1. Look at the Form 1040A you prepared for Lawrence and Theresa. What is the amount on Form 1040A, Line 29?

a. $ -0-.
b. $ 1,000.
c. $ 700. 
d. None of the above.

2. Look at the Form 1040A you prepared for Lawrence and Theresa. What is the amount on Form 1040A, Line 44a?

a. $ -0-.
b. $ 3,407.
c. $ 5,200. 
d. $ 5,107.

3. For 2007, when you figure your credit for child and dependent care expenses, your earned income no longer includes employee compensation that is nontaxable.                        

True False

4. For 2007, the credit for child and dependent care expenses is not long allowed against alternative minimum tax (AMT).                        

True False

5. You cannot figure your credit for child and dependent care expenses using expenses for care while you were temporarily absent from work or working part-time.                        

True False

6. To claim the credit for child and dependent care expenses, you (and your spouse if you are married) must have earned income during the year. Earned income includes

a. Wages, salaries, tips, and other taxable employee compensation and net earnings from self employment.
b. Strike benefits and any disability pay you report as wages.
c. Non-taxable combat pay if you elect to include it. 
d. All of the above.

7. To provide lodging to the housekeeper, you move to an apartment with an extra bedroom. You

a. Cannot count the extra rent and utility expenses for the housekeeper's bedroom as work-related.
b. Can only count the extra utility expenses as work-related.
c. Can count the extra rent and utility expenses for the housekeeper's bedroom as work-related. 
d. None of the above

8. If you received dependent care benefits, your dollar limit for purposes on the credit may be reduced. Dependent care benefits are

a. Amounts your employer paid directly to either you or your care provider for the care of your qualifying person while you work.
b. Fair market value of care in a daycare facility provided or sponsored by your employer.
c. Pre-tax contributions you made under a dependent care flexible spending arrangement. 
d. All of the above.

9. If you are self-employed and receive benefits from a qualified dependent care benefit plan, you

a. Are treated as an employer.
b. Are treated as an employee.
c. Would get a deduction on Form 1040, Schedule C, Schedule E or Schedule F. 
d. All of the above

10. If you exclude dependent care benefits from your income, the amount of the excluded benefits

a. Is not included in your work-related expenses.
b. Reduces the dollar limit on the amount of your work-related expenses you can use to figure the credit.
c. Both A and B are correct. 
d. None of the above.

11. In 2006, Nathan and Cynthia had childcare expenses of $ 2,900 for their 12-year-old child. Of the $ 2,600, they paid $ 2,200 in 2006 and $ 700 in 2007. Their adjusted gross income for 2006 was $ 40,000. Sam's earned income of $16,000 was less that Kate's earned income. As a result,

a. A credit for their 2006 expenses paid in 2007 is not allowed in 2006, but it is allowed for 2007.
b. They must use their adjusted gross income for 2006 to compute the amount.
c. They must add $ 154 to their 2007 credit.  
d. All of the above.

12. If you pay someone to come to your home and care for your dependent or spouse, you may be a household employer and you may be subject to

a. Social Security and Medicare taxes.
b. Federal unemployment tax.
c. Federal income tax withholding. 
d. All of the above.

13. If you pay someone to come to your home and care for your dependent or spouse, you may be a household employer and you may be subject to

a. State unemployment tax.
b. Other state employment taxes.
c. Worker's compensation insurance. 
d. All of the above.

14. Disregard community property laws when you figure earned income for the child and dependent care expenses credit.                  

True False

15. You remarried on December 31. Your earned income for the year was $21,000. You new spouse's earned income for the year was $2,300. You paid work-related expenses of $3,000 for the care of your 8-year-old child and qualify to claim the credit. The amount of expenses you use to figure your credit is

a. $ 3,000.
b. $ 2,300.
c. $ -0-
d. None of the above.

16. You pay $500 a month for the after-school care for your son for all of 2007. Your child turned 13 on June 1. How much of the expenses can you use to figure the credit?

a. $ 3,000.
b. $ 6,000.
c. $ 2,500. 
d. $ -0-.

17. If you pay someone to care for your dependent in your home,

a. you may be a household employer
b. you may have to pay employment taxes
c. you can claim the credit for child and dependent care expenses 
d. all of the above

18. To claim the Child and Dependent Care Expenses Credit, you must file _________ for people who file Form 1040, or  _______ for people who file Form 1040A.

a. Form 2441; Schedule 2.
b. Form 2441; Schedule 3.
c. Form 2606; Schedule C. 
d. Form 4029; Schedule SE.

19. The child and dependent care expenses must be for the care of one or more qualifying person such as

a. a child who is 18 years old
b. your dependent daughter who was under the age of 13 when care was provided.
c. your parents who are perfectly able to care for themselves
d. a person who does not live with you

20. To be able to claim the credit for child and dependent care expenses, you must file Form 1040 or Form 1040A, not Form 1040EZ. The following is not one of the tests that you must meet to claim the credit.

a. The care must be for one or more qualifying persons who are identified on the form you use to claim the credit.
b. The care can be to pay child and dependent care expenses so you (or your spouse if you are married) can have more freedom to do things you enjoy like play tennis.
c. Your filing status must be single, head of household, qualifying widow (er) with dependent child, or married filing jointly. You must file a joint return if you are married, unless an exception applies to you. 
d. You must identify the care provider on your tax return. If correct information is not shown, the credit may be reduced or disallowed.

21. The work related expenses for the child and dependent care expenses care credit are expenses that

a. Allow you (and your spouse if you are married) to work or or look for work.
b. Are for the qualifying person's care.
c. Allow you to go on vacation from work.
d. Both a and b are correct.

