Part 2 - Earned Income Credit

1. Which of the following is NOT a test to determine if a child is a qualifying child for the Earned Income Credit?               

A. Relationship test
B. Age test
C. Residency test
D. Support test 
 

2. You don't want to wait to receive the EIC, you expect to be eligible for the EIC for tax year 2009, so to receive the EIC in advance in tax year 2008, you    

A. Call the IRS and tell them you believe you qualify
B. File your return ahead of time
C. You don't qualify so don't try
D. Give Form W-5 to your employer to get part of EIC credit during the year in advanced payments.
 

3. Which of the following conditions would NOT prevent an individual from qualifying for the Earned Income Credit for tax year 2008?                

A. "Married Filing Separately" filing status.
B. Being a qualifying child of another person.
C. Being age 25.
D. Investment income of more than $2,950.
 

4. What will happen if your spouse does not have a social security number?      

A. The IRS will advise you to write "Applied For" in the social security section.
B. You CANNOT get the EIC.
C. The IRS will ask you for the correct information for sure.
D. You will get credit anyways because it only matters that your child has a correct number
 

5. If you are married, in order to qualify for the EIC, your filing status cannot be

6. To qualify for the Earned Income Credit in tax year 2008, your investment income must not be over  

A. $ 2,950
B. $ 2,850
C. $ 2,900
D. $ 2,700

7. The credit is called the Earned Income Credit because to qualify you must    

A. Be at poverty level
B. Have money in your savings
C. Work and have earned income
D. Not be living in luxury
 

8. If you retire on disability, benefits you receive under your employer's disability retirement plan (for EIC purposes) are                     

A. Always taxable
B. Unearned income
C. Not counted because disability is not taxable.
D. Considered earned income until you reach minimum retirement age
 

9. Income that is not earned income includes all of the following EXCEPT       

A. Net earnings from self-employment
B. Earnings while an inmate in a penal institution.
C. Welfare benefits.
D. Interest and dividends.
 

10. To qualify for the earned income credit with a qualifying child, you must meet 3 tests which are 

A. Joint return test, age, and Residency tests.
B. Citizenship, Age and Qualifying relative test.
C. Relationship, Age, and Residency tests.
D. None of the above.

 11. Having a qualifying child who lives with you in your home for more than 6 months meets what test?                                       

A. Age test
B. Relationship test
C. Residency test
D. Gross income test
 

12. If your Earned Income Credit was denied, send Form 8862 if it was denied because  

A. You loaned your dependents to your friend.
B. You claimed a dependent that was not yours.
C. You and your spouse each tried to claim the earned income credit.
D. Any of the above.
 

13. Your qualifying child is your son, daughter, adopted child, grandchild, or stepchild who at the end of the year                                             

A. Was any age if permanently and totally disabled.
B. Was under age 19.
C. Was under 24 and a student.
D. Any of the above.
 

14. Your son was a qualifying child of his father whom had a higher AGI. Your son lived with both parents the same amount of time and is a qualifying child for both of you. Then,

A. Your son's father can claim the credit because he had a higher AGI.
B. Both parents can claim the credit.
C. You and your child's father can decide which of you will take the EIC.
D. The one with the lower income can claim the credit because he or she needs it most.
 

15. If you are a qualifying child of another person

A. You cannot claim the EIC.
B. You can claim the EIC as long as the other conditions are met.
C. You can claim the EIC if you qualify.
D. You can claim the EIC as long as you have children.
 

16. If your EIC for any tax year after 1996 was denied or reduced for any reason other than for a mathematical or clerical error, you must          

A. Re-do your return with the correct information.
B. Not try to get the EIC credit for 5 years.
C. Attach a completed Form 8862 to your next tax return to claim the EIC.
D. Not try to get the EIC for 15 years.
 

17. You claimed the EIC on your 2007 tax return which you filed March 2008. In October 2008, the IRS denied your claim and determined that your error was due to reckless or intentional disregard for the EIC rules. As a result,                    

A. You cannot claim the earned income credit for tax year 2009.
B. You cannot claim the credit for tax years 2008 and 2009.
C. You cannot claim the credit for tax years 2009 through 2018.
D. You can't claim the credit for tax year 2019.
 

18. If you claimed the EIC on your 2007 tax return, which was filed in February 2008, and in December 2008, the IRS denied your claim and determined that your error was due to fraud, then              

A. You can't claim the credit for tax year 2009.
B. You can't claim the credit for tax year 2008 or 2009.
C. You can't claim the EIC for tax year 2008.
D. You can't claim the EIC for 2008 through 2017.

19. You can receive part of your EIC in your paycheck by completing form W-5 and   

A. Mailing the lower part of the form to the IRS.
B. Giving the lower part of the form to only one employer.
C. Call the IRS and explain your financial situation to a taxpayer advocate.
D. Give the form W-5 to all your employers.

