EA Practice Test 3
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Ray is a client who tells you that his wife died in September 2010. Based on this information, Ray can claim ______.
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Only the personal exemption for himself
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Only the personal exemption for his wife
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Personal exemptions for both himself and for his wife
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A personal exemption for himself and a partial exemption for his wife
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EA practice test 3 assesses knowledge on various tax scenarios, including dependency claims and filing statuses. It tests understanding of IRS regulations relevant for tax preparers, focusing on personal and dependent exemptions, custodial parent criteria, and head of household qualifications.
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- 2.
Alyssa is 18 years old and a full-time student. She comes into your office with some questions about her tax return. She says that she is claimed as a dependent on her parents' tax return. Over the summer, she worked in a clothing boutique and earned $17,000. Alyssa wants to file Form 1040EZ to report her wage income and get a refund. How many exemptions may she claim on her tax return?
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Zero
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One
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Two
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Three
Correct Answer
A. ZeroExplanation
Alyssa may claim zero exemptions on her tax return because she is being claimed as a dependent on her parents' tax return. As a dependent, she cannot claim any exemptions for herself.Rate this question:
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- 3.
John is the sole support of his mother. To claim her as a dependent on his Form 1040, John's mother must be a resident of which of the following countries?
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United States
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Mexico
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Canada
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Any of the above
Correct Answer
A. Any of the aboveExplanation
John can claim his mother as a dependent on his Form 1040 if she is a resident of any of the mentioned countries: United States, Mexico, or Canada. This means that regardless of which country John's mother resides in, he can still claim her as a dependent as long as she meets the other criteria for being a dependent.Rate this question:
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- 4.
Avery, 52, is a single father with one adopted son named Wyatt who has Down syndrome. Wyatt is 32 years old and permanently disabled. He lives with Avery, who supports him. Wyatt had $800 in interest income and $2,000 in wages from a part-time job in 2010. Which of the following statements is true?
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Avery can file as Head of Household, with Wyatt as his qualifying child.
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Avery does not qualify for Head of Household, but he could still claim Wyatt as his qualifying child.
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Avery can file as Head of Household, with Wyatt as his qualifying relative, since Wyatt does not pass the Age Test for a qualifying child.
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Avery must file Single and he can claim Wyatt only as his qualifying relative.
Correct Answer
A. Avery can file as Head of Household, with Wyatt as his qualifying child.Explanation
Avery can file as Head of Household because he is unmarried and provides a home for his adopted son, Wyatt, who is permanently disabled. Wyatt is considered a qualifying child because he meets the age test and is permanently disabled. Therefore, Avery can claim the benefits of filing as Head of Household and claim Wyatt as his qualifying child.Rate this question:
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- 5.
Clifford and Lily divorced in 2009 and they have one child together. Clifford's child lived with him for ten months of the year in 2010. The child lived with Lily for the other two months. The divorce decree states that Lily is supposed to be the custodial parent, not Clifford. Who is considered the custodial parent for IRS purposes?
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Clifford
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Lily
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Neither
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Both
Correct Answer
A. CliffordExplanation
Clifford is considered the custodial parent for IRS purposes because the child lived with him for the majority of the year (10 out of 12 months) in 2010. The divorce decree stating that Lily is supposed to be the custodial parent does not change the fact that Clifford had physical custody of the child for a significant portion of the year.Rate this question:
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- 6.
Haley is 23 and a full-time college student. During the year, Haley lived at home with her parents for four months and lived int he dorm for the remainder of the year. During the tax year, Haley worked part-time and earned $6,000, but that income did not amount to half of her total support. Can Haley's parents still claim her as a dependent?
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No, because Haley earned more than the personal exemption amount.
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No, because Haley does not meet the age test.
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Yes, Haley's parents can claim her as a qualifying child.
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Yes, Haley's parents can claim her as a dependent, but only as a qualifying relative, not as a qualifying child.
Correct Answer
A. Yes, Haley's parents can claim her as a qualifying child.Explanation
Haley's parents can claim her as a qualifying child because she meets the age test (being under 24 and a full-time student) and her income does not exceed half of her total support. Therefore, she meets the criteria to be claimed as a dependent by her parents.Rate this question:
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- 7.
Carson has a 12-year-old daughter named Emma. In 2010, Emma had $900 in interest income from a bank account. Which of the following statements regarding Emma's unearned income is correct?
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Tax will be assessed to Carson and is calculated using Emma's tax rate.
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Emma is not required to file a return, and Carson is not required to report his daughter's income on his own tax return.
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Emma is required to file a tax return, and income tax will be assessed at a flat rate of 10%.
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Carson may elect to report Emily's interest income on his own tax return. Her income will be taxed at the parents' highest marginal rate.
