2024 RETURNS VITA Advanced Course Test/Retest with Interview Notes.

2024 Advanced Course Scenarios Test/Retest Questions – Answers with Solutions;

2024 Advanced Exam Score 82.86% Proof:

Advanced Scenario 1 Sharon Smith – Interview Notes:

• Sharon's husband, Daniel, moved out of their home in February of 2022. Sharon has had no contact with Daniel since he moved out. Sharon and Daniel are not legally separated.
• Sharon has one child, Lea, age 10. She will claim Lea as a dependent on her 2024 tax return. .
• Sharon is 31 years old.
• Sharon earned $44,500 in wages and received $50 of interest. Sharon had lottery winnings of $2,000 reported on Form W-2G.
• Sharon paid all the costs of keeping up her home. She provided over half of the support for Lea.
• They all are U.S. citizens and have valid Social Security numbers. They lived in the U.S. all year.

Advanced Scenario 1 Sharon Smith – Test Questions:

1. Sharon qualifies for Head of Household filing status.
a. True
2. Who qualifies to claim the Earned Income Credit (EIC) also known as Earned Income Tax Credit (EITC) for Lea?
a. Sharon
3. Sharon is required to report her lottery winnings as income on her federal tax return.
a. True

2023 Puerto Rico VITA Certification Test Level I and Level II;

2023 Puerto Rico VITA Certification Test Level I:

The first five questions are designed to measure key competencies, including how to figure the allowable portion of standard deductions to U.S. income. They also encourage use of your research tools.

Use Publication 4696 PR - VITA/TCE Puerto Rico Resource Guide and Publication 1321 Special Instructions For Bona Fide Residents Of Puerto Rico Who Must File A U.S. Individual Income Tax Return Form 1040 or Form 1040-SR to answer the questions.

1.1 Lauren was a resident of Puerto Rico during 2023. She is single and under 65 years of age. She works as a U.S. government employee and her salary was $34,000. She also received income of $6,000 from a part-time job in Puerto Rico not subject to U.S. tax. Use the worksheet on page 3 in Publication 1321 to calculate the allowable portion of the standard deduction.
What is the allowable portion of the standard deduction that Lauren can claim?
a. $11,773 ANSWER
b. $13,850
c. $15,700
d. $25,900

1.2 German and Elena were residents of Puerto Rico in 2023. They are both over 65 years old and file a joint return. German is retired from the U.S. Postal Service and Elena is retired from the U.S. Veterans Affairs. Their taxable pensions were $29,000 and $42,000, respectively.
What is German and Elena’s standard deduction?
a. $25,900
b. $27,700
c. $29,200
d. $30,700 ANSWER

1.3 Marco is 40 years old, qualifies to file Head of Household, and a resident of Puerto Rico during 2023. He informed you that he received the following sources of income: $12,500 for a job he performed in the state of Florida; $23,200 received from the federal government for services performed in Puerto Rico. He also received $6,300 from a part-time job in Puerto Rico that is exempt from federal income tax. Use the worksheet on page 3 in Publication 1321 to calculate the allowable portion of the standard deduction.
What is the allowable portion of Marco’s standard deduction?
a. $13,850
b. $15,700
c. $17,680 ANSWER
d. $20,800

1.4 Camilo is a bona fide resident of Puerto Rico, who received Social Security benefits and pension income from the University of Puerto Rico.
Does Camilo have U.S. source income?
a. Yes, he has U.S. source income. ANSWER
b. No, he does not have U.S. source income.

1.5 Paloma is single and received unemployment benefits from the Puerto Rico Department of Labor reported on a Form 1099-G.
What is the factor determining source of income for unemployment?
a. Residence of the payee
b. The location of the payer
c. Unemployment compensation is generally considered sourced where the taxpayer performed the underlying services ANSWER
d. None of the above

Level I PR Test Scenario 1 Sol Fuente – Taxpayer Documents:

• Completed Intake/Interview and Quality Review Sheet
• Form 499R-2/W-2PR, Puerto Rico Withholding Statement

Level I PR Test Scenario 1 Sol Fuente – Interview Notes:

• Sol Fuente is employed as an executive secretary.
• Sol is divorced with two children. Delmar is 7 years old and Lucas is 16 years old.
• Sol paid all the cost of keeping up the home and more than half the support for her children.
• Social Security numbers: Sol Fuente 133-00-XXXX, Delmar Gracia, daughter, 599-00-XXXX and Lucas Gracia, son, 598-00-XXXX.
• If she is entitled to a refund, Sol would like to receive it via direct deposit.
• Sol has a checking account from Any Town Credit Union Account Number: 54321 Routing Number: 123456789.
• Sol has an Identity Protection Personal Identification Number (IP PIN): 987654.

Level I PR Test Scenario 1 Sol Fuente – Test Questions:

Based on the information provided by Sol Fuente, complete Form 1040-SS or Form 1040-SS (SP) and the required forms and schedules to answer the following questions. You are a volunteer at site S21014444.

1.6 What is the amount of the Additional Child Tax credit on line 19, Part II, in Form 1040-SS (SP)?
a. $0
b. $3,000
c. $3,200 ANSWER
d. $6,000

1.7 What filing status can Sol use?
a. Head of Household ANSWER
b. Married Filing Jointly
c. Married Filing Separately
d. Qualifying surviving spouse

1.8 Sol can file Form 1040-SS (SP) or Form 1040-SS to claim the Additional Child Tax credit.
a. True ANSWER
b. False

1.9 The IRS issues an Identity Protection Personal Identification Number (IP PIN) to protect and confirm taxpayer identity when submitting a tax return.
Should the IP PIN be included on the Form 1040SS or Form 1040-SS (SP)?
a. Yes ANSWER
b. No

1.10 Sol can claim up to $1,600 per child or the Social Security and Medicare taxes withheld from his wages, whichever is lower.
a. True ANSWER
b. False

Level I PR Test Scenario 2 Hernan Cortez and Luisa Oviedo – Taxpayer Documents

• Completed Intake/Interview and Quality Review Sheet
• Form 499R-2/W-2PR, Puerto Rico Withholding Statement

Level I PR Test Scenario 2 Hernan Cortez and Luisa Oviedo – Interview Notes

• Hernan Cortez and Luisa Oviedo are married and bona fide residents of Puerto Rico.
• Hernan and Luisa’s SSNs are 581-00-XXXX and 582-00-XXXX respectively.
• Luisa is a housewife who did not receive income during the year.
• Hernan is an accountant for the Puerto Rico Tourism Company; his wages for this year were $53,000.
• His contributions for the Social Security and Medicare were $3,286 and $768.50, respectively.
• They have two children under 17 and an older child Henry, who is permanently and totally disabled.
• Hernan and Luisa would like a direct deposit to their checking account 57892; routing number 02190XXXX.
Name Date of Birth Relationship
Edward Cortez 3-12-2016 Son
Maria Cortez 3-12-2016 Daughter
Henry Cortez 6-01-2004 Son

Level I PR Test Scenario 2 Hernan Cortez and Luisa Oviedo – Test Questions:

1.11 What filing status can Hernan Cortez and Luisa Oviedo claim on their return?
a. Single
b. Married Filing Jointly ANSWER
c. Head of Household
d. None of the above

1.12 How many dependents are eligible for the Additional Child Tax Credit (ACTC)?
a. 0
b. 1
c. 2 ANSWER
d. 3

1.13 How much is the Additional Child Tax Credit that Hernan and Luisa are entitled to receive?
a. $0
b. $3,000
c. $3,200
d. $4,055 ANSWER

1.14 The modified adjusted gross income for Hernan and Luisa is within the income limit to claim the Additional Child Tax Credit.
a. True ANSWER
b. False

1.15 Which form should be completed by Hernan and Luisa to claim the Additional Child Tax Credit?
a. Form 1040NR and Schedule 8812
b. Form 1040 SS and Schedule 8812
c. Form 1040 SS (SP) or Form 1040-SS ANSWER
d. Any of the above.

2023 Level I Puerto Rica Test 100% Pass Proof:

1.12 How many dependents are eligible for the Additional Child Tax Credit (ACTC)?
a. 0
b. 1
c. 2
d. 3 ANSWER Incorrect (The correct answer is c. 2) and that makes it 100% Pass.

2023 Puerto Rico VITA Certification Test Level II:

The first five questions are designed to measure key competencies related to figuring the allowable portion of itemized deductions to U.S. income; calculating the source of pension income for service performed in the U.S.; and determining the taxable portion of Social Security benefits.

Read each scenario carefully and use your reference materials Publication 4696 (PR) VITA/TCE Puerto Rico Resource Guide and Publication 1321 Special Instructions For Bona Fide Residents Of Puerto Rico Who Must File A U.S. Individual Income Tax Return) to answer the questions. Round all fractions to four decimal places.

2.1 Adan and Eva are both under age 65 and bona fide residents of Puerto Rico who file a joint return. Adan had self-employed gross income of $30,000 from his business in Puerto Rico. Eva works for the federal government and her salary was $45,000. Before calculating the allowable portion, they had the following eligible itemized deductions:
● Home mortgage interest: $8,500
● Real estate taxes: $1,400
● Charitable contributions: $750
What is the amount of calculated allowable itemized deductions that can be claimed?
a. $0
b. $6,390 ANSWER
c. $27,700
d. $29,200
45000 Fred Gov. Income/7500 All Source Income=0.6
8500x0.6=5100
1400x0.6=840
750x0.6=450 (Total 6390)

2.2 Calculate the allowable standard deduction for Adan and Eva (see exercise 2.1 above). Based on these calculations, the allowable standard deduction is higher than the allowable itemized deductions.
a. True ANSWER
b. False
27700x0.6=16620

2.3 Franklin is a single taxpayer, 63 years old, and a bona fide resident of Puerto Rico with no dependents. Franklin received a Form SSA-1099, Social Security benefits, showing $26,700 in box 3. He did not receive any other income. Use Publication 4696(PR) Social Security Benefits section as your reference materials. Is any part of his Social Security benefits subject to U.S. income tax?
a. Yes
b. No ANSWER

2.4 In 2023, Alex, 85 years old, resident of Puerto Rico, received $26,000 from his U.S. Civil Service pension. The benefits of this pension are attributed to a 25-year career with the federal government, in the state of New York.
Alex can claim a Foreign Tax Credit on Form 1040 for the taxes paid to New York.
a. True
b. False ANSWER

When claiming a foreign tax credit, you must complete Form 1116, Foreign Tax Credit. See Topic no. 856 for more information about the foreign tax credit.

