a)

The IRS can penalize a paid tax preparer who fails to comply with the due diligence requirements when the return claims the Earned Income Tax Credit, the Child Tax Credit/Additional Child Tax Credit/Other Dependent Credit, the American Opportunity Tax Credit, and/or the head of household filing status. For 2019, the penalty can be as much as:

$2,120 per return.

$1,590 per return.

$530 per return.

Zero, although penalties may be assessed against the taxpayer.

b)

Interest from a municipal bond investment is:

Federally taxable and must be reported on Form 1040.

Nontaxable and does not have to be reported.

Not federally taxable, but must be reported on Form 1040, regardless of the amount.

Not federally taxable and only reportable on Form 1040 when the amount received exceeds $1,500.

c)

Paulina Morales, a single taxpayer, had wage income of $68,950 in 2019. Her only other income was ordinary dividend income reported to her on Form 1099-DIV. She is required to file Schedule B, Interest and Ordinary Dividends, if her dividend income exceeds a threshold amount of:

$350

$1,200

$1,500

$2,500