Correct Answer
A. Emma is not required to file a return, and Carson is not required to report his daughter's income on his own tax return.Explanation
The correct answer is that Emma is not required to file a return, and Carson is not required to report his daughter's income on his own tax return. This is because Emma's interest income from the bank account is considered unearned income, and the threshold for filing a tax return for a dependent child is typically higher than $900. Additionally, parents are not required to report their child's unearned income on their own tax return unless the child's total income exceeds certain limits.Rate this question:
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- 8.
Chloe's nephew Bradley lived with her all year and was 18 years old at the end of the year. Bradley did not provide more than half of his own support. He had $4,200 in income from wages and $1,000 in investment income. Which of the following is true?
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Bradley qualifies as Chloe's "qualifying child" for tax purposes.
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Bradley is not a qualifying child; however, he can be claimed by Chloe as a qualifying relative.
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Bradley is not a qualifying child or qualifying relative, because he had income that exceeded the personal exemption amount.
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Chloe can claim Bradley only if he is a full-time student, since he is no longer a minor child.
Correct Answer
A. Bradley qualifies as Chloe's "qualifying child" for tax purposes.Explanation
Bradley qualifies as Chloe's "qualifying child" for tax purposes because he lived with her all year, was 18 years old at the end of the year, and did not provide more than half of his own support. Additionally, his income from wages and investment income does not disqualify him from being considered a "qualifying child."Rate this question:
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- 9.
Jon and Suzanna have two children: Wendy, age 13, and Rachel, age 16. Wendy received $948 in dividends on XYZ stock that she legally owns. Rachel worked part-time at the mall during the Christmas holiday and earned $5,600. Rachel also held stocks in an account in her name but no dividends were paid. Which statement is TRUE with regard to filing tax returns for Jon and Suzanna's two children? Wendy: $0 Wages, $948 interest income Rachel: $5,500 Wages, $10 interest income
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Both children are required to file a tax return.
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Rachel needs to file, but Wendy does not.
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Wendy needs to file, but Rachel does not.
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Neither needs to file a tax return.
Correct Answer
A. Neither needs to file a tax return.Explanation
Both Wendy and Rachel are not required to file a tax return because their total income does not exceed the minimum threshold for filing taxes. Wendy only received $948 in dividends and Rachel earned $5,600 in wages, but no dividends were paid on her stocks. Since their income does not meet the filing requirement, neither of them needs to file a tax return.Rate this question:
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- 10.
Donnie's daughter Violet, age 16, lived with him for six months of the year. Donnie also paid for Violet to go to summer camp for two months. Violet then lived with Donnie's ex-wife for the rest of the year. Who is considered the custodial parent for tax purposes?
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Donnie
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Donnie's ex-wife
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Neither
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The summer camp director
Correct Answer
A. DonnieExplanation
Donnie is considered the custodial parent for tax purposes because his daughter Violet lived with him for six months of the year, which meets the IRS definition of a custodial parent. Additionally, Donnie paid for Violet to go to summer camp for two months, further supporting his status as the custodial parent. Donnie's ex-wife, who had Violet for the rest of the year, would not be considered the custodial parent in this scenario.Rate this question:
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- 11.
Tony and Isabelle are the sole support of the following individuals (All are U.S. citizens but none lives with them, files a tax return, or has any income): 1. Jennie, Tony's grandmother 2. Julie, Isabelle's stepmother 3. Jonathan, father of Tony's first wife 4. Timothy, Isabelle's cousin How many exemptions may Tony and Isabelle claim on their joint return?
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3
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2
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4
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5
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6
Correct Answer
A. 5Explanation
Tony and Isabelle can claim exemptions for themselves, their child, Tony's grandmother, Isabelle's stepmother, and Isabelle's cousin. Since none of these individuals live with them, file a tax return, or have any income, they qualify as dependents and can be claimed as exemptions on Tony and Isabelle's joint return. Therefore, the correct answer is 5.Rate this question:
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- 12.
In a multiple support agreement, what is the minimum amount of support that a taxpayer can provide and still claim a dependent?
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10% support
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15% support
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50% support
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75% support
Correct Answer
A. 10% supportExplanation
In a multiple support agreement, the taxpayer can provide a minimum of 10% support and still claim a dependent. This means that the taxpayer must contribute at least 10% of the dependent's total support in order to be eligible to claim them as a dependent on their tax return.Rate this question:
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- 13.
Ted and Sharon (husband and wife) are the sole support of their 23-year-old son Ashton, who lives with them. Ashton is not a student. Ashton was unable to find steady work in 2010, but received $4,900 from a charitable foundation for a speaking engagement. Which of the following statements is true?
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Ted and Sharon may claim Ashton as a qualifying child on their 2010 federal income tax return.