20. To get part of the earned income credit paid to you throughout the year in your paycheck, you must

A. Expect to have a qualifying child.
B. Expect that your earned income and modified adjusted gross income will be less than $35,463 ($38,583 if you expect to file 'Married Filing Jointly' for tax year 2009). 
C. Expect to be eligible for the EIC for tax year 2009.
D. All of the above
 

21. What should you do if you have more than one employer and you would like to receive the advanced EIC payments?                                 

A. Give a Form W-5 only to one employer
B. Give a Form W-5 to all of your employers
C. Send Form W-5 to the IRS
D. Fill out W-4 and claim fewer exemptions
 

22. If you receive advanced EIC payments in year 2008, you must    

A. File a 2008 tax return only if you think they would find out.
B. File a 2008 tax return, even if you would not otherwise have to file.
C. File a 2008 tax return only if you earned enough to file.
D. File a return only if you can't determine if you have to file.
 

23. What is the amount of the Earned Income Credit you qualify for in tax year 2008 if you have two qualifying children and you earned $9,810 in wages and have no other income and your filing status is married Filing jointly.

A. $3,930
B. $2,917
C. $234
D. $3,910

24. In 2008, you were 24, single, and living at home with your parents. You worked and were not a student. You earned $7,500. Your parents cannot claim you as a dependent. When you file your return, you   

A. Can claim the Earned Income Credit because although you are not 25 yet, no one can claim you as a dependent.
B. Can claim the Earned Income Credit because you earned less than $12,880 and it does not matter that you are not at least age 25.
C. Live with your parents so you don't qualify for the Earned Income Credit because your parents will already have claimed a credit. 
D. Cannot claim the Earned Income Credit because you are not at least age 25.
 

25. If you are 'Married Filing Jointly' and you have more than one qualifying child, to qualify for the EIC your income must be less than               

A. $38,646
B. $15,880
C. $36,995
D. $41,646

26. In tax year 2008, you were age 25, single, and living at home with your parents. You earned $7,500. Your parents can't claim you as a dependent. You can claim the EIC because                                                                                     

A. You are not a dependent of another person.
B. You are over 25 years of age.
C. You are not using married filing separate filing status.
D. All of the above.
 

27. Your son is a qualifying child of both you and your son's father, because your son meets the relationship, age and residency tests for both you and your son's father. The father's AGI was more than yours. You and your son's father cannot agree on who would claim the EIC and your son lived with both of you the same amount of time during the year. Who can claim the EIC?                                                  

A. Both you and your son's father can claim the Earned Income Credit at the same time.
B. You can claim the credit because you are the mother and that is all that matters.
C. You can claim the Earned Income Credit as long as the child lives with you and it does not matter if you earned less money.
D. Your son's father is able to claim the Earned Income Credit because he earned more money.

28. You and your son lived with your mother all year. You were over 25 year of age. Your income is only $23,000 from your job. Your mother's only income is $26,000 from her job. Your child meets the relationship, age, and the residency tests for both you and your mother. If you and your mother cannot agree on who will take the EIC, then who can take the EIC?                                          

A. Your mother because her income was higher .
B. Your mother because she is your superior.
C. Your mother because you and your son lived in her household.
D. You because the child is your son.

29. You and your sister shared a household for the entire 2008 tax year. You have five children who lived in the same household. You earned $20,000, and she earned $35,000. If you and your sister don't agree on who can claim the EIC, then your sister cannot claim the Earned Income credit because                   

A. You didn't sign Form 8332.
B. You are the children's parent and using the tie-breaker rule, you have the right to not let her claim the EIC credit.
C. She earned more money and had a higher AGI and therefore she does not need the extra money.
D. She did not care for the children as her own.

30. Earned income to meet the EIC income rules include all of the following, EXCEPT:   

A. Wages, salaries, and tips.
B. Net earnings from self-employment.
C. Gross income received as a statutory employee.
D. Interest earned from your savings account.

31. U.S. Military personnel stationed outside the United States on extended active duty are not considered to have lived in the United States during that duty period for purposes of EIC rules.                                                               

True False

32. The Residency Test for purposes of the EIC rules means that the qualifying child lived only in the U.S. for more than half of the tax year. (Not to be confused with the residency test for dependents).              

True False

33. Welfare benefits are considered earned income for purposes of receiving the Earned Income Credit.                                                                 

True False

34. Your child can be qualifying child of another person (whom is not the father or mother) with a higher modified AGI and that person can claim the EIC if you don't agree on who will claim it.

True False

35. If you do not have a valid social security number and you write "NO" directly on 64a of Form 1040 or line 40a (Form 1040A) or line 8a (Form 1040EZ), then           

A. You can claim the EIC.
B. You cannot claim the EIC. 
C. You cannot send in your tax return.
D. You can claim the EIC as long as you have a valid IRS ITIN Number.

36. Social security and railroad retirement benefits are not considered earned income for purposes of the Earned Income Credit rules                              

True False

37. Unemployment compensation is considered earned income for EIC purposes because in order to receive unemployment compensation you are required to work.         

True False

38. For Earned Income Credit purposes, the child's age does not matter if the child is permanently and totally disabled at any time during the tax year.           

True False

40. Your filing status is 'Married Filing Jointly' and you have only one qualifying child living with you for tax year 2008. Your earnings from work are a total of $33,010, and you have no other income. What is your Earned Income Credit amount?