| Scenario 1: Aiden Smith |
Interview Notes
- Aiden is 19 years old, unmarried, and was a first-year full-time student working on a degree in accounting during 2018. He has never had a felony drug conviction.
- Aiden did not provide more than half of his own support and can be claimed as a dependent by his mother.
- Aiden’s income was $4,000 in wages working as a part-time cook at a fast food restaurant.
- Aiden received Form 1098-T indicating $5,000 for payments received for qualified tuition and related expenses in Box 1. He received $8,500 in scholarships and grants, which was reported in Box 5.
- Aiden’s scholarship was used to pay for room and board, tuition, and books. The cost of his books was $845.
- Aiden is a U.S. citizen with a valid Social Security number.
1. Aiden's scholarship is NOT taxable and does NOT need to be reported on his tax return. INCORRECT | True |
Interview Notes
- Aiden is 19 years old, unmarried, and was a first-year full-time student working on a degree in accounting during 2018. He has never had a felony drug conviction.
- Aiden did not provide more than half of his own support and can be claimed as a dependent by his mother.
- Aiden’s income was $4,000 in wages working as a part-time cook at a fast food restaurant.
- Aiden received Form 1098-T indicating $5,000 for payments received for qualified tuition and related expenses in Box 1. He received $8,500 in scholarships and grants, which was reported in Box 5.
- Aiden’s scholarship was used to pay for room and board, tuition, and books. The cost of his books was $845.
- Aiden is a U.S. citizen with a valid Social Security number.
2. Which of the following is NOT a qualified education expense? | C. Room and board |
| Scenario 2: Sean Yale |
Interview Notes
- Sean is 49 and his divorce became final on October 21, 2018. He pays all the cost of keeping up his home in the United States. He earned $38,000 in wages in 2018.
- Sean's daughter, Sonya, lived with Sean all year. She is 18, single, and had $4,000 in wages in 2018.
- Sonya’s son, Jimmy, was born on November 17, 2018. Jimmy lived in Sean's home all year.
- Sean provides more than half of the support for both Sonya and Jimmy.
- Sean, Sonya, and Jimmy are all U.S. citizens with valid Social Security numbers.
3. Sean is able to claim Sonya for which of the following credit(s)? | B. Credit for other dependents |
Interview Notes
- Sean is 49 and his divorce became final on October 21, 2018. He pays all the cost of keeping up his home in the United States. He earned $38,000 in wages in 2018.
- Sean's daughter, Sonya, lived with Sean all year. She is 18, single, and had $4,000 in wages in 2018.
- Sonya’s son, Jimmy, was born on November 17, 2018. Jimmy lived in Sean's home all year.
- Sean provides more than half of the support for both Sonya and Jimmy.
- Sean, Sonya, and Jimmy are all U.S. citizens with valid Social Security numbers.
4. Sean has two qualifying children for the earned income credit. | True |
Interview Notes
- Sean is 49 and his divorce became final on October 21, 2018. He pays all the cost of keeping up his home in the United States. He earned $38,000 in wages in 2018.
- Sean's daughter, Sonya, lived with Sean all year. She is 18, single, and had $4,000 in wages in 2018.
- Sonya’s son, Jimmy, was born on November 17, 2018. Jimmy lived in Sean's home all year.
- Sean provides more than half of the support for both Sonya and Jimmy.
- Sean, Sonya, and Jimmy are all U.S. citizens with valid Social Security numbers.
5. Sean's most advantageous allowable filing status is Head of Household. | True |
| Scenario 3: Tom and Carol Baker |
Interview Notes
- Tom and Carol are resident aliens, married, and want to file a joint return.
- They have two children. Sydney is 5 years old and a resident alien. Benjamin is 2 years old and a U.S. citizen. Both children lived with the parents in the United States all year.
- Tom, Carol, and Sydney have Individual Taxpayer Identification Numbers (ITINs). Benjamin has a Social Security number.