2.5 Santiago is single, 70 years old and received Form SSA-1099 for 2023, which shows benefits of $19,000 in box 5. He also received the following income during 2023:
● Taxable pension from the University of Puerto Rico of $37,000
● Salary of $5,000 from a company in Puerto Rico
● Taxable IRA distribution of $4,000 from a bank in Puerto Rico
Using Publication 915, Worksheet 1 and VITA/TCE Practice Lab https://vita. taxslayerpro.com/, what amount of his Social Security benefit is taxable to the United States?
a. $0
b. $16,150 ANSWER
c. $17,200
d. $19,000
19000+37000+4000=60000
19000+3700+4000+5000=65000
0.9231

Level II PR Test Scenario 1: Carolina Vigo – Taxpayer Documents:

● Completed Intake/Interview and Quality Review Sheet

● Form CSA 1099-R

● Form SSA-1099

Level II PR Test Scenario 1 Carolina Vigo – Interview Notes:

● Carolina Vigo is 70 and was born on January 2, 1953.
● Carolina’s SSN is 123-00-XXXX and her grandson Lucas Cruz’s SSN is 124-00-XXXX.
● Her grandson, Lucas, was born on July 23, 2007, has lived with her for the last three years and qualifies her to file as Head of Household.
● Carolina pays the total cost of keeping up a home for herself and her grandson.
● She does not want to contribute to the presidential election campaign.
● If a refund or balance is due, Carolina would like a direct deposit to or direct debit from her checking account 67890; routing number 021904512.
● Her address and SSN are correct and were validated during the interview.
● Carolina is retired from the Civil Service Retirement System. She has a single life annuity and began receiving retirement benefits on January 5, 2010. The pension is attributed to services performed in New York. Carolina moved to Puerto Rico in 2010.
● Carolina receives Social Security benefits.
● According to the Simplified Method, Carolina can recover $2,667 of the cost of her pension tax free annually

Level II PR Test Scenario 1 Carolina Vigo –Test Questions:

Please complete Form 1040, Publication 915, Worksheet 1, and the child tax worksheet to answer the following questions. You are a volunteer at site S21014444.
2.6 After considering the cost recovery of tax free amount; what is the taxable portion of Carolina’s pension?
a. $0
b. $15,000
c. $36,033 ANSWER
d. $38,700
2.7 Can Carolina claim a foreign tax credit for the taxes paid to Puerto Rico on her pension attributed to services she performed in New York?
a. Yes
b. No ANSWER

Foreign tax credit (IRS) – Question 2.7:

● If you must report income from Puerto Rican sources on your U.S. income tax return, then you can claim a foreign tax credit for income taxes paid to Puerto Rico on the same income.
● To calculate your foreign tax credit, you must reduce the income taxes paid to Puerto Rico by the amount of income taxes allocable to excluded Puerto Rican source income.
● When claiming a foreign tax credit, you must complete Form 1116, Foreign Tax Credit.
● See Topic no. 856 for more information about the foreign tax credit.
● For more information about how to allocate deductions and credits with respect to excluded income as well as how to determine if you're a bona fide resident, refer to Topic no. 901, Publication 570, and Publication 1321.

2.8 What is the amount of Carolina’s standard deduction?
a. $4,000
b. $18,650
c. $22,650 ANSWER
d. $27,700
2.9 Carolina can claim the Child Tax Credit.
a. Yes ANSWER
b. No
2.10 The taxable amount of Carolina’s Social Security benefit (from the Publication\ 915 worksheet) is $12,871.
a. Yes ANSWER
b. No

Level II PR Test Scenario 2: Pedro Viera and Valeria Real – Taxpayer Documents:

● Completed Intake/Interview and Quality Review Sheet

● Forms W-2 for Pedro Viera and Valeria Real

Level II PR Test Scenario 2: Pedro Viera and Valeria Real – Interview Notes:

● Pedro Viera and Valeria Real are married, filing a joint return, and have two dependent children under the age of 17.
● Valeria’s mother, Sofia Real, lives with them. She is permanently and totally disabled. Sofia received Social Security benefits that are not taxable and were not used for her support.
● The children qualify for claiming both the non refundable and refundable child tax credit.
● The Social Security number for Pedro is 134-00-XXXX (date of birth: 09/23/1982) and for Valeria is 135-00-XXXX (date of birth: 01/25/1980).
● They have a daughter, Crystal (date of birth: 05/13/2012; SSN: 136-00-XXXX), and a son, Louis (date of birth: 02/15/2014; SSN: 137-00-XXXX). Sofia Real’s SSN is 138-00- XXXX (date of birth: 03/30/1948).
● They do not itemize deductions.
● The Puerto Rico tax liability for 2023 is $ 6,200.
● Pedro and Valeria provided the entire cost of maintaining the household and all the support for their children and for Sofia.
● If a refund or balance is due, Pedro and Valeria would like a direct deposit to or direct debit from their checking account 53890; routing number 06790XXXX.

Level II PR Test Scenario 2: Pedro Viera and Valeria Real – Test Questions:

Complete the Form 1040, schedules, and worksheet based on the information provided by Pedro and Valeria, complete Form 1040, the required forms and schedules to answer the following questions. You are a volunteer at site S21014444.
If you are using the Link & Learn Taxes Practice Lab, when entering Social Security numbers (SSNs) or Employer Identification Numbers (EINs), replace the Xs as directed, or with any four digits of your choice. In classroom situations, replace the Xs with the information provided by your instructor.
2.11 Pedro and Valeria’s total income shown on line 1a of Form 1040 is:
a. $0
b. $76,912
c. $86,912 ANSWER
d. $93,206
2.12 Pedro and Valeria are eligible to claim which of the following non-refundable credits on their 2023 tax return?
a. Other Dependent Credit
b. Foreign tax credit
c. Child Tax Credit
d. All of the above ANSWER
2.13 What is the amount of Foreign Taxes that should be entered on line 8 in Form 1116?
a. $0
b. $2,750
c. $4,500
d. $ 6,200 ANSWER
2.14 Which of the following items are included in the total payments on Pedro and Valeria’s tax return?
a. Federal income tax withheld from Form W-2
b. Additional child tax credit
c. Child Tax Credit
d. Both a and b ANSWER
2.15 What is the taxable income reported on Form 1040?
a. $0
b. $51,012
c. $59,212 ANSWER
d. $72,958

2023 Level II Puerto Rico Test Pass Proof:

2023 RETURNS VITA Advanced Course Test/Retest with Interview Notes.

2023 Advanced Course Scenarios Test/Retest Questions – Answers with Solutions;

IRS Started Direct File pilot Software for filing season 2023:

IRS Direct File is one more option from which taxpayers can choose to file a 2023 federal tax return during the 2024 filing season. Free IRS Direct File option to be available for taxpayers in 13 states, California is included.

IRS Inflation Adjustments for 2024:

1. Married filing jointly, the Standard Deduction for 2024 rises to $27,700 up $1,800.
2. Single and married individuals filing separately, the Standard Deduction rises to $13,850 for 2024, up $900.
3. Heads of households, the Standard Deduction will be $20,800 for tax year 2024, up $1,400.

Get ready to file 2024 returns. Four electronic filing options for individual taxpayers are available and listed below:

1. IRS Free File Fillable Forms, if you are comfortable using tax forms and do your own taxes, and your adjusted gross income is $73,000 or less.
2. Free Tax Return Preparation VITA Site.
3. Use Commercial Tax Prep Software (TaxSlayerPre) to prepare and file your taxes.
4. Find an Authorized e-file Provider. Tax pros accepted by IRS electronic filing program are authorized IRS e-file providers. They are qualified to prepare, transmit and process e-filed returns.

Advanced Scenario 1 Sharon Smith-Interview Notes:

• Sharon's husband, Daniel, moved out of their home in February of 2022. Sharon has had no contact with Daniel since he moved out. Sharon and Daniel are not legally separated.
• Sharon has one child, Lea, age 10. She will claim Lea as a dependent on her 2024 tax return.
• Sharon is 31 years old.
• Sharon earned $44,500 in wages and received $50 of interest. Sharon had lottery winnings of $2,000 reported on Form W2-G.
• Sharon paid all the costs of keeping up her home. She provided over half of the support for Lea.
• They all are U.S. citizens and have valid social security numbers. They lived in the U.S. all year.

Advanced Scenario 1 Sharon Smith-Test Questions:

1. What is the most beneficial allowable filing status that Sharon is eligible to claim on her 2024 tax return?
a. Single
b. Married Filing Separately
c. Qualifying Surviving Spouse (QSS)
d. Head of Household ANSWER
Solution: Even though Sharon is still married to her husband Daniel, she meets the requirements to be considered unmarried for filing status purposes and qualifies to file as Head of Household. Although technically she could file as Married Filing Separately, it would not be to her advantage to do so.
2. Based on the information provided, Sharon qualifies for the earned income credit.
a. True ANSWER
b. False
Solution:
For Sharon to qualify for the EITC, she must have:
1. Have worked and earned income under $46,560 in the tax year 2024.
2. Have investment income no more than $11,000 in the tax year 2024.
3. And have a valid Social Security Number by the due date of her 2024 tax return.
3. Sharon is required to report her lottery winnings as income on her federal tax return.
a. True ANSWER
b. False
Solution:
Lottery winning is taxable income. If you received lottery winning, you generally must include the payments in your income when you file your federal income tax return.

