct Answers ✔✔ -Unearned.
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Schedule E - correct Answers ✔✔ -Supplemental Income and Loss
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Deductible Maintenance and Repairs - correct Answers ✔✔ -Those that do not appreciably add to the
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value or useful life of the property.
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Is the value of the owner's labor deductible when it comes to rental property? - correct Answers ✔✔ -
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No.
Rental Property Depreciable Basis - correct Answers ✔✔ -Basis MINUS land value TIMES the rental use
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percentage.
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Vacation home - correct Answers ✔✔ -A dwelling unit and may be a house, apartment, condominium,
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mobile home, boat, or any other property that provides normal living accomodations.
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Used as a Residence - correct Answers ✔✔ -A dwelling unit is used for personal purposes during the
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year for whichever is greater: more than 14 days; more than 10% of the days the house is rented at fair
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rental value.
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Royalty - correct Answers ✔✔ -Payments received for the right to extract natural resources from the
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taxpayer's property or to use a taxpayer's literary, musical, or artistic creation.
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Economic Interest - correct Answers ✔✔ -One acquired by investment, the return on which is
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dependent upon the extraction of the natural deposit or cutting of the timber.
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Two Methods of Computing Depletion - correct Answers ✔✔ -Cost and Percentage
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What tax form must estates and trusts file? - correct Answers ✔✔ -Form 1041
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What tax form must partnerships file? - correct Answers ✔✔ -Form 1065
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Do partnerships pay income taxes? - correct Answers ✔✔ -No.
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General Partner - correct Answers ✔✔ -One who is personally responsible for partnership debts.
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Limited Partner - correct Answers ✔✔ -A partner in a partnership organized under a state's limited
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partnership law, whose personal liability for partnership debts is limited to their investment in the
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partnership.
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