- Tom earned $30,000 in wages. Carol had $8,000 in wage income. They had no other income.
- Tom and Carol provided all the support for Sydney and Benjamin.
- Sydney and Benjamin attended daycare while Tom and Carol were at work.
- Tom and Carol did not receive dependent care benefits from a dependent care benefits plan or flexible spending account.
- The daycare center provided the Baker's with a statement indicating the amount of $3,250 paid for 2018, their name, address and valid Employer Identification Number.
6. Tom and Carol are able to eligible to claim Benjamin as a qualifying child for the child tax credit. | True |
Interview Notes
- Tom and Carol are resident aliens, married, and want to file a joint return.
- They have two children. Sydney is 5 years old and a resident alien. Benjamin is 2 years old and a U.S. citizen. Both children lived with the parents in the United States all year.
- Tom, Carol, and Sydney have Individual Taxpayer Identification Numbers (ITINs). Benjamin has a Social Security number.
- Tom earned $30,000 in wages. Carol had $8,000 in wage income. They had no other income.
- Tom and Carol provided all the support for Sydney and Benjamin.
- Sydney and Benjamin attended daycare while Tom and Carol were at work.
- Tom and Carol did not receive dependent care benefits from a dependent care benefits plan or flexible spending account.
- The daycare center provided the Baker's with a statement indicating the amount of $3,250 paid for 2018, their name, address and valid Employer Identification Number.
7. Tom and Carol are eligible to claim the credit for other dependents and child and dependent care credit. INCORRECT | False |
| Scenario 4: Bill Johnson |
Interview Notes
- Bill is 31 years old, married, and lived with his spouse Michelle from January 2018 to September 2018. Bill paid all the cost of keeping up his home. He indicated that he is not legally separated and he and Michelle agreed they will not a file a joint return.
- Bill has an 8-year-old son, Daniel, who qualifies as Bill's dependent.
- Bill worked as a clerk and his wages are $20,000 for 2018. His income tax before credits is $500.
- In 2018, he took a computer class at the local university to improve his job skills.
- Bill has a receipt showing he paid $1,200 for tuition. He paid for all his educational expenses and did not receive any assistance or reimbursement.
- Bill does not have enough deductions to itemize.
- Bill, Michelle, and Daniel are U.S. citizens with valid Social Security numbers.
8. Bill is not able to file Head of Household nor claim the earned income credit or education credit. | True |
Interview Notes
- Bill is 31 years old, married, and lived with his spouse Michelle from January 2018 to September 2018. Bill paid all the cost of keeping up his home. He indicated that he is not legally separated and he and Michelle agreed they will not a file a joint return.
- Bill has an 8-year-old son, Daniel, who qualifies as Bill's dependent.
- Bill worked as a clerk and his wages are $20,000 for 2018. His income tax before credits is $500.
- In 2018, he took a computer class at the local university to improve his job skills.
- Bill has a receipt showing he paid $1,200 for tuition. He paid for all his educational expenses and did not receive any assistance or reimbursement.
- Bill does not have enough deductions to itemize.
- Bill, Michelle, and Daniel are U.S. citizens with valid Social Security numbers.
9. The maximum amount of the refundable additional child tax credit Bill is allowed to claim on Schedule 8812 is $1,400. | True |
| Scenario 5: Fran Emerson |
| 10. Head of Household is Fran’s most advantageous filing status. | False |
| 11. How many qualifying persons does Fran have for the earned income credit? | D. 3 |
12. What is the amount of the child and dependent care credit Fran can claim on Form 2441, Child and Dependent Care Expenses? $________.
