Questions 1. Janice Bell (63) shared a home all year with her son, Antonio (41), and Antonio's son, Dante (23). They were all U.S. citizens, lived in the U.S. all year, and all had valid SSNs valid for employment. Janice and Antonio worked full-time. Dante was a part-time student during the year; he took one class at the local community college. He had no income. No one else lived in the home. Janice had earned income and an adjusted gross income of $23,459. She had no foreign income or investment income. Antonio had earned income and an adjusted gross income of $32,500. He had no foreign income or investment income. Who, if anyone, is eligible to claim and receive the Earned Income Credit?

No one.

Janice only.

Both Janice and Antonio.

Either Janice or Antonio but not both.

Question 2. The maximum amount of qualified student loan interest a taxpayer may be eligible to deduct as an adjustment to income is:

$1,500

$2,000

$2,500

$4,000

Question 3. If a taxpayer claiming the American Opportunity Tax Credit (AOTC) has their tax liability reduced to zero, what is the maximum amount they may receive as a refundable credit?

20% of the credit, up to $500.

40% of the credit, up to $1,000.

100% of the first $1,000 of qualified education expenses.

100% of the first $4,000 of qualified education expenses.

Question 4. Susie Peterson (29) spent $2,900 for tuition and required course fees to complete two college courses during the year. Susie cannot be claimed as a dependent on anyone else's return, and she will use the single filing status. She is not a degree candidate, nor was she a full-time student. However, the courses she took were job-related. Her 2021 modified adjusted gross income was $55,000. Given the information provided, Susie potentially qualifies for which of the following tax benefits for education?

American Opportunity Tax Credit.

Lifetime learning credit.

Qualified tuition program.

Sallie Mae student loan.

Question 5. How does a deduction differ from a credit?

A deduction reduces adjusted gross income to determine taxable income. A credit can reduce total tax.

A credit reduces total income to determine adjusted gross income. A deduction increases payments.

A deduction always lowers the amount of earned income credit while a credit will increase the amount of earned income credit.

A deduction reduces the taxable income. A credit increases taxable income.

Question 6. Ryan and Lonnie Montague, a married couple who will file jointly, are both high school teachers. In 2021, Ryan had receipts totaling $394 in qualifying expenses for his classroom. Lonnie had receipts totaling $275 for qualified expenses. They both worked over 900 hours in the school building during the school year and were not reimbursed by their employer. What is the maximum amount of the educator expense deduction that they may claim on their Form 1040?

$250

$394

$500

$669

Question 7. Choose the response that accurately completes the following sentence. A taxpayer claiming the Premium Tax Credit:

May be claimed as a dependent on another person's return, as long as they are under age 27.

May have employer-sponsored health care coverage.

Must have purchased private coverage through a plan outside the Marketplace.

Must be lawfully present in the United States.

Question 8. Miles (45) and Sarah (51) Tobias are married, and they will file a joint return for 2021. During the year, Miles earned $95,000 in wages; Sarah earned $19,700 from a part-time job and was not a participant in an employer-maintained retirement plan. They had no other income. What is the maximum amount the couple may contribute to Sarah's traditional IRA for 2021?

$0

$3,500

$6,000

$7,000

Question 9. Which of the following taxpayers may potentially qualify for the Retirement Savings Contributions Credit (Saver's Credit)? Assume that all are over the age of 18, not claimed as a dependent on another's return and not a student.

Alice and John are married and will file married filing jointly. Their 2021 modified adjusted gross income was $42,762. Alice contributed to a Roth IRA.

Larry will use the single filing status. His 2021 modified adjusted gross income was $27,000. His employer made contributions on his behalf to a simplified employee pension (SEP) IRA.

Maurice will use the head of household filing status. His 2021 modified adjusted gross income was $54,000. He contributed to a traditional IRA.

Victoria and Evan are a married couple filing a joint return. Their 2021 modified adjusted gross income was $72,000. Victoria made voluntary contributions to her company's 401(k) plan.

Question 10. Choose the response that correctly explains how a taxpayer must compute and report the taxable amount of distribution from a traditional IRA to which nondeductible contributions were made. They must:

Report the entire amount as a taxable distribution on Form 1040.

Use the general rule to compute the taxable portion of their distribution.

Use the simplified method to compute the taxable portion of their distribution.

Calculate the taxable portion of their distribution on Form 8606, Nondeductible IRAs.

Question 11. Roberta (69) and Henry (72) Stein are married, retired and live together. Roberta receives social security benefits in the amount of $18,420, and Henry's social security benefits total $22,420. They both are using the Married Filing Separately filing status. What is the Roberta's maximum percentage of taxable social security benefits when her Modified Adjusted Gross Income (MAGI) is $30,426?

0.00%

10.00%

50.00%

85.00%

Question 12. Yolanda Smith is an unmarried, 34 year-old taxpayer. She will use the head of household filing status, and she has the following income for the year:

Wages: $34,500.

interest from a bank savings account: $350.

Municipal bond interest: $200.

Lottery prize: $250.

Gift from her father: $5,000.

Yolanda contributed $1,500 to her traditional IRA, which she qualifies for and will deduct. What is Yolanda's adjusted gross income?

$33,350

$33,600

$33,800

$38,800

Question 13. All of the following must be included in income and reported on a tax return EXCEPT:

Lottery winnings of $500.

Dividends of $750.

Royalty payments of $1,500.

A $5,000 scholarship received by a degree candidate and used to pay tuition at a state university.

Question 14. Danielle Williams is a 29-year-old single taxpayer who changed jobs during the year. When she left her first job, she decided to take a total distribution from the 401(k) plan she had established with her former employer. She then used the proceeds to make a down payment on a new car. In early 2022, she received the following Form 1099-R reporting the distribution. Her only other income was from wages, and her 2021 taxable income was $51,350. What will be the amount of the penalty for the early withdrawal from her 401(k) plan, if any? (Answer choices are below the image.)

$0

$400

$600

$1,200

Question 15. Which of the following statements about the relationship between domicile and residency is correct?

All taxpayers have one, and only one, state of domicile; but they may have more (or less) than one state of residency.

A taxpayer domiciled in a state will always also be a resident of the state.

All taxpayers have one, and only one, state of residency; but they may have more (or less) than one state of domicile.

A taxpayer who is a resident of a state will always also be domiciled in that state.

Question 16. A state's IRC conformity date can be used to determine:

Qualifications for state tax credits.

Which state-specific deductions may be claimed in the current year.

Whether recent changes to the Internal Revenue Code will carry through to the state return.

Whether the starting point for calculation of state taxable income is federal taxable income or federal adjusted gross income. ________________________________________