1. Look at the Form 1040 you prepared for Eleonor Gwen. What is the amount on Form 1040, Line 75?

A. $12,594.
B. $15,380.
C. $2,400. 
D. $12,850.

2. Look at the Form 1040 you prepared for Eleonor Gwen. What is the amount on Form 1040, Line 76?

A. $1,980.
B. $0.
C. $240. 
D. $1,538.

3. You must make estimated tax payments for 2010 if you expect to owe at least $1,000 in tax year 2010, after subtracting your withholding and credits, and you expect your withholding and credits to be less than the smaller of: (1) 90% of the tax to be shown on your 2010 tax return, or (2) 100% of the tax shown on your 2009 tax return. Your 2009 tax return must cover all 12 months.

True False

4. If you had income tax withheld during 2009, you should receive a statement by February 2, 2010, showing your income and the tax withheld. Depending on the source of your income, you will receive:

A. Form W-2, Wages and Tax Statement.
B. Form W-2G, Certain Gambling Winnings.
C. A form in the 1099 series.
D. Any of the above.

5. Sue must make estimated tax payments of $4,000 for tax year 2010. She makes the following payments:

    1st payment - $1,000 on April 20, 2009.

    2nd payment - $1,000 on May 31, 2009.

    3rd payment - $1,000 on September 1, 2009.

    4th payment - $1,000 January 10, 2010.   

A. She has not made timely payments because her 1st payment was not made by April 15th.
B. She has not made timely payments because her 2nd payment was not made by June 15th.
C. She has made timely estimated payments.
D. She has not made any timely payments because none of the payments were made by the required IRS schedule.

6. Income tax is withheld at a flat rate from certain kinds of gambling winnings. Gambling winnings from any sweepstakes, wagering pool, or lottery, or any other wager if the proceeds are at least 300 times the amount of the bet, are subject to income tax withholding if the winning are more than

A. $3,050.
B. $5,000.
C. $600.
D. $1,500.

7. Marge Goodfrey sold her investment property March 30, 2009 at a gain of $50,000. Marge expects to owe $10,000 in additional income taxes on this sale. She had a tax liability of $900 for 2008 and will have no withholding for 2009. Marge's first estimated tax payment is due on what date?

A. April 30, 2009.
B. April 15, 2009.
C. January 31, 2010.
D. June 15, 2009.

8. The tips you receive while working on your job are considered to be part of your pay. Your employer will take into account the tips you report when figuring how much to withhold from your regular pay. You employer can figure your withholding by

A. Withholding at the regular rate on the sum of your pay plus your reported tips.
B. Withholding at the regular rate on your pay plus a percentage of your reported tips.
C. Withholding as much social security tax, Medicare tax, or railroad retirement tax as possible.
D. Both A and B above.

9. Susan, a single filer, started a home-based dress business on March 1, 2009. She was an employee and paid income taxes of $6,000 for 2008. Susan's business had net income of $0, $9,000, $11,000, and $15,000 respectively for each of the calendar quarters in 2009. Susan's total tax liability for the year was $5,500. Her first payment of estimated taxes is due:

A. April 15.
B. No estimates are due if Susan files by January 31, 2010.
C. June 15.
D. Susan's tax liability for 2008 exceeds 90% of her 2009 tax liability so no estimated payments are required to be paid.

10. If you have been notified by a payer that the TIN you gave is incorrect, you can usually prevent backup withholding from starting or stop backup withholding once it has begun by giving the payer your correct name and TIN. You must certify the TIN you give is correct. However, the payer will provide additional instructions if the TIN you gave needs to be validated by the Social Security Administration or by the IRS, if

A. The IRS notifies the payer twice within 3 calendar years that a TIN you gave fro the same account is incorrect.
B. The incorrect TIN is still being used on the account when the payer receives the second notice.
C. Both A and B above.
D. None of the above.

11. Generally, you are considered to have reason to know that a claim to U.S. status or of a reduced rate of withholding is incorrect if statements contained in the withholding certificate or other documentation or other relevant facts of which you have knowledge,  

A. Would cause a reasonably prudent person in your position to question the claims made.
B. Cannot base your determination on the receipt of statements or documents.
C. Have a mailing or residence address outside the treaty country.
D. Any of the above.

12. You may be liable for tax, interest, and penalties if you

A. Comply with the presumption rules even if the rate of withholding that should have been applied based on actual status of payee is different than presumed.
B. If you rely on your actual knowledge about a payee's status and withhold an amount less than that required under the presumption rules.
C. Report a payment that is subject to reporting under the presumption rules.
D. Any of the above.