(Do not enter dollar signs, commas, periods, or decimal points in your answer.) |
660
|
| 13. The total amount of qualified educational expenses used in the calculation of Fran’s 2018 American opportunity credit is: | B. $3,825 |
14. What is the amount of Fran’s individual shared responsibility payment? $________.
(Do not enter dollar signs, commas, periods, or decimal points in your answer.) |
695
|
15. What is the amount of Fran’s federal withholding? $________.
(Do not enter dollar signs, commas, periods, or decimal points in your answer.) |
2520
|
| 16. Fran's cancelled debt from Form 1099-C, Cancellation of Debt, must be included on her federal income tax return as other income. | True |
| 17. Fran can use the higher education expenses exception to avoid the 10% additional tax on the early distribution from her IRA on Form 5329, Additional Taxes on Qualified Plans (including IRAs) and Other Tax-Favored Accounts. | True |
| Scenario 6: Matthew and Mary Donnelly |
| 18. Ryan qualifies the Donnellys for the credit for other dependents. | True |
| 19. The Donnellys must pay an individual shared responsibility payment because Mary and Ryan did NOT have healthcare coverage for each month of 2018. | False |
| 20. The net capital gain or loss reported on Schedule D, Capital Gains and Losses, is a gain of $638. | False |
| 21. The combined age used to calculate the taxable portion of the pension using the Simplified Method is 129. | True |
| 22. None of Matthew's Social Security income is taxable.INCORRECT | True |
| 23. The Donnellys can split their refund using Form 8888, Allocation of Refund (Including Savings Bond Purchases). | True |
| 24. The total withholding on the tax return is $4,146. | True |
| Scenario 7: Austin Drake |
| 25. Austin must report the income shown on Form 1099-MISC, Miscellaneous Income, and Form 1099-K, Payment Card and Third Party Network Transactions, and his cash tip income from customers on Schedule C, Profit or Loss From Business. | True |
26. What is Austin’s mileage expense deduction (at the standard mileage rate) for his business as a ride share driver? $_______. (Round to the nearest dollar.)
(Do not enter dollar signs, commas, periods, or decimal points in your answer.) |
14753
|
| 27. Austin cannot deduct the amount he pays for lunch. | True |
| 28. The full amount of his self-employment tax is deducted on Schedule 1. | False |
| 29. The Qualified Business Income (QBI) deduction does NOT reduce the income that is used to calculate self-employment taxes. | True |
| 30. Self-employed health insurance deduction is claimed as an adjustment to income on Schedule 1, Additional Income and Adjustments to Income. | True |
| 31. If Austin owes a balance due on his income tax return, he can pay with his credit card. | True |
| Scenario 8: Roberta Wilson |
Interview Notes
- Roberta Wilson is 63 years old and single.
- Her grandson, Jacob, is 9 years old and lived with her all year. Roberta paid all household expenses and Jacob qualifies as her dependent.
- Roberta and Jacob are both U.S. citizens and have valid Social Security numbers.
- Roberta claimed EIC for Jacob on her 2015 tax return, but he only lived with her for 2 months and the credit was disallowed.
- Roberta had wage income of $35,000 in 2018.
- She is not sure if she should itemize or take the standard deduction.
- Roberta paid the following:
- $7,200 mortgage interest for a qualified home purchased in 2010.
- In 2018, she took out a home equity loan for $8,000 to pay off her credit cards. She paid interest in the amount of $650 on this loan.
- $9,010 for real estate taxes.
- $1,762 for state income taxes withheld in 2018.
- Unreimbursed doctor bills in the amount of $2,200.
- Unreimbursed prescription drugs for $250.
- Health club dues of $600.
- A statement received from her church showing donations made throughout the year totaling $4,500.
- Receipts for donations of furniture and clothing in good, used condition to Goodwill. The total estimated fair market value is $500.
- $50 donated to a friend in need via their Go-Fund-Me account.
- $45 paid in 2018 on her 2017 balance due state income tax return.
32. If Roberta chooses to itemize her deductions, she is able to take a deduction of $10,772 for state income and real estate taxes. | False |
Interview Notes
- Roberta Wilson is 63 years old and single.
- Her grandson, Jacob, is 9 years old and lived with her all year. Roberta paid all household expenses and Jacob qualifies as her dependent.
