Part 4 - Apply Your Federal Tax Knowledge

In this tax school part, you will be able to review your tax knowledge you have in tax preparation. You will be able to apply knowledge you have integrated with new knowledge. 

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Student Instructions:

Print this page, work on the questions and then submit test by mailing the answer sheet or by completing quiz online.

Instructions to submit quiz online successfully: Step-by-Step check list

Answer Sheet            Quiz Online

Most forms are in Adobe Acrobat PDF format. You will need Adobe Reader to view and print these forms. If you do not already have Adobe Reader installed on your computer, you may download the software for free.

Use publication IRS Publication 17 to complete this topic.

 IRS Form 1040
 IRS Form 2441
 IRS Form 8812
IRS Form 8863
IRS Form 4137

Prepare the appropriate Federal forms for Margarita Gutierrez. Her address is current on Form W-2. Get all her basic information from the following W2, including income information.  

Margarita has three children:

Margarita paid rent $8,800 for tax year 2008.

March 12, 2008, Margarita placed a deposit of $180 ($90 for each child) with a care provider to reserve a place for her two children Carlos and Anita in the child care facility. Her plans were for the facility to care for her children until her mother suggested that it would be great for her (Margarita's mother) to take of the children. As a result, Margarita forfeited her deposit.

In 2008, Margarita paid her mother Linda Gutierrez $ 2,100 ($1,050 for each child) for child care.  Linda lives at 1965 S. Virginia St., Reno, NV  89502. Her number is 912-52-1060. Linda cared for both children.

Margarita is the only person that can claim the children. The children lived with her for all of 2008 tax year. She paid all of the household expenses and she was the only person supporting her children.

Margarita's son Javier turned 17 on December 31, 2008. He is a U.S. Citizen and Margarita can claim him as a dependent. Margarita was told by another preparer that she can get the child tax credit for Javier because Javier was 16 years old for the most part of the tax year.

In 2008, Margarita bought a new car for $ 9,000 cash and received a $ 400 rebate check from the manufacturer.

Margarita received $ 3,000 in court ordered alimony payments from her ex-husband Francisco Tovar (SSN 540-16-7021) as specified in her divorce decree .

In 2008, Margarita makes a payment directly to an eligible educational institution for her son Javier's qualified educational expenses. She paid $ 2,000 for him on borrowed funds. These funds will be paid with a balloon payment at the end of 2009. Margarita is asking if she can take both the Hope credit and the Lifetime Learning Credits. Margarita will claim both credits if she can.

Margarita received tip income that she did not report because according to her employer she was not supposed to report tips for certain months that the amount did not reach a minimum reportable amount. Her employer included in Margarita's W-2 only tips that were more than the minimum amount to report. I asked Margarita to bring me just the totals of the tip income she received per month. The following list shows her tips received in their respective months.

1. January  $235
2. February $160
3. March $16.15
4. April $17.25
5. May $19.90
6. June $320
7. July $180
8. August $19.30
9. September $255
10. October $14.50
11. November $18.75
12. December $620

Margarita will contribute the most that she can contributed to a traditional IRA on April 10, 2009 a few days before her return is due to be filed. She was not covered by a retirement plan at work. 

1. Look at the Form 1040 you prepared for Margarita. What is the amount on Form 1040, Line 7?

A. $ 46,326.
B. $ 44,500.
C. $ 44,606. 
D. None of the above.

2. Look at the Form 1040 you prepared for Margarita. What is the amount on Form 1040, Line 11?

A. $ 985.
B. $ 3,000.
C. $ -0-. 
D. None of the above.

3. Look at the Form 1040 you prepared for Margarita. What is the amount on Form 1040, Line 19?

A. $ 985.
B. $ 911.
C. $ -0-. 
D. None of the above.

4. Look at the Form 1040 you prepared for Margarita. What is the amount on Form 1040, Line 21?

A. $ 985.
B. $ 911.
C. $ -0-. 
D. None of the above.

5. Look at the Form 1040 you prepared for Margarita. What is the amount on Form 1040, Line 22?

A. $ 46,326.
B. $ 44,500.
C. $ 49,916. 
D. None of the above.

6. Look at the Form 1040 you prepared for Margarita. What is the amount on Form 1040, Line 32?

A. $ 5,000.
B. $ 4,000.
C. $ -0-. 
D. $ 3,000.

7. Look at the Form 1040 you prepared for Margarita. What is the amount on Form 1040, Line 48?

A. $ 181.
B. $ 2,100.
C. $ 420. 
D. None of the above.

8. Look at the Form 1040 you prepared for Margarita. What is the amount on Form 1040, Line 50?

A. $ 1,600.
B. $ 400.
C. $ 2,000. 
D. None of the above.

9. Look at the Form 1040 you prepared for Margarita. What is the amount on Form 1040, Line 52?

A. $ 3,000.
B. $ 2,000.
C. $ 1,970. 
D. $ 411.

10. Look at the Form 1040 you prepared for Margarita. What is the amount on Form 1040, Line 66?

A. $ 859.
B. $ 1,141.
C. $ 1,589. 
D. $ 1,141.

11. Look at the Form 1040 you prepared for Margarita. What is the amount on Form 1040, Line 73a?

A. $ 3,400.
B. $ 1,811.
C. $ 2,670. 
D. None of the above.

12. To claim the child tax credit, you can claim it on Form 1040EZ.     

True False

13. Your son turned 17 on December 31, 2008. You claim him as a dependent on your return. What is the amount of your child tax credit.