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Ted and Sharon may claim Ashton as a qualifying relative on their 2010 federal income tax return.
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Ted and Sharon may not claim Ashton as a dependent in 2010.
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None of the above.
Correct Answer
A. Ted and Sharon may not claim Ashton as a dependent in 2010.Explanation
According to the information provided, Ashton is 23 years old and not a student. In order to be claimed as a qualifying child, the child must be under the age of 19 (or 24 if a full-time student). Since Ashton does not meet the age requirement, Ted and Sharon cannot claim him as a qualifying child. Additionally, Ashton does not meet the criteria to be claimed as a qualifying relative since he received income of $4,900 in 2010, which exceeds the income limit for a qualifying relative. Therefore, the correct statement is that Ted and Sharon may not claim Ashton as a dependent in 2010.Rate this question:
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- 14.
If a child being adopted is eligible to be claimed as a dependent by the adoptive parents, what must occur in order for the child to be taken as a dependent on the adoptive parents' tax return?
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An identifying number must be obtained for the child (an ATIN, ITIN, or Social Security Number).
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The adoption must become final first.
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The child must always be related to the taxpayer by blood.
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Only domestic adoptions qualify; a taxpayer cannot claim a dependency exemption for a foreign-born child.
Correct Answer
A. An identifying number must be obtained for the child (an ATIN, ITIN, or Social Security Number).Explanation
In order for a child to be taken as a dependent on the adoptive parents' tax return, an identifying number must be obtained for the child, such as an ATIN, ITIN, or Social Security Number. This is necessary for the IRS to track and verify the child's information and eligibility as a dependent. The adoption becoming final and the child being related to the taxpayer by blood are not requirements for claiming the child as a dependent. Additionally, domestic adoptions qualify, but a taxpayer cannot claim a dependency exemption for a foreign-born child.Rate this question:
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- 15.
There are many tests which must be met for a taxpayer to claim an exemption for a dependent as a qualifying relative. Which of the following is NOT a requirement?
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Citizen or Resident Test
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Member of Household or Relationship Test
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Disability Test
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Joint Return Test
Correct Answer
A. Disability TestExplanation
The Disability Test is not a requirement for a taxpayer to claim an exemption for a dependent as a qualifying relative. This test is not relevant in determining if someone qualifies as a dependent. The other three tests mentioned - Citizen or Resident Test, Member of Household or Relationship Test, and Joint Return Test - are all criteria that must be met in order for a taxpayer to claim an exemption for a dependent.Rate this question:
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- 16.
Peter filed for divorce in 2010. He and his wife moved into separate residences on April 20, 2010. Peter's 10-year-old daughter lived with him for the entire year in 2010. Peter owns the home and pays all the costs of upkeep for it. His ex-wife did not live in the home at any time during the year. Which of the following is true?
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Peter must file jointly with his wife in 2010, since they are still legally married. They may claim their daughter as a dependent on their jointly filed return.
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Peter must file Single in 2010.
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Peter must file MFS in 2010.
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Peter qualifies for HOH filing status.
Correct Answer
A. Peter qualifies for HOH filing status.Explanation
Peter qualifies for HOH (Head of Household) filing status because he meets the requirements. He is considered unmarried because he and his wife lived separately for the entire year and they did not file a joint return. Peter also provided a home for his qualifying child, his 10-year-old daughter, whom he can claim as a dependent. Additionally, Peter pays for all the costs of upkeep for the home, which further supports his eligibility for HOH filing status.Rate this question:
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- 17.
Tyler is single and 17 years old. He works a part-time job at night and is going to school full-time. His total income for 2010 was $10,500. Tyler lives with his parents, who provided the majority of Tyler's support. Tyler's parents are claiming him as a dependent on their 2010 tax return. Which of the following statements is true?
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Tyler is required to file his own return, and he may also take an exemption for himself.
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Tyler is not required to file his own return.
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Tyler's parents may not claim him as a dependent because Tyler earned more than the standard deduction amount for 2010.
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His parents may claim Tyler as their qualifying child. Tyler is required to file a tax return, but he cannot claim a personal exemption for himself. He is still entitled to the standard deduction for SINGLE filers.
Correct Answer
A. His parents may claim Tyler as their qualifying child. Tyler is required to file a tax return, but he cannot claim a personal exemption for himself. He is still entitled to the standard deduction for SINGLE filers.Explanation
Tyler is single and 17 years old, and his parents provide the majority of his support. Therefore, his parents may claim him as a dependent on their tax return. However, since Tyler earned income in 2010, he is required to file his own tax return. Even though he cannot claim a personal exemption for himself, he is still entitled to the standard deduction for single filers.Rate this question:
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