22. If your spouse is a student or is not able to care for him or herself, he or she is treated as having earned income for any month that he or she is

a. A part time student attending classes in the day time.
b. A partially disabled spouse capable of caring for him or herself
c. Physically or mentally not able to care for him or herself or is a full time student
d. A student that is attending full time only at night time.

23.  You paid work related expenses of $5,000 in tax year 2007. The state social services agency reimbursed $2,000 for your work related child care expenses. Which of the following is correct?

a. Since you were reimbursed, you can't take the child and dependent care expenses credit
b. You can use $2,000 to figure your credit
c. You can use $5,000 to figure your credit
d. You can use $3,000 to figure your credit

24. There are many ways the taxpayer can show due diligence. Which of the following is correct as far as showing due diligence?

a. Get and keep the care provider's completed Form W-10.
b. Show a copy of the care provider's driver license (in state that has social security number in driver license).
c. A copy of the provider's social security card. 
d. All of the above.

25. Juan and Miriam Johnson are married filing jointly and keep up a home for their two pre-school children. In tax year 2007, they claimed their children as dependents. Juan earned $15,200 and Miriam earned $5,100. They paid $2,000 for each child in work related child care expenses. What is their credit amount?

a. $ 4,000.
b. $ 1,280.
c. $ 880. 
d. $ -0-.

26. You can count work-related payments you make to relatives who are not your dependents, even if they live in your home. You would not count payments to

a. A dependent for whom you (or your spouse if you are married) can claim as an exemption.
b. Your child who was under age 19 at the end of the year, even if he or she is not your dependent. 
c. A person who was your spouse any time during the year, or the parent of your qualifying child.
d. Any of the above.

27. Child and dependent care expenses must be work-related to qualify for the credit. Expenses are considered work-related only if

a. work-related expenses allow you (and your spouse) to work or look for work.
b. work-related expenses are for a qualifying person's care.  
c. work-related expenses allow you (and your spouse) to go out more often.
d. both a and b are true. 

28. Do not count as work-related expenses amounts you pay for child and dependent care while you are

a. a full-time student if you are enrolled at and attend a school for the number of hours or classes that the school considers full time.
b. working or looking for work.  
c. off work because of temporary illness, if you had to pay for care anyways.
d. None of the above. 

29. To be work-related, your expenses must be to provide care for a qualifying person. You do not have to choose the least expensive way of providing the care. Expenses are for the care of a qualifying person only if their 

a. main purpose include amounts you pay for food, clothing, education, and entertainment.
b. main purpose is the person's well-being and protection.  
c. main purpose is for qualifying person is to attend kindergarten or a higher grade level.
d. both a and b are true. 

30. Your child and dependent care expenses must be for the care of one or more qualifying persons. A qualifying person is your qualifying child who is your dependent and who was under age 13 when the care was provided, or

a. Your spouse who was physically or mentally not able to care for himself or herself and lived with you for more than half the year.
b. A person who was physically or mentally not able to care for himself or herself, lived with you for more than half the year and was your dependent.   
c. A person was physically or mentally not able to care for himself or herself, lived with you for more than half the year and would have been your dependent except that earned more than $3,400, filed jointly, or you or your spouse if filing jointly can be claimed on someone else's return. 
d. Any of the above.

31. Look at the Form 540A you prepared for Lawrence and Theresa. What is the amount on Form 540A, Line 43?

a. $ 700.
b. $ 140.
c. $ 301. 
d. None of the above.

32. Look at the Form 540A you prepared for Lawrence and Theresa. What is the amount on Form 540A, Line 66?

a. $ 2,450.
b. $ 2,051.
c. $ 1,890. 
d. None of the above.

33. For California, if you had qualifying expenses for care that was provided in 2006 that you paid in 2007, you may be able to increase your credit for 2007.                     

True False

34. You may qualify to claim the 2007 credit for child and dependent care expenses if you (and your spouse/RDP) paid someone in California to care for your child or other qualifying person while you worked or looked for employment.                       

True False

35. Care must be provided in California for one or more qualifying persons. You paid for care so you (and your spouse/RDP) could work or look for work. If you did not find a job and have no earned income, you still qualify for the credit.                      

True False

36. Enter each qualifying person's SSN. Verify that the name and SSN match the qualifying person's social security card to avoid the reduction or disallowance of your credit.                     

True False

37. There are differences between California and federal laws regarding the Child Care and Dependent Care Expenses credit. For example, California allows this credit only for care provided in California. In addition, the California credit is a percentage of the federal credit as modified by the California law. Furthermore, with the California credit

a. Federal adjusted gross income must be $100,000 or less to qualify for the California credit contrary to federal with no AGI limit.
b. The credit is refundable.
c. If you were a nonresident, you can use your earned wages from working in other states to qualify for the California credit.
d. Both a and b are correct.

38. Tom and Rose both worked full-time and claim Naomi, their daughter, as a dependent. They paid $500 per month to have Juanita take care of Naomi while they were at work. Juanita gets paid on the 1st and the 15th of each month and she has been taking care of Naomi for about 5 years now. Naomi turned 13 years old June 31, 2007. Child care payments were a total of $6,000 for all of 2007. What was the amount of child care payments that they are allowed to count as qualified child care for Naomi.   

a. $ 6,000.
b. $ 3,000.
c. $ 1,500.
d. $ 2,500.

39. Jorge and Lucy Duran are married and keep up a home for their two pre-school children. In tax year 2007, they claimed their children as dependents. Jorge earned $15,200 and Lucy earned $5,100. They paid $2,000 for each child in work related child care expenses. What is their credit?

a. $ -0-
b. $ 2,000
c. $ 320
d. $ 640

40. What is the percentage of the federal Child and Dependent Expenses Care credit that is allowed for California for taxpayers who earned less than $40,000?

a. 42%
b. 50%
c. 63%
d. 22%