13. A payment is subject to NRA withholding if it is from sources within the United States, and it is a fixed or determinable annual or periodical (FDAP) income or 

A. Are certain gains from the disposition of timber, coal, and iron ore.
B. Are from the sale or exchange of patents, copyrights, and similar intangible property.
C. Either A or B above.
D. Are insurance premiums paid on a contract issued by a foreign insurer.

14. The following items are examples of FDAP income, except

A. Compensation for personal services.
B. Real property income, such as rents.
C. Market discount and option premiums.
D. A commission paid for a single transaction.

15. Generally, when a foreign person engages in a trade or business in the United States, all income from sources in the United States connected with the conduct of that trade or business is considered effectively connected with a U.S. business. A factor to consider in establishing whether FDAP income is effectively connected with a U.S. trade or business is 

A. Whether the income is from assets used in, or held for use is, the conduct of that trade or business.
B. Whether the activities of that trade or business were a material factor in the realization of the income.
C. Either A or B above.
D. Whether the services were performed by an individual or an entity.

16. Illegal aliens who are resident aliens and who receive income from performing dependent personal services are

A. Subject to 30% withholding.
B. Subject to the same reporting and withholding obligations which apply to U.S. citizens for the same kind of income.
C. Are not subject to U.S. taxes because of their illegal status.
D. Are not subject to U.S. taxes since they are nonresident aliens.

17. Compensation paid to certain residents of Canada or Mexico who enter or leave the United States at frequent intervals are not subject to withholding. To qualify for the exemption from withholding during the year, a Canadian or Mexican resident must give the employer a statement with name, address, and identification number, and certifying that 

A. He or she is not a U.S. citizen or resident.
B. He or she is a resident of Canada or Mexico.
C. He or she expects to perform the described duties during the tax year.
D. All of the above.

18. Every withholding agent, whether U.S. or foreign, must file _________ to report payments to amounts subject to NRA withholding. 

A. Form 1042 and Form 1042-S.
B. Form 1040ES.
C. Form 8288 and Form 8288-A.
D. Form 8804-W.

19. A partner that is a U.S. person should provide Form W-9 to the partnership. A partnership may rely on a partner's certification of nonforeign status and assume that a partner is not a foreign partner unless 

A. The form does not give the partner's name, U.S. taxpayer identification number and address.
B. The form is not signed under penalties of perjury and dated.
C. The partnership has reason to know that any information on the form is incorrect or unreliable.
D. Any of the above.

20. The general rule exceptions apply for farmers and fishermen. If at least two-thirds of your gross income for 2009 or 2010 is from farming or fishing, your required annual estimated payment is

A. 90% of your total expected tax for 2010.
B. 66 2/3 % (.6667) of your total tax for 2010.
C. 100% of the total tax shown on your 2009 tax return that must cover all 12 months of the year.
D. Is the smaller of B and C above.

21. Whether you are entitled to claim a certain number of allowances or complete exemption from withholding is subject to review by the IRS. Your employer may be required to send a copy of the Form W-4 to the IRS. If the IRS determines that you cannot claim more than a specified number of withholding allowances or claim a complete exemption from withholding, the IRS

A. Cannot tell your employer how much to withhold from your wages.
B. Will issue a notice of the maximum number of withholding allowances permitted to both you and your employer (lock-in letter).
C. Audit your return and issue an order barring you from working with that employer.
D. Will tell your employer to withhold at the maximum rate possible.

22. You are a high school student and expect to earn $2,500 from a summer job. You do not expect to have any other income during the year, and your parents will be able to claim an exemption for you on their tax return. You worked last summer and had $375 federal income tax withheld from your pay. The entire $375 was refunded when you filed your 2009 return. With the facts above, you

A. Can claim exemption from withholding.
B. Have to have tax withheld at a single rate.
C. Have to send a copy of Form W-4 to the IRS.
D. Don't need to give a copy of Form W-4 to your employer.

23. For estimated tax purposes, the year is divided into four payment periods. If you do not pay by the due dates of each period, you may be charged a penalty even if you are due a refund when you file your return. If the due date for making an estimated tax payment falls on a Saturday, Sunday, or legal holiday, the payment will be

A. On time if you make it on the business day before the due date.
B. On time if you make it on the next business day.
C. Not required because if the due date falls on a Saturday, Sunday, or legal holiday, the IRS will be closed.
D. Postmarked for the next pay period.

24. Claudio and Conchita Nuñez made joint estimated tax payments for 2008 totaling $4,000. They file separate 2009 Forms 1040. Claudio's tax is $4,500 and Conchita's is $1,200. They do not agree on how to divide the $4,000, therefore

A. Claudio's share $3,160; Conchita's $840.
B. Claudio's share $2,000; Conchita's $2,000.
C. Claudio reports all the estimated payments because he made more money.
D. None of the above.