Advanced Scenario 1 Sharon Smith-Retest Questions:

1. Sharon qualifies for Head of Household filing status.
a. True ANSWER
b. False
2. Who qualifies to claim the earned income credit for Mary?
a. Sharon ANSWER
b. Morgan
c. Both Lydia and Morgan
d. Neither Lydia nor Morgan
3. Sharon does not need to report her gambling winnings on her federal tax return.
a. True
b. False ANSWER

Advanced Scenario 2 Jeff and Jane Spring-Interview Notes:

• Jeff and Jane are married and want to file a joint return.
• Jeff is a U.S. citizen and has a valid Social Security number. Jane is a resident alien and has an ITIN. They resided in the United States all year with their children.
• Jeff and Jane have two children, Joan, age 7, and Jim, age 15. Joan and Jim are U.S. citizens and have valid Social Security numbers.
• Jeff earned $23,000 in wages.
• Jane earned $21,000 in wages.
• In order to work, the Springs paid $2,000 to their son, Jim, to care for Joan after school.
• Jeff and Jane provided all of the support for their two children.

Advanced Scenario 2 Jeff and Jane Spring-Test Questions:

4. What is the maximum amount Jeff and Jane are eligible to claim for the child tax credit?
a. $2,000
b. $3,000
c. $4,000 ANSWER
d. $6,000
Solution: The child tax credit (CTC) is a nonrefundable credit that allows taxpayers to claim a tax credit of up to $2,000 per qualifying child.
5. The Springs qualify for the child and dependent care credit.
a. True
b. False ANSWER
Solution:
What if the taxpayer makes payments to a relative? Payments to relatives may qualify as work-related expenses if the taxpayer does not claim the relative as a dependent.
Resources:
Form 2441 and Instructions, Child and Dependent Care Expenses and Publication 503, Child and Dependent Care Expenses.

Advanced Scenario 2 Jeff and Jane Spring-Retest Questions:

4. The maximum amount Jeff and Jane are eligible to claim for the Child Tax Credit is $2,000.
a. True
b. False ANSWER
Solution:
The maximum amount taxpayers can claim for the child tax credit is $2,000 for each qualifying child. The amount claimed on Form 1040 depends on the taxpayer’s filing status, modified adjusted gross income (MAGI) and tax liability.
5. Payments made to Jim can be claimed on Form 2441 as child and dependent care expenses.
a. True
b. False ANSWER
Solution:
What if the taxpayer makes payments to a relative? Payments to relatives may qualify as work-related expenses if the taxpayer does not claim the relative as a dependent.

Advanced Scenario 3 Rose Jones-Interview Notes:

• Mary Wood, age 57, is single.
• Mary earned wages of $51,000 and was enrolled the entire year in a high deductible health plan (HDHP) with self-only coverage.
• During the year, Mary contributed $2,000 to her Health Savings Account (HSA) and her mother also contributed $1,000 to Mary's HSA.
• Mary's Form W-2 shows $1,150 in Box 12 with code W. She has Form 5498-SA showing $4,150 in Box 2.
• Mary has Form 1099-SA showing her HSA distributions.She used her distributions to pay the following unreimbursed expenses:
o $500 for nine visits to a physical therapist after her knee surgery.
o $1,000 unreimbursed doctor bills. o $280 prescription medicine. o $1,500 replacement of a crown.
o $300 deep cleaning for teeth.
o $40 over the counter medication.
o $260 gym membership (for her general health and fitness).
o Mary is a U.S. citizen with a valid Social Security number.

Advanced Scenario 3 Rose Jones-Test Questions:

7. Form 8889, Part 1 is used to report HSA contributions made by _______________.
a. Mary
b. Mary's employer
c. Mary's mother
d. All of the above ANSWER
Solution:
Form 8889, Part 1, is used to report all HSA contributions and to compute the allowable HSA deduction. This includes contributions made by the filing deadline for the tax year. Contributions made by an employer are also shown in Part I, but are not included in the deductible amount.
6. Rose is eligible to contribute an additional $__________ to her HSA because she is age 55 or older. a. $0
b. $850
c. $1,000 ANSWER
d. $2,000
Solution:
Health Savings Account (HSA) Contribution Limits on Deductions;
For 2024, the annual contribution limits on deductions for HSAs for individuals with self-only coverage is $4,150 and $8,300 for family coverage. Reference: IRS 2024 Publication 969.
There is an additional contribution amount of $1,000 for taxpayers who are age 55 or older.
8. What is the total unreimbursed qualified medical expenses reported on Form 8889, Part II?
a. $3,320 ANSWER
b. $3,580
c. $3,620
d. $3,860
Solution:
Gym membership $260 is not a qualified medical expense. You can deduct on Schedule A (Form 1040) only the amount of your medical and dental expenses that is more than 7.5% of your AGI.
You can't include membership dues in a gym, health club, or spa. Even a fee for weight loss program unless prescribed by a doctor.
Reference:
Publication 502, Medical and Dental Expenses.

Advanced Scenario 3 Rose Jones-Retest Questions:

6. Rose cannot include her mother's contribution on Form 8889, Part 1.
a. True
b. False ANSWER
Solution:
Family members or any other person may also contribute on behalf of an eligible individual. Contributions to an HSA must be made in cash.
7. Rose is eligible to contribute an additional $2,000 to her HSA because she is age 55 or older.
a. True
b. False ANSWER
8. The over the counter medicine is a qualified medical expense for HSA purposes.
a. True ANSWER
b. False
Solution:
IRS says yes, over the counter medicine is a qualified medical expense for HSA purposes and may be paid or reimbursed by an HSA.

Advanced Scenario 4 Cheryl Brown-Interview Notes:

• Cheryl, age 62, is single. She owns her home and provided all the costs of keeping up her home for the entire year. Her only income for 2024 was $48,700 in W-2 wages.
• Cindy, age 24, and her daughter Cary, age 5, have lived with Cindy's mother, Cheryl, since Cindy separated from her spouse in April of 2023. Cindy's only income for 2024 was $24,000 in wages. Cindy provided over half of her own support. Cary did not provide more than half of her own support.
• Cindy will not file a joint return with her spouse.
• All individuals in the household are U.S. citizens with valid Social Security numbers. No one has a disability. They lived in the United States all year.

Advanced Scenario 4 Cheryl Brown-Test Questions:

9. For the purpose of determining dependency, Cary could be the qualifying child of _______________.
a. Only Cheryl
b. Only Cindy
c. Either Cheryl or Cindy ANSWER
d. Neither Cheryl nor Cincy
Solution:
To Be a Qualifying Child. What are the rules for a qualifying child of more than one person?
Sometimes a child meets the tests to be a qualifying child of more than one person. A child who meets the conditions to be a qualifying child of more than one person can only be claimed by one taxpayer for the EIC.
10.Cindy is eligible to claim Cary for the earned income credit.
a. True ANSWER
b. False
Solution:
Cindy is eligible to claim Cary for the earned income credit.
File Schedule EIC Earned Income Credit (Form 1040) if you have a qualifying child even if that child doesn't have a valid SSN.
Reference:
596 2023 IRS Publication Earned Income Credit (EIC).

Advanced Scenario 4 Chery Brown-Retest Questions:

9. Either Cindy or Chery can claim Andrea as a dependent.
a. True ANSWER
b. False
10. Which of the following statements is true?
a. Cindy is not eligible to claim Cary for the EIC because her filing status is married filing separate.
b. Cindy is not eligible to claim the EIC for Cary because she is under age 25.
c. Cindy is not eligible to claim Cary for the EIC because her income is too high.
d. None of the above statements is true. ANSWER

Advanced Scenario 5 Elizabeth Greene-Interview Notes:

• Elizabeth is 48 years old and files as single.
• Her 2024 adjusted gross income (AGI) is $51,000, which includes gambling winnings of $2,000.
• Elizabeth would like to itemize her deductions this year.
• Elizabeth brings documents for the following expenses:
o $9,500 Hospital and doctor bills.
o $600 Contributions to Health Savings Account (HSA).
o $3,600 State withholding (higher than Helen's calculated state sales tax deduction).
o $300 Personal property taxes based on the value of the vehicle.
o $400 Friend’s personal GoFundMe campaign.
o $350 Cash contributions to the Red Cross.
o $200 Fair market value of clothing in good condition donated to the Salvation Army (Helen purchased clothing for $900).
o $7,300 Mortgage interest.
o $2,300 Real estate tax.
o $1,500 Homeowners association fees.
o $4,000 Gambling losses.

Advanced Scenario 5 Elizabeth Greene-Test Questions:

11. Elizabeth can claim the $1,500 Homeowners association fees as a deduction on her Form 1040, Schedule A.
a. True
b. False ANSWER
Solution:
Real estate taxes; some real estate taxes or charges that may be included on the real estate tax bill are not deductible. These include homeowners’ association fees.
12. What amount of gambling losses is Elizabeth eligible to claim as a deduction on her Form 1040, Schedule A?
a. $0
b. $1,000
c. $2,000 ANSWER
d. $3,000
Solution:
What miscellaneous expenses are deductible?
Examples of miscellaneous itemized deductions include:
Gambling losses and expenses (through 2024) to the extent of gambling winnings (taxpayers must have a record of their losses).

