2022 TAX 1 Comprehensive Module 2 Final Exam
Comprehensive Module 2: Final Exam
1. Don is a single parent. His son is 19 (not a student), and his daughter is 17 (still a student). Don claimed EIC on his tax return for both children. He later received a letter from the Internal Revenue Serv...
Comprehensive Module 2: Final Exam
1. Don is a single parent. His son is 19 (not a student), and his daughter is 17 (still a
student). Don claimed EIC on his tax return for both children. He later received a letter
from the Internal Revenue Service which disallowed EIC for his son. The letter also stated
that Don’s claim was an error due to reckless or intentional disregard of the EIC rules.
For how many years will Don be denied EIC?
a) 10 years
b) 5
years c) 2
years
d) 1 year
2. Last year Rick fraudulently claimed his cousin’s children as dependents on his return to
receive earned income credit. The IRS discovered this when Rick’s cousin also claimed
the children. Rick’s cousin was able to prove he had the right to claim his children, and
the EIC was denied on Rick’s return. How long will EIC be prohibited if a taxpayer is
denied EIC due to fraud?
a) 10 years
b) 5 years
c) 2 years
d) 1 year
3. Walt was a tax preparer who neglected to complete Form 8867 or record information
needed for the return Rick fraudulently claimed the children for EIC purposes. After the
IRS proved Rick had committed fraud, it was shown that Walt failed to exercise due
diligence. What penalty will a tax preparer face if it is determined that he failed to
exercise due diligence?
a) $540 per return
b) $540 per failure to comply
c) $540 per year
d) $540 per taxpayer and per return
4. In which of the following scenarios does the taxpayer fail to meet the residency test for
EIC purposes? a) A taxpayer whose child lived with him for 5 months and 28 days
b) A taxpayer whose eligible foster child lived with him all year
c) A taxpayer whose child lived with him all year. He and his spouse separated on May 29.
d) A taxpayer who is 64 years old and lived in the United States for more than half of the year
5. Trudy lives with her two children (ages 16 and 12), and her filing status is Head of
Household. Trudy’s earned income and AGI was $31,000. Is Trudy eligible for EIC?
a) Yes
b) No, the taxpayer’s earned income is not within the range to receive EIC.
c) No, the taxpayer’s children do not meet the age test to be a qualifying child.
d) No, the taxpayer is not eligible due to her filing status.
,6. Jill prepares returns for many clients who can claim the earned income credit. To be
certain she is practicing due diligence about the earned income credit, which of the
following forms must Jill prepare for these clients?
a) Form 1040
b) Form W-5
c) Form
8862 d)
Form 8867
7. Danika is a single mother with three children, ages 3, 7, and 9. They all have a valid
Social Security number. Danika’s tax return shows an AGI of $32,765, which includes
earned income of $32,700 and interest income of $65. She meets the requirements for
filing status Head of Household and supports her family without any additional help from
other sources. Which of the following statements is true?
a) Danika’s EIC will be based on her earned income alone without considering her AGI.
b) Danika’s EIC will be the smaller of the two EIC amounts based on her AGI or her earned
income.
c) Danika’s EIC will be based on her AGI without considering the earned income amount.
d) Danika is not eligible to receive EIC.
8. Lucy had the following income in tax year 2020: 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?
a) $27,200
b)
$25,900 c)
$27,600
d)
$30,200
9. Which of the following correctly identifies a condition of eligibility for purposes of earned
income credit?
a) The taxpayer must have wages.
b) The taxpayer’s qualifying children must be under 25 years old.
c) The taxpayer must have only earned income.
d) The taxpayer is not required to have a qualifying child.
10. Which of the following meets the age test for purposes of EIC?
a) Michael’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.
b) Natasha’s 30-year-old daughter is permanently and totally disabled. Natasha’s
daughter lived with her all 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. Jacob’s brother is a full-time student and works odd jobs
to help with his support.
d) 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.
11. Which of the following situations meets the residency test requirements?
, juvenile detention facility where he stayed through the remainder of the year.
b) 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.
c) 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.
d) 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.
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