Rtrp - IRS Registered Tax Return Preparer Test | Attempts: 1554

2.

Which of the following is not an applicable adjustment to gross income?

Tuition
Alimony fee
Groceries
Self-employment tax

Correct Answer

A. Groceries

Explanation

Groceries would not typically be an applicable adjustment to gross income. Adjustments to gross income, also known as "above-the-line deductions," are expenses that can be deducted from your total gross income to arrive at your adjusted gross income (AGI).
The other options listed—tuition, alimony fee, and self-employment tax—are all potential adjustments to gross income:
Tuition: Certain educational expenses, such as tuition and fees, may be deductible if you meet certain criteria, such as the Lifetime Learning Credit or the Tuition and Fees Deduction.
Alimony fee: Alimony payments made to a former spouse can generally be deducted as an adjustment to gross income, subject to specific IRS rules and requirements.
Self-employment tax: Self-employed individuals can deduct the employer-equivalent portion of their self-employment tax, which represents the Social Security and Medicare taxes paid by self-employed individuals. This deduction reduces the individual's adjusted gross income.

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3.

Retirement savings is also known as which of the following?

Savings contribution
Saver's credit
Joint savings
Maximum credit

Correct Answer

A. Saver's credit

Explanation

The correct answer is "Saver's credit." Retirement savings is commonly referred to as the Saver's credit. This credit is a tax incentive provided by the government to encourage individuals to save for retirement. It allows eligible taxpayers to claim a credit on their tax return based on the amount of money they contribute to qualified retirement savings plans, such as IRAs or 401(k)s. The Saver's credit is designed to help lower-income individuals and families save for retirement and reduce their overall tax liability.

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4.

What part of the AMT (alternative minimum tax-individual) charts cover medical and dental expenses?

Exclusion
Deferral
Both A and B
Neither A nor B

Correct Answer

A. Exclusion

Explanation

The correct answer is "Exclusion." This means that medical and dental expenses are excluded from the calculation of alternative minimum tax for individuals. In other words, these expenses are not considered when determining if an individual owes alternative minimum tax.

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5.

Which of the following does self-employment tax apply to?

Individuals who report only dividend and interest income
Contractors that submit reports of less than $50000 for gross receipts
Church employee income of more than $100
None of the options

Correct Answer

A. Church employee income of more than $100

Explanation

Self-employment tax applies to individuals who report only dividend and interest income, contractors that submit reports of less than $50000 for gross receipts, and church employee income of more than $100.

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2

6.

Estimated tax is due for which taxpayers? Those who...

Owe additional tax.
Has no tax liability.
Have had a tax for at least 12 months.
Lived in the US for a year.

Correct Answer

A. Owe additional tax.

Explanation

The correct answer is "owe additional tax." This means that taxpayers who have a tax liability that is not fully covered by withholding or estimated tax payments are required to make estimated tax payments. These taxpayers are responsible for calculating and paying the amount of tax they owe throughout the year, rather than waiting until the end of the year to pay it all at once.

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7.

If a taxpayer wants to adjust his/her income on Form 1040, which of the following can the adjustment be made for?

Medical expenses
Before year federal income tax paid
Deductible part of self-employment tax form schedule SE
Tier 1 railroad retirement tax and excess social security

Correct Answer

A. Deductible part of self-employment tax form schedule SE

Explanation

The adjustment can be made for the deductible part of self-employment tax form schedule SE. This means that a taxpayer can deduct a portion of the self-employment tax they paid from their income on Form 1040. This adjustment helps reduce the taxpayer's taxable income and ultimately their tax liability.

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8.

Which of the following is the maximum mortgage deduction for a taxpayer who paid $4000 in mortgage interest on a primary residence, $2000 in loan intense for a recreation vehicle and other basic needs, and $2000 mortgage interest on a vacation home?

$5000
$4000
$6000
$6500

Correct Answer

A. $6000

Explanation

In the United States, taxpayers can generally deduct mortgage interest paid on their primary residence and one additional residence (such as a vacation home), subject to certain limitations. As of my last update in January 2022, the maximum mortgage interest deduction for a taxpayer is limited to interest paid on up to $750,000 of qualified residence loans if filing as married filing jointly, or $375,000 if filing as married filing separately or single.
Given the information provided:
$4000 in mortgage interest on a primary residence
$2000 in mortgage interest on a vacation home
The total deductible mortgage interest would be $4000 (primary residence) + $2000 (vacation home) = $6000.
Therefore, the maximum mortgage deduction for the taxpayer in this scenario would be $6000.

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2

9.

Which is one of AMT's triggers?

Long-term capital gains
Short-term capital gains
Interactive gains
Interstitial gains

Correct Answer

A. Long-term capital gains

Explanation

Long-term capital gains are one of the triggers for the Alternative Minimum Tax (AMT). The AMT is a parallel tax system in the United States that ensures individuals with high income and certain deductions pay a minimum amount of tax. When a taxpayer has long-term capital gains, which are profits from the sale of assets held for more than one year, it can increase their overall income and potentially trigger the AMT. This is because the AMT calculation adds back certain deductions and exemptions, including the preferential tax treatment given to long-term capital gains.

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10.

How true is this statement? "Taxpayers must be 65 years or older to claim the saver's credit."

Always true
True, but not always
Completely false
Depends on the saver's credit

Correct Answer

A. Completely false

Explanation

The statement "Taxpayers must be 65 years or older to claim the saver's credit" is completely false. The age requirement for claiming the saver's credit is not related to being 65 years or older. The eligibility for this credit depends on the taxpayer's income, filing status, and contribution to a retirement savings account. Age is not a determining factor for claiming the saver's credit.

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Rtrp - IRS Registered Tax Return Preparer Test

When it comes to earned income credit, a qualifying child is one who does what?

Quiz Preview

Which of the following is not an applicable adjustment to gross income?

Retirement savings is also known as which of the following?

What part of the AMT (alternative minimum tax-individual) charts cover medical and dental expenses?

Which of the following does self-employment tax apply to?

Estimated tax is due for which taxpayers? Those who...

If a taxpayer wants to adjust his/her income on Form 1040, which of the following can the adjustment be made for?

Which of the following is the maximum mortgage deduction for a taxpayer who paid $4000 in mortgage interest on a primary residence, $2000 in loan intense for a recreation vehicle and other basic needs, and $2000 mortgage interest on a vacation home?

Which is one of AMT's triggers?

How true is this statement? "Taxpayers must be 65 years or older to claim the saver's credit."