20 Hour Tax Course - Instructor Key

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Part 1 - Filing Basics

In this "Filing Basics" tax school part 1, we will review some tax rules that affect every person who may have to file a federal income tax return. We will cover topics such as who must and should file, what filing status and how many exemptions to use. In addition, this tax topic is about the standard deduction and taxpayers who do not itemize their deductions.

Please use the IRS Publication 501 to complete this tax assignment.

A. Form 2441 or Schedule 2.
B. Form 2106 or Schedule 3.
C. Form 4567 or Schedule 1.
D. None of the above.     

83. To qualify for child and dependent care expenses credit, you      

A. Can pay for care so that you will be able to go on vacation
B. Can hire your child who is under 19 years old
C. Can hire your aunt whom you can claim as a dependent
D. Must have a child that must live with you for more than half of the year and meet other requirements.

84. To claim the Child and Dependent Care Credit, you (and your spouse if you're married) must have earned income. Your spouse is treated as having earned income for any month that he or she is                         

A. A full-time student.
B. Physically not able to care for himself or herself. 
C. Mentally not able to care for himself or herself.
D. Any of the above.

85. Generally, married couples must file a joint return to take the child and dependent care credit. You may be able to file a separate tax return and still take the credit if

A. You are legally separated. 
B. You are living apart from your spouse.
C. Your spouse signs an agreement not to claim the credit.
D. Both A and B above.

86. Your child and dependent care expenses must be for the care of one or more qualifying persons such as  

A. A child who is under 18 years-old when the care was provided.
B. Your dependent daughter who was under the age of 13 when the care was provided.
C. Your parents who are perfectly able to care for themselves.
D. A person who did not live with you.

87. You take your 4-year-old child to nursery school that provides lunch and a few educational activities as part of its pre-school child-care service. Which one of the following would be correct?                               

A. You can count the total cost as child care because the costs were partly to provide education.
B. You can count the total cost when you figure the child and dependent care credit because lunch and educational activities are incident to the childcare and the cost cannot be separated.
C. Expenses were for child's lunch so they do count.
D. All of the above

88. You pay a nanny to care for your 2-year-old son and 4-year-old daughter so you can work. You become ill and miss 4 months of work but received sick pay. You continue to pay the nanny to care for the children while you are ill.

A. Your absence is not a short temporary absence, and your expenses are not qualifying care expenses because they are not work related.
B. Your absence is a short temporary absence, and your expenses are qualifying care expenses.
C. An absence of 6 months or less is a short, temporary absence
D. An absence of more than 2 weeks may never be considered a short, temporary absence regardless of the circumstances.

89. You place your 12 year old child in a boarding school so you can work full-time. Which of the following would be correct?                          

A. You can only count the educational part of the boarding costs as qualifying expenses
B. You can't count the boarding cost because it was not for a pre-school child
C. You can count that part of the expense in figuring your child and dependent care credit, if it can be separated from the cost of the education
D. If you place your child in boarding school, he will be away from the home and thus you can't claim the care credit

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

A. Are for the cost of a babysitter while you and your spouse go out to eat.
B. Are not really for the qualifying person's care
C. Allow you to work or look for work
D. Allow you to go on vacation from work

91. 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. Not your dependent even if her or she lived in your home.
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

92. You can count child care expense payments you make to relatives who are   

A. Not your dependents, even if they live in your home.
B. Your children who are under 19 years old, as long as they not your dependents.
C. Your dependents for whom you (or your spouse) can claim an exemption. 
D. Any of the above.

93. You, a single taxpayer, paid work related child care expenses of $3,000 in tax year 2008. You were reimbursed $2,400 by a state social services agency. Which of the following is correct regarding the child and dependent care expenses credit? (two qualifying dependents).        

A. Since you were reimbursed, you can't take the child and dependent care expenses credit
B. You can use $1,000 to figure your credit
C. You can use $600 to figure your credit
D. You can use $2,600 to figure your credit

94. If the care provider information you give is incorrect or incomplete, your credit will not be allowed unless you                                            

A. Provide the correct information.
B. Show proof that you did pay.
C. Show due diligence in trying to supply the correct information by keeping the care provider's completed Form W-10.
D. Call the IRS and give them the telephone number of the care provider.

95. 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 statement furnished by your employer if the the provider is your employer's dependent care plan.
C. Show a letter or invoice from the provider if it shows the necessary information.
D. Any of the above

96. There is a dollar limit on the amount of your work related expenses that you can use to figure the child and dependent care expenses credit. This limit is set per qualifying person. The limit is      

A. $3,000 for one qualifying person.
B. $6,000 for two or more qualifying people.
C. $3,000 for each qualifying person.
D. Both A and B are correct.