- Roberta and Jacob are both U.S. citizens and have valid Social Security numbers.
- Roberta claimed EIC for Jacob on her 2015 tax return, but he only lived with her for 2 months and the credit was disallowed.
- Roberta had wage income of $35,000 in 2018.
- She is not sure if she should itemize or take the standard deduction.
- Roberta paid the following:
- $7,200 mortgage interest for a qualified home purchased in 2010.
- In 2018, she took out a home equity loan for $8,000 to pay off her credit cards. She paid interest in the amount of $650 on this loan.
- $9,010 for real estate taxes.
- $1,762 for state income taxes withheld in 2018.
- Unreimbursed doctor bills in the amount of $2,200.
- Unreimbursed prescription drugs for $250.
- Health club dues of $600.
- A statement received from her church showing donations made throughout the year totaling $4,500.
- Receipts for donations of furniture and clothing in good, used condition to Goodwill. The total estimated fair market value is $500.
- $50 donated to a friend in need via their Go-Fund-Me account.
- $45 paid in 2018 on her 2017 balance due state income tax return.
33. If Roberta chooses not to itemize, her standard deduction is $19,600. | False |
Interview Notes
- Roberta Wilson is 63 years old and single.
- Her grandson, Jacob, is 9 years old and lived with her all year. Roberta paid all household expenses and Jacob qualifies as her dependent.
- Roberta and Jacob are both U.S. citizens and have valid Social Security numbers.
- Roberta claimed EIC for Jacob on her 2015 tax return, but he only lived with her for 2 months and the credit was disallowed.
- Roberta had wage income of $35,000 in 2018.
- She is not sure if she should itemize or take the standard deduction.
- Roberta paid the following:
- $7,200 mortgage interest for a qualified home purchased in 2010.
- In 2018, she took out a home equity loan for $8,000 to pay off her credit cards. She paid interest in the amount of $650 on this loan.
- $9,010 for real estate taxes.
- $1,762 for state income taxes withheld in 2018.
- Unreimbursed doctor bills in the amount of $2,200.
- Unreimbursed prescription drugs for $250.
- Health club dues of $600.
- A statement received from her church showing donations made throughout the year totaling $4,500.
- Receipts for donations of furniture and clothing in good, used condition to Goodwill. The total estimated fair market value is $500.
- $50 donated to a friend in need via their Go-Fund-Me account.
- $45 paid in 2018 on her 2017 balance due state income tax return.
34. Roberta is able to deduct interest paid on her home equity loan and the donation she made to a friend in need. | False |
Interview Notes
- Roberta Wilson is 63 years old and single.
- Her grandson, Jacob, is 9 years old and lived with her all year. Roberta paid all household expenses and Jacob qualifies as her dependent.
- Roberta and Jacob are both U.S. citizens and have valid Social Security numbers.
- Roberta claimed EIC for Jacob on her 2015 tax return, but he only lived with her for 2 months and the credit was disallowed.
- Roberta had wage income of $35,000 in 2018.
- She is not sure if she should itemize or take the standard deduction.
- Roberta paid the following:
- $7,200 mortgage interest for a qualified home purchased in 2010.
- In 2018, she took out a home equity loan for $8,000 to pay off her credit cards. She paid interest in the amount of $650 on this loan.
- $9,010 for real estate taxes.
- $1,762 for state income taxes withheld in 2018.
- Unreimbursed doctor bills in the amount of $2,200.
- Unreimbursed prescription drugs for $250.
- Health club dues of $600.
- A statement received from her church showing donations made throughout the year totaling $4,500.
- Receipts for donations of furniture and clothing in good, used condition to Goodwill. The total estimated fair market value is $500.
- $50 donated to a friend in need via their Go-Fund-Me account.
- $45 paid in 2018 on her 2017 balance due state income tax return.
35. Roberta must file Form 8862, Information To Claim Earned Income Credit After Disallowance, to claim the earned income tax credit after the disallowance. | True |