A. $ 1,000.
B. $ 2,000.
C. $ 3,000.
D. $ -0-.

14. Credits, such as the child tax credit, the adoption credit, or the credit for child and dependent care expenses, are used to reduce tax. If your tax on Form 1040, line 46, or Form 1040A, line 28 is zero, figure the child tax credit to see if you qualify.

True False

15. The additional child tax credit is a credit you may be able to take if you are not able to claim the full amount of the child tax credit.

True False

16. This credit is called the "Earned Income Credit" because, to qualify, you must work and have earned income. Earned income includes

A. Certain dependent care benefits.
B. Certain adoption benefits.
C. Net earnings from self-employment or gross income received as a statutory employee.
D. All of the above.

17. You can elect to include your non-taxable combat pay as earned income to figure the earned income credit.

True False

18. For the Earned Income Credit, payments you received from a disability insurance policy that you paid the premiums for are earned income once you have reached minimum retirement age. 

True False

19. During the 2008 fall semester, Luis was a high school student who took classes on a half-time basis at Los Felix College. Luis was not enrolled as part of a college degree program at Los Felix College because this college only admits students to a degree program if the students have a high school diploma or equivalent. Luis

A. Did not have expenses that qualify him to figure a hope credit.
B. Was an eligible student for the hope credit for tax year 2008.
C. Was not an eligible student for the hope credit for tax year 2008.
D. None of the above.

20. Generally, you can claim an educational credit if you

A. Pay qualified education expenses of higher education.
B. Pay the education expenses for an eligible student.
C. Pay qualified education expenses for your spouse, or a dependent for whom you claim an exemption on your return.
D. All of the above.

21. Include in your income on Form 1040, line 11, any alimony payments you received.

True False

22. Report the value of any non-cash tips, such as tickets or passes, to your employer, because you have to pay social security and Medicare taxes or railroad retirement tax on these tips.

True False

23. If you received $20 or more in cash and charge tips in a month from any one job and did not report all those tips to your employer, you must report the social security and Medicare taxes on the un-reported tips as additional tax on your return. To figure the additional taxes use

A. Form 8880.
B. Form W-2.
C. Form 4137.
D. Form 8919.

24. You can set up and make contributions to a traditional IRA if

A. You (or, if you file a joint return, your spouse) received taxable compensation during the year.
B. You were not age 70 1/2 by the end of the year.
C. You have a job and your employer agrees to you making a contribution.
D. Both A and B are correct.

25. To claim the child tax credit your qualifying child must be  

A. Under age 17 by the end of tax year 2008.
B. Your child, stepchild, grandchild, great-grandchild.
C. An eligible foster child that lived with you for more than half of 2008.
D. All of the above
 

26. If the child tax credit exceeds the tax liability, part or all of the excess may be refundable as an additional credit calculated on Form 8812.      

True False

27. For purposes of the Child Tax Credit, your modified AGI is your AGI plus

A. Any amount excluded from income because of the exclusion of income from Puerto Rico. 
B. Any amount on line 45 or line 50 of Form 2555.
C. Any amount on line 18 of Form 2555-EZ or line 15 of Form 4563.
D. Any of the above

28. For tax year 2008, how much Is the maximum child tax credit amount per qualifying child?

A. $600
B. $2,600
C. $1,000
D. $2,000

29. Juanita Ramos is a single woman whom has three dependent children living with her. Her children are under 17. Juanita's total income is $25,000 as shown on her W-2. Her social security and Medicare taxes from Forms W-2, boxes 4 and 6 show $1,913 total withheld. Juanita provided her children total support and they lived with her all year. No one else can claim an exemption for Juanita or the children. Other than the Earned Income Credit, she had no other credits. Figure out what the Additional Child Tax Credit is for tax year 2008.   

A. $ 303
B. $ 2,697
C. $ 2,475
D. $ -0-

30. Albert has one child who turned 17 years old on December 10, 2008. Albert's tax liability on Form 1040, line 46 is $1,100. What is Albert's Additional Child Tax Credit amount for 2008?  

A. $ 1,000
B. $ 100
C. $ -0-
D. None of the above.