25. If at least two-thirds of your gross income for 2009 or 2010 is from farming or fishing,

A. You have only one payment due date for your 2010 estimated tax - January 15, 2011.
B. The due dates for the first three payment periods do not apply to you.
C. If you file your 2009 Form 1040 by March 1, 2010, and pay all the tax you owe, you do not need to pay estimated tax.
D. All of the above.

26. Even if the total of credits is more than your tax for the year, if the total of your withholding and your estimated tax payments for any payment period is less than the amount you needed to pay by the due date for that period

A. You may be charged a penalty.
B. You may not get your refund.
C. You do not need to file as you don't owe any tax.
D. None of the above.

27. You and your spouse can qualify to make joint estimated payments 

A. If you are legally separated under a decree of divorce or separate maintenance.
B. Even if you are not living together.
C. If you and your spouse have different tax years.
D. Even if either spouse is a nonresident alien.

28. You will not be liable for the penalty for failure to pay estimated income tax if the total tax shown on your tax return minus the amount you paid through withholding is less than

A. $1,000.
B. $600.
C. $500.
D. $100.

29. Generally, you do not have to pay an underpayment penalty if

A. Your total tax is less than $1,000.
B. You had no tax liability last year.
C. Either A or B above.
D. None of the above.

30. The tips you receive while working on your job are considered part of your pay. You must report to your employer the total amount of tips you receive on the job during the month. The report is due by the 10th day of the following month. You must report tips to your employer if you received tips 

A. Only if you worked for more than one employer.
B. Of $100 or more in a month while working for any one employer.
C. Of $40 or more in a month while working for any one employer.
D. Of $20 or more in a month while working for any one employer.

31. You must use the Electronic Federal Tax Payment System (EFTPS) to make electronic deposits of all depository tax liabilities you incur after 2009 if you had to make electronic deposits in 2009, or 

A. You deposited more than $200,000 in federal depository taxes in 2008.
B. You deposited less than $200, in federal depository taxes in 2008.
C. You deposited at least $100,000 in federal depository taxes in 2008.
D. None of the above.

32. Generally, a foreign person is subject to U.S. tax on its U.S. source income of __________ unless a reduced rate applies if there is a tax treaty between the foreign person's country of residence and the U.S. 

A. 20%.
B. 30%.
C. 40%.
D. 50%.

33. As a withholding agent, you are personally liable for any tax required to be withheld. This liability is independent of the tax liability to the foreign person to whom the payment is made. If you fail to withhold and the foreign payee fails to satisfy its U.S. tax liability, then 

A. You are liable for the tax.
B. Both you and the foreign person are liable for tax.
C. The foreign person is liable for tax.
D. None of you are liable for the tax.

34. In the determination of the source of the income or the amount subject to tax depends on facts that are not known at the time of payment. You must withhold an amount sufficient to ensure that at least 30% of the amount subsequently determined to be subject to withholding is withheld even if this means that you withhold more than 30% of the total amount paid.

True False

35. The payees of payments made to a foreign flow-through entity are the owners or beneficiaries of the flow-through entity. This rule applies for purposes of NRA withholding and or Form 1099 reporting and backup withholding. The following is a flow-through entity.

A. A withholding foreign partnership.
B. A withholding foreign trust.
C. A fiscal transparent entity receiving income for which treaty benefits are claimed.
D. All of the above.

36. A trust is foreign unless 

A. A court within the United States is able to exercise primary supervision over the administration of the trust.
B. One or more U.S. persons have the authority to control all substantial decisions of the trust.
C. Both A and B above.
D. It is a foreign trust that is not required to distribute all of its income annually.

37. NRA withholding applies only to payments made to a payee that is a foreign person. It does not apply to payments made to U.S. persons. Usually, you determine the payee's status as a U.S. or foreign person 

A. Based on the nationality of that person.
B. Based on the documentation that person provides.
C. Based on where that person lives.
D. Any of the above.

38. If a QI does not assume Form 1099 reporting and backup withholding responsibility, you must report on Form 1099 and, if applicable, backup withhold as if you were making the payment directly to the U.S. person.

True False 

39. If you are the employer of a nonresident alien,  

A. You generally must withhold taxes at graduated rates.
B. You must apply NRA withholding unless you can treat the foreign owner as a beneficial owner entitled to a reduced rate of withholding.
C. You treat a payee as a flow-through entity if it provides you with a Form W-8IMY.
D. Any of the above.

40. A corporation created or organized in, or under the laws of, the U.S. Virgin Islands or American Samoa is not considered a foreign corporation for purposes of withholding tax for the year if 

A. At all times during the tax year less than 25% in value of the corporation's stock is owned, directly or indirectly, by foreign persons.
B. At least 65% of the corporation's gross income is effectively connected with the conduct of a trade or business in the U.S. Virgin Islands, American Samoa, Guam, the CNMI, or the United States for the 3-year period ending with the close of the tax year of the corporation.
C. No substantial part of the income of the corporation is used, directly or indirectly, to satisfy obligations to a person who is not a bona fide resident of the U.S. Virgin Islands, American Samoa, Guam, the CNMI, or the United States.
D. All of the above.