Advanced Scenario 5 Elizabeth Greene-Retest Questions:

11. If Elizabethn chooses to itemize, which of the following is she not eligible to claim as a deduction on Form 1040, Schedule A?
a. $7,300 mortgage interest
b. $1,500 Homeowner's Association fees ANSWER
c. $2,300 real estate tax
d. $350 contribution to the Red Cross
12. Elizabeth is eligible to claim $2,000 in gambling losses as a deduction on her Form 1040, Schedule A.
a. True ANSWER
b. False

Advanced Scenario 6 David Stone-Interview Notes:

• David Stone is 28 years old and single. He provides all of his own support.
• David works at a gas station and earned $18,500 in wages.
• David took two management courses at a community college to improve his job skills. He was less than a half time student. He He wants to know if that qualifies for any educational tax benefit.
• David took an early distribution from his IRA of $2,000 for tuition and $500 for emergency repairs of his air conditioning system. This is the first time he has taken a distribution from his IRA. • David is a U.S. citizen and lived in the U.S. for the entire year. He has a valid Social Security number.

Advanced Scenario 6 David Stone-Test Questions:

13. David is eligible to claim the American Opportunity Credit on his 2024 tax return.
a. True
b. False ANSWER
Solution:
To be eligible for AOTC, the student must:
1. Be pursuing a degree or other recognized education credential.
2. Be enrolled at least half time for at least one academic period* beginning in the tax year.
3. Not have finished the first four years of higher education at the beginning of the tax year.
Reference:
IRS Publication 970, Tax Benefits for Education.
14. For which of the following IRA distributions will David owe an additional tax of 10%.
a. $2000 for tuition.
b. $500 for emergency repares. ANSWER
c. Both a and b.
d. Neither a nor b.
Solution:
The additional tax is equal to 10% of the portion of the distribution that's includible in gross income.
Reference:
IRS 2024 Topic no. 557, Additional tax on early distributions from traditional and Roth IRAs.

Advanced Scenario 6 David Stone-Retest Questions:

13. David's modified adjusted gross income (MAGI) must be less than $90,000 to claim the Lifetime Learning Credit in 2024.
a. True ANSWER
b. False
14. David will owe an additional $50 tax on the $500 IRA distribution for emergeny repair?
a. True ANSWER
b. False

Advanced Scenario 7 Vincent and Faith Hunter – Interview Notes:

• Vincent is a 5th grade teacher at a public school. Vincent and Faith are married and choose to file Married Filing Jointly on their 2024 tax return.
• Vincent worked a total of 1,800 hours in 2024. During the school year, he spent $844 on unreimbursed classroom expenses.
• Faith retired in 2021 and began receiving her pension on November 1st of that year. She explains that this is a joint and survivor annuity. She has already recovered $1,259 of the cost of the plan.
• Vincent settled with his credit card company on an outstanding bill and brought the Form 1099-C to the site. They aren’t sure how it will impact their tax return for tax year 2024. The Hunters determined that they were solvent as of the date of the canceled debt.
• Faith received $280 from Jury duty.
• Their daughter, Hope, is in her second year of college pursuing a bachelor’s degree in Physics at a qualified educational institution. She received a scholarship and the terms require that it be used to pay tuition. Box 2 was not filled in and Box 7 was not checked on her Form 1098-T for the previous tax year. The Hunters provided Form 1098-T and an account statement from the college that included additional expenses. The Hunters paid $1500 for books and equipment required for Hope's courses. This information is also included on the college statement of account. The Hunters claimed the American Opportunity Credit last year for the first time.
• Hope does not have a felony drug conviction.
• They are all U.S. citizens with valid Social Security numbers.

2024 Faith Hunter’s FEDERAL TAX RETURN DOCUMENTS:
FORM W-2 Wages: 1. Wages $37,353, 2. Federal Tax Withheld $3200, 17. State Tax $500
FORM 1099-R Annuities: 1. Gross Distribution $20,100, 4. Federal Tax Withheld $2010, 7. Distribution Code 7, 9b. Total Employee Contribution $15,000
FORM SSA-1099 Social Security Bemefit: 5. Net Benefit $23,899, 6. Federal Tax Withholding $2390
FAITH HUNTER'S TOTAL TAX = $7600 ($2390 + $2010 + $3200)

FAITH HUNTER'S TOTAL INCOME = 75486 (37353 + 19419 + 1050 + 19464)
INCOME:
W-2 35353 (12A. D 1000 EMPLOYEE RETIREMENT CONTRIBUTION)
1099-R 19419 INCOME
1099-C 850 INCOME (CANCELLATION OF DEPT SCH1 LINE 8C)
JURY 280 SCHEDULE 1 LINE 8H
SSA-1099 19464 (22899X.85=19464 TAXABLE INCOME)
TOTAL INCOME 75486 – 300 EDUCATOR EXPENSES = 75186 ADJUSTED INCOME LINE 11
MINUS 29200 = 45986 TAXABLE INCOME (F1040 LINE 15
TAX FROM TAX TABLE 5077
5077-(500 CREDIT FOR OTHER DEP+1393 SCH3 LINE 8) = 3184
3184 THIS IS YOUR TOTAL TAX (F1040 LINE 24)
TOTAL PAYMENTS 7490 + 928 = 8418 (F1040 LINE 33)
REFUND TO YOU 8418 – 3184 = 5234 (SUBTRACT LINE 24 FROM LINE 33)
PAYMENTS 1040 LINE 29 (981) (FROM FORM 8863 LINE 8)
EDUCATION CREDITS F8863 LINE 8 928 AND Form 1040 LINE 29
CREDIT Amount from Schedule 3, line 3 1393 (F8863 LINE 19 1393) F1040 Line 20

Advanced Scenario 7 Matthew and Rebecca Monroe – Test Questions:

15. What is the taxable portion of Rebecca's pension from Riverside Enterprises using the simplified method?
a. $0
b. $18,741
c. $19,419 ANSWER
d. $20,000
SOLUTION:
1963 Taxpayer Born 1954 Spouse Born
2023-1963=60 Taxpayer’s Age
2023-1954=69 Spouse’s Age
69+60=129-3=126 Combine Age at 2020 Pension Start Date (2023-2020=3) from table 2 for Line 3 = 310
Simplified Method Worksheet – Lines 5a and 5b

16. All of Rebecca’s social security benefits are taxable according to the social security benefits worksheet.
a. True
b. False ANSWER
17. What is the total amount of other income reported on the Monroe's Form 1040, Schedule 1?
a. $200
b. $850
c. $1,050 ANSWER
d. $4,152
SOLUTION:
$850 Cancelled Debt + $200 Jury Duty = 1050.
18. Matthew is eligible to deduct qualified educator expenses in the amount of $____________. 300 ANSWER
SOLUTION:
1. Eligible educators can deduct up to $300 of qualified expenses paid during the tax year. An eligible educator is a kindergarten through grade 12 teacher, who worked in a school for at least 900 hours during a school year.
2. If you were an eligible educator in 2023, you can deduct qualified expenses up to $300 you paid in2023 in the Adjustments to Income section of Schedule 1 (FORM 1040), Line 11.
19. What is the Monroe's standard deduction on their 2023 tax return?
a. $20,800
b. $27,700
c. $29,200 ANSWER
d. $30,700
20. Which of the following expenses qualify for the American opportunity credit?
a. Required course related books and equipment
b. Tuition
c. Parking pass
d. Both a and b ANSWER
21. The Monroes are eligible to claim the credit for other dependents on their tax return.
a. True ANSWER
b. False
22. What is the Monroe’s total federal income tax withholding?
a. $5,200
b. $5,490
c. $6,200
d. $7,490 ANSWER
SOLUTION:
$7,490 (3,200 + 2,000 + 2.290)

Advanced Scenario 7 Matthew and Rebecca Monroe – Retest Questions:

15. The taxable portion of Rebecca's pension from Riverside Enterprises using the simplified method is $19,419.
a. True ANSWER
b. False
16. The taxable amount of Rebecca's social security income is:
a. $0
b. $18,630
c. $19,464 ANSWER
d. $22,899
17. The total amount of other income reported on the Monroe's Form 1040, Schedule 1 is $1,050.
a. True ANSWER
b. False
SOLUTION: Cancellation of debt $850 Jury duty pay $200.
18. What is the amount Matthew is eligible to claim as qualified educator expenses on Form 1040, Schedule 1?
a. $0
b. $250
c. $300 ANSWER
d. $733
SOLUTION:
1. Eligible educators can deduct up to $300 of qualified expenses paid during the tax year. An eligible educator is a kindergarten through grade 12 teacher, who worked in a school for at least 900 hours during a school year.
2. If you were an eligible educator in 2023, you can deduct qualified expenses up to $300 you paid in 2023 in the Adjustments to Income section of Schedule 1 (FORM 1040), Line 11.
19. The Monroe's standard deduction on their Form 1040 for tax year 2023 is $27,700.
a. True
b. False ANSWER
20. Which is not a qualifying expense for the American opportunity credit?
a. Parking pass ANSWER
b. Required course related books
c. Tuition
d. Required course related equipment
21. Which of the following credits are the Monroes able to claim on their federal tax return?
a. Earned Income Credit
b. American Opportunity Credit ANSWER
c. Child Tax Credit
d. Premium Tax Credit
SOLUTION:
1. Taxpayers can take education credits for themselves, their spouse or dependents, claimed on the tax return, who were enrolled and attended an eligible postsecondary educational institution during the tax year.
2. The IRS tax law requires that the student must generally receive a Form 1098-T, Tuition Statement, in order for the taxpayers to claim the education credit.
22. The federal income tax withholding reported on the Monroe's Form 1040 is $5,200.
a. True
b. False ANSWER
SOLUTION:
$7,490 (3,200 + 2,000 + 2.290)