97. You and your spouse (MFJ) paid $5,000 in child care, you earned $19,000 for the entire year. Your spouse did not work and was not a student or disabled. You have only one qualifying child. What is your child and dependent care expenses credit for tax year 2008?

A. $0 federal credit.
B. $990 federal credit.
C. $960 federal credit.
D. $1,600 federal credit.

98. If I am single and want to file my return and have no tax liability.  If I claim the child and dependent care expenses credit for federal, would I get a refund?        

A. Yes, tax liability can be zero, and you can still qualify because for federal the credit is refundable.
B. No, you cannot get a refund for any part of the credit that is more than your regular tax because this tax credit is not refundable.
C. No, if you have tax, the child and dependent care credit would not cancel it and thus there is no reason to claim it.
D. No, the federal tax system does not have a Child and Dependent Care Expenses Credit.

99. Juan and Maria Escobedo are married and keep up a home for their two pre-school children. In tax year 2008, they claimed their children as dependents. Juan earned $15,200 and Maria earned $5,100. They paid $4,900 in work related child care expenses. What is their credit?

A. $-0- for federal.
B. $501.76 for federal.
C. $1,632 for federal.
D. $1,568 for federal.

100. The amount of child and dependent care credit you can claim is limited to your regular tax.

True False

101. In tax year 2008, if you are single with one qualifying child and your gross income is $40,100, what would your federal be if you paid $4,000 in child care?

A. $660.
B. $1,280.
C. $3,000.
D. $-0-.

102. If your qualifying person is a nonresident or resident alien who does not have and cannot get a social security number (SSN), then you are not able claim a child and dependent expenses credit for that person.

True False

103. In tax year 2008, to qualify for the federal child and dependent care credit, your adjusted gross income must be less than                              

A. $70,000
B. $43,000
C. $100,000
D. There is no income limit.

104. You paid a fee to an agency to get the services of the nanny who cares for your 2-year-old daughter while you work. The fee you paid for the nanny search is NOT a work-related expense for the child and dependent care expenses credit.

True False

105. For purposes of claiming the Child and Dependent Care Expenses Credit, if your child turns age 13 during the year                            

A. The child is not a qualifying person because he has to have been under age 13 at the end of the year.
B. The child's age does not matter as long as he is your dependent.
C. The child is a qualifying person only for the qualifying expenses paid when he or she was under age 13 for federal.
D. The child is not a qualifying child because the child has to be in pre-school.

106. In tax year 2008, Ramon's wife did not work all year because she was not able to care for herself. They are filing jointly. Ramon worked and earned $21,100. They have one qualifying child for the Child and Dependent care credit. They paid $2,000 for care of the child. How much credit can they qualify for?   

A. Federal $0.
B. Federal $744.
C. Federal $640.
D. Federal $620.

107. Kevin's girlfriend claimed his son on her tax return. His son lived with her all year. Kevin paid for his child care expenses a total of $2,200. Can Kevin claim the Child and Dependent care Expenses Credit?      

A. No, because he is not his dependent. Besides he did not live in his home at all and therefore not the custodial parent.
B. Yes, because he passes the relationship test
C. Yes, because he paid for the child care expenses
D. Yes, because they (Kevin and his girlfriend) signed Form 8332

108. If you are the non-custodial parent, for purposes of claiming the child and and dependent care credit, the child can be your qualifying child.             

True False

109. If you and your qualifying person did not live in the same home for more than half of the year, other than for reasons because of birth, death or temporary absences, you are able to claim the child and dependent care expenses credit.                               

True False

110. For purposes of the child and dependent care expenses credit, if your spouse was permanently and totally disabled and you have two qualifying children he or she is considered to have earned $500 per month for the time that he or she was disabled.                  

True False

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. 

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. 

111. 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.

112. 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.

113. 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.

114. 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.

115. 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.

116. 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.

117. 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.

118. 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.

119. 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. $ 846.

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

A. $ 859.
B. $ 1,141.
C. $ 1,154. 
D. $ 4,928.

121. 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. $ 2,965.

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

True False

123. 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-.

124. 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

125. 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

126. 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.

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

True False

128. 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

129. 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.

130. 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.

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

True False

132. 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

133. 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.

134. 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.

135. 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

136. 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

137. 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

138. 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

139. 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-

140. 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. 