41. If all the appropriate requirements have been established on a Form W-8BEN, W-8ECI, W-8EXP or, if applicable, on documentary evidence, you may treat the payee as a foreign beneficial owner. Form W-8BEN is used by a foreign person to 

A. Establish foreign status.
B. Claim that such person is the beneficial owner of the owner for which the form is being furnished or a partner in a partnership subject to section 1446 withholding.
C. If applicable, claim a reduced rate of, or exemption from withholding under an income tax treaty.
D. All of the above.

42. Generally, you must withhold 30% from the gross amount paid to a foreign payee unless you can reliably associate the payment with valid documentation that establishes that the payee is a foreign person that is the beneficial owner of the income and it entitled to the reduced rate of withholding or that 

A. It is a foreign partnership or foreign simple or grantor trust.
B. The payee is a U.S. person.
C. A court within the United States is able to exercise primary supervision over the administration of the business.
D. State whether that person is the transferee or transferor.

43. You may apply a reduced rate of withholding to a foreign person that provides a Form W-8BEN claiming a reduced rate of withholding under an income tax treaty only if the person provides a U.S. TIN and certifies that 

A. It is a resident of a treaty country and is the beneficial owner of the income.
B. It derives the income within the meaning of section 894 of the Internal Revenue Code if it is an entity.
C. It meets any limitation on benefits provision contained in the treaty, if applicable.
D. All of the above.

44. A QI may apply special rules to a smaller partnership or trust only if the partnership or trust 

A. Is a foreign partnership or foreign simple or grantor trust.
B. Is a direct account holder of the QI.
C. Does not have any partner, beneficiary, or owner that is a U.S. person or a pass-through partner, beneficiary, or owner.
D. All of the above.

45. If your regular pay is not enough for your employer to withhold all the tax due on your pay plus your tips, you can give your employer money to cover the shortage.                    

True False

46. If your adjusted gross income is more than $150,000 ($75,000 if married filing separately return) to avoid an estimated tax penalty, your withholding and estimated tax payments must be

A. 90% of your tax liability for 2009.
B. 110% of the tax shown on your 2010 return (provided that your tax return cover all 12 months).
C. The smaller of A and B above.
D. Both A and B above.

47. The amount of income tax your employer withholds from your regular pay depends on

A. The amount you earn.
B. The information you give your employer on Form W-4.
C. Your marital status and age.
D. Both A and B above.

48. You must pay the tax as you earn or receive income during the year either through withholding from your job or estimated tax payments. The federal income tax is a

A. Pay-as-you-go tax.
B. Estimated tax.
C. Withholding tax.
D. Pay as you file tax.

49. After you have given your employer a Form W-4, you can check to see whether the amount of tax withheld from your pay is too little or too much. If too much or too little tax is being withheld, you should

A. Give your employer a new Form W-4 to change your withholding.
B. Expect your withholding and credits to be less than 90% of the tax to be shown on your 2010 tax return.
C. Expect your withholding and credits to be less than 100% of the tax shown on your 2009 tax return that covers all 12 months.
D. Any of the above.

50. Estimated tax payments are not required for 2010 if

A. You had no tax liability for 2009.
B. You were a U.S. citizen or resident for the whole year.
C. Your 2009 tax year covered a 12 month period.
D. All of the above.

51. If you claim exemption from withholding, your employer will not withhold federal income tax from your wages. You can claim exemption from withholding for 2010 only if

A. Form 2009 you have a right to a refund of all federal income tax withheld because you had not liability.
B. For 2010 you expect a refund of all federal income tax withheld because you expect to have no tax liability.
C. You are a student.
D. Both A and B above.

52. Your employer should give you a Form W-2 for 2009 by January 31, 2010. If you stopped working before the end of the year, your employer could have given you your Form W-2 at any time after you stopped working. Include the federal income tax withheld (as shown on Form W-2) on:

A. Line 61 if you file Form 1040.
B. Line 38 if you file Form 1040A.
C. Line 7 if you file Form 1040EZ.
D. Any of the above.

53. If you do not give your employer a completed Form W-4, your employer 

A. Must consider you exempt from federal income tax.
B. Will have no choice but to ask you to leave the company.
C. Must notify the IRS of your non-compliance.
D. Must withhold at the highest rate, as if you were single and claimed no allowances.

54. A student (including a trainee or business apprentice) or researcher who has become a resident alien for U.S. tax purposes may use the terms of a tax treaty due to a provision known as a "saving clause". 

True False