Advanced Scenario 7 Matthew and Rebecca Monroe-1040 2023 RETURN PAGE 1 2 AND 3 using free TaxSlayer-Pro Practice Lab Software:

Schedule 1 line 10=$850, Schedule 3 line 8=$1393, Schedule 8812=$500, Form 8863 line 8=$928, Total Tax line 24 $3172, Total Payments line 33=$8418, Refund: $8418 Subtract $3172=$5246:

Advanced Scenario 8 Julia Oakley-Interview Notes:

• Julia is a data entry clerk, age 26, and single.
• Julia has investment income and a consolidated broker’s statement.
• Julia is self-employed delivering groceries for Quick Market on the weekends. She received a Form 1099-NEC and a Form 1099-K. She received additional cash payments of $535.
• Julia uses the cash method of accounting. She uses business code 492000.
• Julia provided a statement from the grocery delivery service indicating the fees paid for the year. These fees are considered ordinary and necessary for the grocery delivery business:
o $150 for insulated box rental
o $50 for vehicle safety inspection (required by Quick Market)
o $600 for Quick Market fees
• Julia also kept receipts for the following out-of-pocket expenses:
o $80 for business parking
o $300 for speeding ticket
o $160 for Julia's lunches
• Julia’s record keeping application shows she has driven a total of 2,500 miles during and between deliveries.
o She placed her only vehicle, an SUV, in service on 3/15/2020. The total mileage on her SUV for tax year 2023 was 12,000 miles. Of that, 9,500 miles were personal and commuting miles. Julia will take the standard business mileage rate.
• Julia is paying off her student loan from 2017, when she completed her undergraduate degree.
• Julia is working towards her Master of Education degree to start a new career as an Associate Professor. She took a few college courses this year at an accredited college.
• Julia took an early distribution of $3,000 from her IRA in April. She used $2,400 of the IRA distribution to pay her educational expenses for the current year.
• If Julia has a refund, she would like it deposited into her checking account.

Advanced Scenario 8 Julia Oakley-Test Questions:

23. What is the net long term capital gain reported on Julia's Schedule D?
a. $350
b. $2,100
c. $2,450 ANSWER
d. $6,100
24. Which of the following can be claimed as a business expense on Julia's Schedule C?
a. Business Parking ANSWER
b. Speeding Ticket
c. Lunches
d. All of the above
25. Julia can take a student loan interest deduction of $3,250. a. True
b. False ANSWER
26. What is the total standard mileage deduction for her business on Schedule C? a. $983
b. $1,638 ANSWER
c. $2,500
d. $2,518
27. The amount of Julia's lifetime learning credit is $480.
a. True ANSWER
b. False
28. What is Julia's additional 10% tax on the early withdrawal from her IRA?
a. $0
b. $60 ANSWER
c. $240
d. $300
29. How can Julia prevent having a balance due next year?
a. She can increase the withholding on her Form W-4.
b. She can make estimated tax payments.
c. She can use the IRS withholding calculator to estimate her withholding for next year.
d. All of the above ANSWER

Advanced Scenario 8 Julia Oakley-Retest Questions:

23. Julia's net long term capital gain reported on Schedule D is $1,700
. a. True
b. False ANSWER
24. Julia can claim the speeding ticket as a business expense on her Schedule C.
a. True
b. False ANSWER
25. What is the amount Julia can take as a student loan interest deduction on her Form 1040, Schedule 1?
a. $0
b. $750
c. $2,500 ANSWER
d. $3,250
26. The total standard mileage deduction for Julia's business on Schedule C is $983.
a. True
b. False ANSWER
27. Julia meets the qualifications to claim the American Opportunity Credit.
a. True
b. False ANSWER
28. Julia will have to pay $60 additional tax because she received the early distribution from her IRA.
a. True ANSWER
b. False
29. Julia can make estimated tax payments to avoid owing tax next year.
a. True ANSWER
b. False

LIST OF SCHEDULES AND FORMS:
FORM 1040 PAGE1
FORM 1040 PAGE2
1. SCHEDULE 1 – PART I (ADDITIONAL INCOME) TOTAL ADDITIONAL INCOME LINE 10 =4549 (on FORM 1040 LINE 8 ENTER 4549):
2. SCHEDULE 1 – PART II (ADJUSTMENTS TO INCOME) TOTAL ADJUSTMENTS TO INCOME LINE 26 =2822 (on FORM 1040 LINE 10 ENTER 2822):
3. SCHEDULE 2 – PART II (OTHER TAXES) TOTAL OTHER TAXES LINE 21 =703 (on FORM 1040 LINE 23 ENTER 703):
4. SCHEDULE 3 – PART I (NONREFUNDABLE CREDITS) LINE 8 =480 (on FORM 1040 LINE 20 ENTER 480):
5A. SCHEDULE B (INTEREST)LINE 4 =15 (on FORM 1040 LINE 2b ENTER 15):
5B. SCHEDULE B (ORDINARY DIVIDENTS) LINE 6 =300 (on FORM 1040 LINE 3b ENTER 300):
6. SCHEDULE C (BUSINESS INCOME)LINE 31 =4549 ENTER on BOTH SCHEDULE 1 LINE 3 =4549 AND on SCHEDULE SE LINE 2 =4549 (on FORM 1040 LINE 8 ENTER 4549):
7A. SCHEDULE D (CAPITAL GAINS/LOSSES) – PART I SHORT-TERM LOSS: LINE 7 =-750:
7B. SCHEDULE D (CAPITAL GAINS/LOSSES) – PART II LONG-TERM GAIN LINE 15 =2450:
7C. SCHEDULE D (CAPITAL GAINS/LOSSES) – PART III SUMMARY LINE 16 =1700 (2450-750=1700) (on FORM 1040 LINE 7 ENTER 1700):
8. SCHEDULE SE (SELF-EMPLOYMENT TAX) LINE 12 =643 (on SCHEDULE 2 LINE 4 ENTER 643) AND LINE 13 =322 DEDUCTION FOR ONE-HALF OF SE TAX (on SCHEDULE 1 LINE 15 ENTER 322) AND (on FORM 1040 LINE 23 ENTER 703 FROM SCHEDULE 2 LINE 21):
9. FORM 5329 (TAX ON EARLY RETIREMENT DISTRIBUTIONS)
10. FORM 8863 (EDUCATIOANAL DREDITS) – PART II (NONREFUNDABLE EDUCATION CREDUTS) LINE 19 =480 (on SCHEDULE 3 LINE 3 ENTER 480) FROM SCHEDULE 3 LINE 8 =480 (on FORM 104O LINE 29 ENTER 480:
11. FORM 8995 (QUALIFIED BUSINESS INCOME DEDUCTION) LINE 15 =851 (on FORM 1040 LINE 13 ENTER 851:

Advanced Scenario 8 Julia Oakley-1040 2023 RETURN PAGE 1 AND 2 using free TaxSlayer Pro-Practice Lab Software:

1. OAKLEY SCHEDULE 1 – PART I (ADDITIONAL INCOME) TOTAL ADDITIONAL INCOME LINE 10 =4549 (on FORM 1040 LINE 8 Enter 4549):

2. SCHEDULE 1 – PART II (ADJUSTMENTS TO INCOME) TOTAL ADJUSTMENTS TO INCOME LINE 26 =2822 (on FORM 1040 LINE 10 ENTER 2822):

3. SCHEDULE 2 – PART II (OTHER TAXES) TOTAL OTHER TAXES LINE 21 =703 (on FORM 1040 LINE 23 ENTER 703):

4. SCHEDULE 3 – PART I (NONREFUNDABLE CREDITS) LINE 8 =480 (on FORM 1040 LINE 20 ENTER 480):

5A. SCHEDULE B (INTEREST) LINE 4 =15 (on FORM 1040 LINE 2b ENTER 15:

5B. SCHEDULE B (ORDINARY DIVIDENTS) LINE 6 =300 (on FORM 1040 LINE 3b ENTER 300:

6. SCHEDULE C (BUSINESS INCOME) LINE 31 =4549 ENTER on BOTH SCHEDULE 1 LINE 3 =4549 AND on SCHEDULE SE LINE 2 =4549 (on FORM 1040 LINE 8 ENTER 4549):

7A. SCHEDULE D (CAPITAL GAINS/LOSSES) – PART I SHORT-TERM CAPITAL LOSS LINE 7 =-750:

7B. SCHEDULE D (CAPITAL GAINS/LOSSES) – PART II LONG-TERM GAIN LINE 15 =2450:

7C. SCHEDULE D (CAPITAL GAINS/LOSSES) – PART III SUMMARY LINE 16 =1700 (2450-750=1700) (on FORM 1040 LINE 7 ENTER 1700):

8. SCHEDULE SE (SELF-EMPLOYMENT TAX)LINE 12 =643 (on SCHEDULE 2 LINE 4 ENTER 643) AND LINE 13 =322 DEDUCTION FOR ONE-HALF OF SE TAX (on SCHEDULE 1 LINE 15 ENTER 322) AND (on FORM 1040 LINE 23 ENTER 703 FROM SCHEDULE 2 LINE 21):

9. FORM 5329 (TAX ON EARLY RETIREMENT DISTRIBUTIONS) LINE 4 =60 (on SCHEDULE 2 LINE 8 ENTER 60):

10. FORM 8863 (EDUCATIOANAL DREDITS) – PART II (NONREFUNDABLE EDUCATION CREDUTS) LINE 19 =480 (on SCHEDULE 3 LINE 3 ENTER 480) FROM SCHEDULE 3 LINE 8 =480 (on FORM 104O LINE 29 ENTER 480:

11. FORM 8995 (QUALIFIDE BUSINESS INCOME DEDUCTION) LIND 15 =851 (on FORM 1040 LINE 13 ENTER 851):

NOTE FOR LINE 1i AND COLUMN c) Qualified business income or (loss):
NET PROFIT FROM SCHEDULE C =4549 MINUS DEDUCTIBLE Self-Employment TAX =322 (4549-322 = 4227).

