Basic Scenarios 29 Basic Scenario 5: Aurora Davis Interview Notes

Aurora and Oscar separated in 2017 and divorced in October 2019. She earned $40,000 in wages and paid more than half the cost of keeping up her home in 2019. Aurora and Oscar have a son, Milo, who is 17 years old and unmarried. Aurora signed Form 8332 (Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent) allowing Oscar to claim Milo in 2019.

Milo is a full-time student working towards a degree in computer information systems. Milo lived on campus during the school year and spent the summer at home with his mother.

Milo does not a have a felony drug conviction and is not a qualifying child for anyone except Aurora.

Aurora paid $5,000 of Milo's tuition that was not covered by his scholarship.

Aurora provided more than half of her son's support and all the cost of his room and board on campus.

Milo's only income was $3,800 in wages and $400 of dividend income. He had no federal or state tax withholding.

Aurora and Milo are U.S. citizens and have valid Social Security numbers.

Basic Scenario 5: Test Questions 10. Is Milo required to file a federal tax return?

a. Yes, because Milo's gross income was more than the gross income limit required to file a federal tax return.

b. Yes, because Milo had unearned income over the unearned income limit of $1,100 required to file a federal income tax return.

c. No, because Milo had earned income that was under the earnings limit that requires him to file a tax return.

d. No, because Milo didn't have any federal or state income tax withholding. 30 Basic Scenarios

11. Aurora's most advantageous filing status for 2019 is Single.

a. True

b. False

12. Aurora cannot claim her son for the earned income credit because he did not live with her for more than half the year and does not meet the residency test.

a. True. Milo only lived with his mother during the summer, which was less than six months.

b. False. Attendance at school is considered a temporary absence and those months are counted as time that Milo lived with her for the earned income credit.

13. Milo is Oscar's qualifying person for which of the following?

a. Head of Household filing status

b. Earned income credit

c. Credit for other dependents

d. Child tax credit

14. Ella's disability pension is reported as wages and considered earned income for the purposes of the earned income tax credit.

a. True

b. False

15. Amounts paid for room and board and meal plan are qualified education expenses for claiming the American opportunity credit.

a. True b.False

16. How much of Noah's Social Security is taxable?

a. $0

b. $6,851

c. $2,175

d. $31,000 17.

What is the amount of Noah and Ella's standard deduction? $________.

18. Which of the following items are included in the total payments on Noah and Ella's tax return?

a. Federal income tax withheld from Forms W-2 and 1099

b. $500 estimated tax payment c. Refundable credits

d. All of the above

19. Leo and Freddie are dependents on Noah and Ella's 2019 tax return.

a. True

b. False 40 Basic Scenarios