Part 5 - California Tax Credits

Please use California 540A/540 Booklet  to do this assignment.

141. You paid $5,100 in child care, you are single and earned $28,000 for the entire year, and you have one qualifying child. What is your child and dependent care expenses credit for tax year 2008?

A. $840    
B. $420
C. $1,428
D. $714

142. I want to file my return and have no tax liability.  If I claim the child and dependent care expenses credit, would I still get a refund for California based on my Child and dependent Care expenses credit?

A. Yes, tax liability can be zero, and you can still qualify because for California credit is refundable
B. No, the amount of credit is limited to the amount of tax liability and is non-refundable
C. No, even if you have tax, the child and dependent care credit would not cancel it and thus there is no reason to claim it
D. No, California does not have a Child and Dependent Care Expenses Credit

143. Juan and Maria Escobedo are married and keep up a home for their two pre-school children. In tax year 2008, they claimed their children as dependents. Juan earned $25,200 and Maria earned $8,200. They paid $5,900 in work related child care expenses. What is their credit?

A. $1,475
B. $737.50
C. $1,711
D. $738

144. To claim the Child and Dependent Care Expenses Credit for California, you must complete and attach to your California tax return the following:

A. Federal Form 2441 or Schedule 2.
B. FTB Form 3506
C. Federal Form 3102 or Schedule 3
D. Federal Form 2106 or Schedule C

145. In tax year 2008, if your gross income is $45,000 and your federal child and dependent care expenses credit amount was $480, then your California Credit is

A. $206
B. $-0-
C. $240
D. $163

146. For Federal the child and dependent care expenses credit is a non-refundable credit and for California the credit is

A. Not allowed
B. Amount of credit if is always greater than Federal credit
C. The same as federal
D. A refundable credit

147. What is the percentage of the federal Child and Dependent Expenses Care credit that is allowed for California for taxpayers who earned more than $100,000 in 2008?

A. 42%
B. 50%
C. 63%
D. 0%

148. In tax year 2008, to qualify for the California child and dependent care expenses credit, your federal adjusted gross income must be less than

A. $40,000
B. $70,000
C. $100,000
D. $15,000

149. In tax year 2008, if you are head of household and you would like to qualify for renter's credit, you would not qualify if your income is over what amount?

A. $34,936
B. $69,872
C. $66,544
D. $100,000

150. If for more than half of the year, you lived in the home of a parent, foster parent, or legal guardian in 2008 whom can claim you as a dependent

A. You do not qualify for the renter's credit.
B. You prepare a renter's qualification record and divide the credit accordingly.
C. You qualify to claim the credit because everyone in the household qualifies as long as you pay at least $1.00 of rent.
D. Since you are a dependent, you still qualify for $30 of renter's credit.

151. The non-refundable renter's credit qualification record must be kept with your records; therefore, you should not mail it.

True False

152. To qualify for Renter's credit, you must have paid rent for at least 6 months of the tax year and your principal residence must have been in California.

True False

153. If your filing status was married filing separate, you cannot claim the California renter's credit.

True False

154. If a single employer withheld California State Disability Insurance (SDI) from your wages at more than 0.8% of your gross wages,

A. Contact the employer for refund
B. Claim excess SDI on your Form 540/540A
C. Contact the state of California for a refund
D. You cannot get a refund because once W2 is filed it is too late. 

155. You may be entitled to claim a credit for excess SDI on Form 540/540A if

A. You had two or more employers during 2008.
B. You received more than $86,698 in wages
C. The amounts of SDI withheld appear on your forms W2.
D. All of the above

156. For California you claim the child and dependent care expenses credit on form

A. FTB 3506
B. FTB 3808
C. FTB 2441
D. FTB 2

157. For purposes of claiming the California Child and Dependent Care Expenses Credit, if your child turns age 13 during the year

A. The child is not a qualifying person because he has to have been under age 13 at the end of the year.
B. The child's age does not matter as long as he is your dependent.
C. The child is a qualifying person for the part of the year he or she was under 12 years old.
D. The child is not a qualifying child because the child has to be in pre-school.

158. In tax year 2008, my wife did not work all year because she was not able to care for herself for the entire year. I worked and earned $21,000. We have one qualifying child for the Child and Dependent care credit. We paid $2,000 for child care. How much credit can we qualify for?

A. $620
B. $310
C. $1,000
D. $744

159. You are single and only paid rent for one month in 2008. You qualify to claim the renter's credit.

True False