Advanced Scenario 9 David MacLee-Interview Notes:

• David is age 40 and was widowed in July, 2022. He has a daughter, Linda, age 8, who lived with him the entire year. • David provided the entire cost of maintaining the household and over half of the support for Linda. In order to work, he pays childcare expenses to Uptown Daycare. • David purchased health insurance for himself and his daughter through the Marketplace. He received a Form 1095-A. • David and Linda are U.S. citizens and lived in the United States all year in 2023.

Advanced Scenario 9 David MacLee-Test Questions:

30. What is David's most advantageous filing status?
a. Single
b. Married Filing Separately
c. Head of Household
d. Qualifying Surviving Spouse (QSS) ANSWER
31. David MacLee's adjusted gross income on his Form 1040 is _______.
a. $8,404
b. $36,000
c. $36,104 ANSWER
d. $36,130
32. David cannot claim which of the following credits on his tax return.
a. Child Tax Credit
b. Credit for Other Dependents ANSWER
c. Premium Tax Credit
d. Child and Dependent Care Credit
33. David's retirement savings contributions credit on Form 8880 is $________. 100 ANSWER
34. The total amount of David's net premium tax credit on Form 1040 Schedule 3, line 9 is $696.
a. True ANSWER
b. False
35. David's child and dependent care credit from Form 2441 is reported as a non-refundable credit on Form 1040, Schedule 3.
a. True ANSWER
b. False

Advanced Scenario 9 David MacLee-Retest Questions:

30. David is eligible to claim the Qualifying Surviving Spouse filing status.
a. True ANSWER
b. False
31. David's adjusted gross income is $36,130.
a. True
b. False ANSWER
32. David is eligible to claim the child tax credit.
a. True ANSWER
b. False
33. David qualifies to claim a retirement savings contribution credit.
a. True ANSWER
b. False
34. David's net premium tax credit on his Schedule 3, line 9 is $_______. 696 ANSWER
35. David's child and dependent care credit is refundable in 2023.
a. True
b. False ANSWER
Taxpayers with children under the age of 17 may be eligible to claim a tax credit of up to $2,000 per qualifying dependent. For 2023, $1,600 of the credit is potentially refundable. We'll cover who qualifies, how to claim it.

Advanced Scenario 9 David MacLee-1040 2023 RETURN PAGE 1 AND 2 using free TaxSlayer Pro-Practice Lab Software:

2023 1040 LINE 16 843 TAX ON 8404 INCOME MACLEE:

2023 MACLEE 1040 LINE 19 Child tax credit or credit for other dependents from SCHEDULE 8812 LINE 14:

2023 MACLEE 1040 LINE 27 EARNED INCOME CREDIT (EIC) SCHEDULE EIC QUALIFYING CHILD INFORMATION:

2023 MACLEE 1040 LINE 27 EARNED INCOME CREDIT (EIC) Worksheet A—2023 EIC—Line 27:

2023 1040 MACLEE SCHEDULE 8812 LINE 13 Enter the amount from Credit Limit Worksheet A:

2023 MACLEE 1040 LINE 28 ADDITIONAL CHILD TAX CREDIT FROM SCHEDULE 8812 PAGE 2 LINE 27:

2023 DAVID MACLEE 1040 SCHEDULE 1 ADJUSTMENTS AND SCHEDULE 3 CREDITS:

SCHEDULE 3 NONREFUNDABLE CREDITS 2023:

2441 LINE 2 SCHEDULE 3 Credit for child and dependent care expenses from Form 2441, line 11. Attach Form 2441.
8880 LINE 4 SCHEDULE 3 Retirement savings contributions credit. Attach Form 8880.

SCHEDULE 3 REFUNDABLE CREDITS 2023:

8962 LINE 9 SCHEDULE 3 Net premium tax credit. Attach Form 8962.

2023 Advanced Exam Score 94.29% Proof:

2023 Advanced Exam Incorrect Quesitions:

23. What is the net long term capital gain reported on Julia’s Schedule D?
$2,100 Incorrect Answer: $2100+$350=$2450 Correct Answer.
Review the Publication 4491, Capital Gains and Losses lesson and
Publication 4012 Tab D, Capital Gains and Losses.

26. What is the total standard mileage deduction for her business on Schedule C?
$2,500 Incorrect Answer: 2500x0.655=$1,638 Correct Answer.
65.5 cents per mile driven for business use.
Review the Publication 4491, Business Expenses lesson and
Publication 4012 Tab D, Income, Schedule C – Car and Truck Expenses.
=100% Pass.

2022 Advanced Course Scenarios Test/Retest Questions – Answers with Solutions;

2022 Advanced Test/Retest – 100% Pass Proof;

Advanced Scenarios 1 through 9 – Test/Retest Questions;

Directions:
The first six scenarios do not require you to prepare a tax return. Read the interview notes for each scenario carefully and use your training material IRS Publication 4491 2022 VITA Training Guide, and your resource material IRS Publication 4012 2022 VITA Resource Guide to answer the questions after the scenarios.
Chris Spalding – Interview Notes: • Chris’s husband, George, moved out of their home in February of 2022. She had no contact with him since he moved out. Chris and George are not legally separated.
• Chris has one child, Mary, age 9. She will claim Mary as a dependent on her 2022 tax return. Chris is 31 years old.
• Chris earned $36,200 in wages and received $50 of interest. Chris was out of work for a month and received unemployment income of $1,800.
• Chris paid all the costs of keeping up her home. She provided over half of the support for Mary.
• They all are U.S. citizens and have valid social security numbers. They lived in the U.S. all year.

Chris Spalding – Test Questions;

1. What is the most beneficial of the following filing statuses that Chris is eligible to claim on her 2022 tax return?
a. Single
b. Married Filing Separately
c. Qualifying Surviving Spouse (QSS)
d. Head of Household Answer
Chris Spalding – Question 1 Explanation:
The question 1 correct answer is Head of Household. Even though Chris is still married to her husband, she meets the requirements to be “considered unmarried” for filing status purposes and qualifies to file as Head of Household. Although technically she could file as Married Filing Separately, it would not be to her advantage to do so.
2. Based on the information provided, Chris qualifies for the earned income credit.
a. True Answer b. False
Chris Spalding – Question 2 Explanation:
For Chris Spalding to qualify for the EITC, she must have: Have worked and earned income under $57,414. Have investment income below $10,000 in the tax year 2022. And have a valid Social Security Number by the due date of her 2022 tax return.
3. What amount of Chris's unemployment compensation is taxable? $______________.
$1,800 Answer. Chris Spalding – Question 3 Explanation:
Unemployment compensation is taxable income. If you receive unemployment benefits, you generally must include the payments in your income when you file your federal income tax return.

Chris Spalding – Retest Questions;

Chris Spalding – Retest Questions;

1. Chris's most beneficial allowable filing status is Single.
a. True b. False Answer

Chris Spalding – Retest Question 1 Explanation:

Although she could file as Married Filing Separately, it would be not to her advantage.

2. Mary is a qualifying child for the earned income credit.
a. True Answer b. False

Chris Spalding – Retest Question 2 Explanation:

To qualify for the EITC, a qualifying child must:

• Your child must have Valid Social Security Number for employment.
• Your child must be under age 19 at the end of the year and younger than you.
• Your child must be your Son, daughter, stepchild, adopted child or foster child.
• Your child must live in the same home as you in the United States for more than half of the tax year.

3. All of Chris's unemployment compensation is taxable.
a. True Answer b. False

Chris Spalding – Retest Question 3 Explanation:

Unemployment compensation is taxable income. If you receive unemployment benefits, you must include the payments in your income when you file your federal income tax return.

Adam and Lisa Garcia – Interview Notes:
• Adam and Lisa are married and want to file a joint return.
• Adam is a U.S. citizen and has a valid Social Security number. Lisa is a resident alien and has an ITIN. They resided in the United States all year with their children.
• Adam and Lisa have two children, Maria, age 11, and Luis, age 17. Maria and Luis are U.S. citizens and have valid Social Security numbers.
• Adam earned $22,000 in wages.
• Lisa earned $20,000 in wages.
• In order to work, the Garcias paid $2,000 to their son Luis to care for Maria after school.
• Adam and Lisa provided all of the support for their two children.

Adam and Lisa Garcia – Test Questions;

4. What is the maximum amount Adam and Lisa are eligible to claim for the child tax credit?
a. $2,000 Answer
b. $3,000
c. $4,000
d. $6,000
Adam and Lisa Garcia – Question 4 Explanation:

• Child tax credit (CTC) is not refundable.
• 2022 CTC is $2,000 for each qualifying child.
• Must have a Social Security number that is valid for employment issued before the due date of the return, including extensions.
• A child must be under age 17 at the end of 2022 to be a qualifying child.

5. The Garcias qualify for the child and dependent care credit.
a. True b. False Anawer
Adam and Lisa Garcia – Question 5 Explanation:
IRS Topic No. 602 Child and Dependent Care Credit:
Payments to Relatives or Dependents – The care provider can't be your spouse, the parent of your qualifying individual if your qualifying individual is your child and under age 13, your child who is under the age of 19, or a dependent whom you or your spouse may claim on your return.
Can a family member get paid for childcare IRS?
These payments may be qualified childcare expenses if the family member babysitting isn't your spouse, the parent of the child, your dependent, or your child under age 19, and if you otherwise qualify to claim the child and dependent care credit.

Adam and Lisa Garcia Interview Notes:

• Adam and Lisa are married and want to file a joint return.
• Adam is a U.S. citizen and has a valid Social Security number. Lisa is a resident alien and has an ITIN. They resided in the United States all year with their children.
• Adam and Lisa have two children, Maria, age 11, and Luis, age 17. Maria and Luis are U.S. citizens and have valid Social Security numbers.
• Adam earned $22,000 in wages.
• Lisa earned $20,000 in wages.
• In order to work, the Garcias paid $2,000 to their son Luis to care for Maria after school.
• Adam and Lisa provided all of the support for their two children.

Adam and Lisa Garcia – Retest Questions:

4. The maximum amount Adam and Lisa are eligible to claim for the Child Tax Credit is $4,000.
a. True b. False Answer

Adam and Lisa Garcia – Test Question 4 Explanation:

Child tax credit (CTC) is not refundable. 2022 CTC is $2,000 for each qualifying child. Must have a Social Security number that is valid for employment issued before the due date of the return, including extensions. A child must be under age 17 at the end of 2022 to be a qualifying child.

5. Payments made to Luis can be claimed on Form 2441 as child and dependent care expenses.
a. True b. False Answer

Adam and Lisa Garcia – Question 5 Explanation:

irs Topic No. 602 Child and Dependent Care Credit:

Payments to Relatives or Dependents – The care provider can't be your spouse, the parent of your qualifying individual if your qualifying individual is your child and under age 13, your child who is under the age of 19, or a dependent whom you or your spouse may claim on your return.

Jenny Smith – Interview Notes:
• Jenny Smith, age 57, is single.
• Jenny earned wages of $52,000 and was enrolled the entire year in a high deductible health plan (HDHP) with self-only coverage.
• During the year, Jenny contributed $2,000 to her Health Savings Account (HSA) and her mother also contributed $1,000 to Jenny's HSA account.
• Jenny's Form W-2 shows $650 in Box 12 with code W. She has Form 5498-SA showing $3,650 in Box 2.
• Jenny took a distribution from her HSA to pay her unreimbursed expenses:
o 8 visits to a physical therapist after her knee surgery $400
o unreimbursed doctor bills for $900
o prescription medicine $200
o replacement of a crown $1,500
o over the counter medication $40
o gym membership $240
• Jenny is a U.S. citizen with a valid Social Security number.

Jenny Smith – Test Questions:

6. Form 8889, Part 1 is used to report HSA contributions made by _______________.
a. Jenny
b. Jenny's employer
c. Jenny's mother
d. All of the above Answer
Jenny Smith – Question 6 Explanation:
7. Jenny is eligible to contribute an additional $1,000 to her HSA because she is age 55 or older.
a. True Answer b. False

Jenny Smith – Question 7 Explanation:

8. What is the total unreimbursed qualified medical expenses reported on Form 8889, Part II?
a. $2,640
b. $3,000
c. $3,040 Answer
d. $3,280
Jenny Smith – Question 8 Explanation:

2022 Publication 502 You can't include membership dues in a gym, health club, or spa as medical expenses, but you can include separate fees charged there for weight loss activities.

Jenny Smith – Retest Question:

6.Jenny can include her mother's contribution on Form 8889, Part 1.
a. True Anawer b. False

Jenny Smith Retest Question 6 – Explanation:

7. Jenny is eligible to contribute an additional $_________________ 1000 to her HSA because she is age 55 or older.

Jenny Smith – Retest Question 7 Explanation:

Those 55 and older can contribute an additional $1,000 as a catch-up contribution.

8. The gym membership is a qualified medical expense for HSA purposes.
a. True b. False Answer

Alice Adams – Interview Notes:
• Alice, age 58, is single. She owns her home and provided all the costs of keeping up her home for the entire year. Her only income for 2022 was $46,000 in W-2 wages.
• Linda, age 24, and her daughter Nancy, age 4, moved in with Linda's mother, Alice, after she separated from her spouse in April of 2020. Linda's only income for 2022 was $25,000 in wages. Linda provided over half of her own support. Nancy did not provide more than half of her own support.
• Linda will not file a joint return with her spouse.
• All individuals in the household are U.S. citizens with valid Social Security numbers. No one has a disability. They lived in the United States all year.

Alice Adams – Test Questions;

9. For the purpose of determining dependency, Nancy could be the qualifying child of _______________.
a. Only Alice
b. Only Linda
c. Either Alice or Linda Answer
d. Neither Alice nor Linda
Alice Adams – Question 9 Explanation;
10. Linda is not eligible to claim Nancy for the earned income credit because her filing status is Married Filing Separate.
a. True b. False> Answer
Alice Adams – Question 10 Explanation:
To figure the credit, see Publication 596, Earned Income Credit 2022. When you file Form 1040 or 1040-SR, you must attach Schedule EIC to your return to claim the EIC with a qualifying child.
Special rule for separated spouses: You can claim the EIC if you are married, not filing a joint return, had a qualifying child who lived with you for more than half of 2022 and either of the following apply:
1. You lived apart from your spouse for the last 6 months of 2022, or
2. You are legally separated according to your state law under a written separation agreement or a decree of separate maintenance and you didn't live in the same household as your spouse at the end of 2022.

9. Linda is the only person that qualifies to claim Nancy as a dependent.
a. True b. False Answer

Alice Adams – Retest Question 9 Explanation:

10. Which of the following statements is true?
a. Linda is not eligible to claim Nancy for the EIC because her filing status is married filing separate.
b. Linda is not eligible to claim the EIC for Nancy because she is under age 25.
c. Linda is not eligible to claim Nancy for the EIC because her income is too high.
d. None of the above statements are true. Answer

Alice Adams Retest Question 10 – Explanation:

Ellen Black Interview Notes:

• Ellen is 48 years old and files as single.
• Her 2022 adjusted gross income (AGI) is $51,000, which includes gambling winnings of $2,000.
• Ellen would like to itemize her deductions this year.
• Ellen brings documents for the following expenses:
o $9,000 Hospital and doctor bills
o $500 Contributions to Health Savings Account (HSA)
o $3,600 State withholding (higher than Ellen's calculated state sales tax deduction)
o $300 Personal property taxes based on the value of the vehicle
o $400 Friend’s personal GoFundMe campaign
o $275 Cash contributions to the Red Cross
o $200 Fair market value of clothing in good condition donated to the Salvation Army (Ellen purchased the clothing for $900)
o $7,300 Mortgage interest
o $2,300 Real estate tax
o $150 Homeowners association fees
o $3,000 Gambling losses

Ellen Black – Test Question

11. Ellen can claim the $400 she donated to her friend's personal GoFundMe campaign as a deduction on her Schedule A.
a. True
b. False Answer

Ellen Black – Test Question 11 Explanation:

Money donated to personal GoFundMe campaign are not deductible.

12. What amount of gambling losses is Ellen eligible to claim as a deduction on her Schedule A?
a. $0
b. $1,000
c. $2,000 Answer
d. $3,000

Ellen Black – Test Question 12 Explanation:

Ellen is eligible to claim $2,000 in gambling losses as a deduction on her Schedule A. You may deduct gambling losses only if you itemize your deductions on Schedule A (Form 1040) and kept a record of your winnings and losses.

The amount of losses you deduct can't be more than the amount of gambling income you reported on your return.

Ellen Black – Retest Questions;

11. If Ellen chooses to itemize, which of the following is she eligible to claim as a deduction on Schedule A?
a. $400 GoFundMe donation
b. $500 Contributions to Health Savings Account (HSA)
c. $150 Homeowner’s Association fees
d. $300 Personal property taxes based on the value of her vehicle Answer

Ellen Black – Retest Question 11 Explanation:

Nondeductible payments; You can’t deduct any of the following items:
$150 Homeowner’s Association fees
$400 GoFundMe donation

What are the benefits of an HSA? HSA contributions are not deductible on Schedule A.

You may enjoy several benefits from having an HSA.

You can claim a tax deduction for contributions you, or someone other than your employer, make to your HSA even if you don’t itemize your deductions on Schedule A (Form 1040).

12. Ellen is eligible to claim $3,000 in gambling losses as a deduction on her Schedule A.
a. True b. False Answer

Ellen Black – Retest Question 12 Explanation:

Ellen is eligible to claim $2,000 in gambling losses as a deduction on her Schedule A.

You may deduct gambling losses only if you itemize your deductions on Schedule A (Form 1040) and kept a record of your winnings and losses.

The amount of losses you deduct can't be more than the amount of gambling income you reported on your return.

David Stone Interview Notes: • David Stone is 28 years old and single. He provides all of his own support.
• David works at a gas statopm and earned $18,500 in wages.
• David took two management courses at a community college to improve his job skills. He was less than a half time student. He wants to know if that qualifies for any educational tax benefit.
• David took an early distribution from his IRA of $2,000 for tuition and $500 for emergency repairs of his air conditioning system. This is the first time he has taken a distribution from his IRA. • David is a U.S. citizen and lived in the U.S. for the entire year. He has a valid Social Security number.
David Stone – Test Questions: 13. David is eligible to claim the American Opportunity Credit on his 2024 tax return. a. True
b. False ANSWER
David Stone – Test Question 13 Explanation:
Reference:
IRS Publication 970, Tax Benefits for Education.

To be eligible for Lifetime Learning Credit (LLC), the student must:

1. Felony drug conviction doesn’t make the student ineligible for Lifetime Learning Credit.
2. Information can be found in Publication 970, Tax Benefits for Education.
3. Be enrolled or taking courses at an eligible educational institution.
4. Be taking higher education course or courses to get a degree or other recognized education credential or to get or improve job skills.
5. Be enrolled for at least one academic period beginning in the tax year.
6. You can't claim the credit if your MAGI is $90,000 or more ($180,000 or more if you file a joint re-turn).

14. Which of the following is not a requirement for John to claim the earned income credit with no qualifying children in 2022?
a. John must have a Social Security number valid for employment.
b. John must be a full time student. Answer
c. John must not be the dependent of another taxpayer.
d. John must have lived in the United States more than half the year.

John Ward – Test Question 14 Explanation:

To be eligible for Lifetime Learning Credit (LLC), the student must:

1. Felony drug conviction doesn’t make the student ineligible for Lifetime Learning Credit.
2. Information can be found in Publication 970, Tax Benefits for Education.
3. Be enrolled or taking courses at an eligible educational institution.
4. Be taking higher education course or courses to get a degree or other recognized education credential or to get or improve job skills.
5. Be enrolled for at least one academic period beginning in the tax year.
6. You can't claim the credit if your MAGI is $90,000 or more ($180,000 or more if you file a joint re-turn).

John Ward – Retest Questions;

13. Which of the following is a requirement for John to claim the lifetime learning credit in 2022?
a. John must be at least a half-time student.
b. John must be a degree candidate at an eligible educational institution.
c. John's modified adjusted gross income (MAGI) must be less than $90,000. Answer
d. John must have no felony drug convictions.

John Ward Retest Question 13 – Explanation:

Reference: Publication 970, Tax Benefits for Education. The lifetime learning credit is phased out if your MAGI is between $80,000 and $90,000 ($160,000 and $180,000 if you file a joint return).

To be eligible for LLC, the student must: Be enrolled or taking courses at an eligible educational institution.

Be taking higher education course or courses to get a degree or other recognized education credential or to get or improve job skills. Be enrolled for at least one academic period* beginning in the tax year.

You can't claim the credit if your MAGI is $90,000 or more ($180,000 or more if you file a joint re-turn).

14. John is eligible to claim the earned income credit on his 2022 tax return.
a. True Answer b. False

John Ward Retest Question 14 – Explanation:

Must be at least age 25 but under age 65 as of December 31 with earned income below $21,430 for those filing single and $27,380 for spouses filing a joint return.

The maximum credit for taxpayers with no qualifying children is $1,502.

Directions:
Using the tax software, complete the tax return, including Form 1040 and all appropriate forms, schedules, or worksheets. Answer the questions following the scenario.

When entering Social Security numbers (SSNs) or Employer Identification Numbers (EINs), replace the Xs as directed, or with any four digits of your choice.

Robert and Emily Lincoln – Interview Notes:

• Robert is a 6th grade teacher at a public school. Robert and Emily are married and choose to file Married Filing Jointly on their 2022 tax return.
• Robert worked a total of 1,340 hours in 2022. During the school year, he spent $733 on unreimbursed classroom expenses.
• Emily retired in 2019 and began receiving her pension on November 1st of that year. She explains that this is a joint and survivor annuity. She has already recovered $1,216 of the cost of the plan.
• Robert settled with his credit card company on an outstanding bill and brought the Form 1099-C to the site. They aren’t sure how it will impact their tax return for tax year 2022. The Lincolns determined that they were solvent as of the date of the canceled debt.
• Emily won $4,414 gambling at a casino and had additional lottery winnings of $175. Emily has documented casino losses of $1,260.
• Their daughter, Safari, is in her second year of college pursuing a bachelor’s degree in Veterinary Medicine at a qualified educational institution. She received a scholarship and the terms require that it be used to pay tuition. Box 2 was not filled in and Box 7 was not checked on her Form 1098-T for the previous tax year. The Lincolns provided Form 1098-T and an account statement from the college that included additional expenses. The Lincolns paid $865 for books and equipment required for Safari's courses. This information is also included on the college statement of account. The Lincolns claimed the American Opportunity Credit last year for the first time.
• Safari does not have a felony drug conviction.
• They are all U.S. citizens with valid Social Security numbers.

2022 LINCOLN FEDERAL RETURN CUSTOMER’S DOCUMENTS:

2022 LINCOLN FEDERAL RETURN LIST OF IRS FORMS:

2022 LINCOLN FEDERAL RETURN QUICK SUMMARY – IRS:
FILING STATUS: 2 (MFJ)
TOTAL INCOME: 75908
ADJUSTMENTS TO INCOME: 300
ADJUSTED GROSS INCOME: 75608
STANDARD DEDUCTION: 27300
TAXABLE INCOME: 48308
TAX: 5394
TOTAL CREDITS: 1893 (500 OTHER DEPENDENT + 1393 EDUCATION)
TOTAL TAX: 3501
TOTAL PAYMENTS: 7963 (7035 TAX WITHHELD + 928 REFUNDABLE)
REFUND: 4468

Advanced Scenario 7: Robert and Emily Lincoln – Test Questions;

15. What is the taxable portion of Emily's pension from Maple Enterprises using the simplified method?
a. $0
b. $17,415
c. $18,789 Answer
d. $19,350
Robert and Emily Lincoln – Question 15 Explanation:

• Robert Lincoln 2022 – 1961 = 61
• Emily Lincoln 2022 – 1954 = 68
• 61 + 68 = 129 from Table 2 121 – 130 = 310
Partially Taxable Pensions and Annuities:
• Simplified Method: You must use the Simplified Method if the payments are from a qualified employee plan or a qualified employee annuity.
• Enter the total pension or annuity payments from Form 1099-R, box 1 on line 5a. If your Form 1099-R doesn't show the taxable amount, you must use the Simplified Method to figure the taxable part to enter on line 5b.
• If your Form 1099-R shows a taxable amount, you can report that amount on line 5b. But you may be able to report a lower taxable amount by using the Simplified Method
. • If you must use the Simplified Method, complete the Simplified Method Worksheet in 2022 1040 instructions to figure the taxable part of your pension or annuity.
• You can ask the IRS to figure the taxable part for you for a $1,000 fee. For details, see Pub. 939.
16. All of Emily's social security income is taxable.
a. True b. False Answer
Robert and Emily Lincoln – Question 16 Explanation:
IRS Notice 703: You were married, would file jointly, and line E above is more than $32,000. 21203 / 2 = 10602 plus total income 33657 = 44259 minus 32000, then some of the social security income is taxable. Up to 85% of a taxpayer's benefits may be taxable if they are: Married filing jointly with more than $44,000 income. 21203 x .85 = 18023 Answer.

17. What is the total amount of other income reported on the Lincoln's Form 1040, Schedule 1?
a. $5,439 Answer
b. $5,264
c. $4,589
d. $850
Robert and Emily Lincoln – Question 17 Explanation;
Cancellation of credit card debt is included in the Income – Other Income lesson of Publication 4491 2022 RETURNS.
Form 1099-C: If a taxpayer receives Form 1099-C for canceled credit card debt and was solvent (assets greater than liabilities) immediately before the debt was canceled, all the canceled debt will be included on the tax return as other income.
Examples of "Other Income" on Schedule 1:

• Gambling winnings, 4,414 + 175 + 850 = 5,439 Answer
• Lotteries, 175
• Nonbusiness credit card debt cancellation, 850

18. Robert is eligible to deduct qualified educator expenses in the amount of $____________. 300 Answer.
Robert and Emily Lincoln – Question 18 Explanation:
An eligible educator is a kindergarten through grade 12 teacher, who worked in a school for at least 900 hours during a school year. If you were an eligible educator in 2022, you can deduct qualified expenses up to $300 you paid in 2022 in the Adjustments to Income section of Schedule 1 (Form 1040), line 11.
19. What is the Lincoln's standard deduction on their 2022 tax return?
a. $28,700
b. $27,300 Answer
c. $25,900
d. $19,400
Robert and Emily Lincoln – Question 19 Explanation:
IF your filing status is Married filing jointly AND the number of boxes checked is 1 THEN your standard deduction is $27,300 Anawer.
20. Which is not a qualifying expense for the American opportunity credit?
a. Parking pass Answer
b. Required course related books
c. Tuition
d. Required course related equipment
Robert and Emily Lincoln – Question 20 Explanation:
Expenses eligible for the American Opportunity Credit: Qualified education expenses include amounts spent for tuition and materials for course enrollment. This includes books, supplies, and equipment needed for a course of study. Parking pass is not a qualifying expense for the American Opportunity Credit.
21. Which of the following credits are the Lincolns eligible to claim on their tax return?
a. Child tax credit
b. Credit for other dependents
c. American opportunity credit
d. Only b and c Answer
Lincoln Advanced Test – Question 21 Explanation:
To qualify for the Credit for Other Dependents: There is a $500 credit for other dependents who do not qualify for the $2,000 child tax credit. The dependent must be a U.S citizen, U.S. national, or resident of the U.S. The dependent must have a valid identification number (ATIN, ITIN, or SSN).
To qualify for the American Opportunity Credit: To be eligible for AOTC, the student must be pursuing a degree or other recognized education credential. Be enrolled at least half time for at least one academic period beginning in the tax year. Not have finished the first four years of higher education at the beginning of the tax year.
22. What is the Lincoln’s total federal income tax withholding? $__________. 7035 Answer
Robert and Emily Lincoln – Question 22 Explanation:
3,000 W-2 + 2,100 SSA-1099 + 1,935 1099-R = $7,035 Answer.

Advanced Scenario 7: Robert and Emily Lincoln – Retest Questions;

15. The taxable portion of Emily's pension from Maple Enterprises using the simplified method is $19,350.
a. True b. False Answer
16. The taxable amount of Emily's social security income is:
a. $21,203
b. $18,023 Answer
c. $17,062
d. $0
17. The total amount of other income reported on the Lincoln's Form 1040, Schedule 1 is $850.
a. True b. False Answer
18. What is the amount Robert is eligible to claim as qualified educator expenses on Form 1040, Schedule 1?
a. $0
b. $250
c. $300 Answer
d. $733
19. The Lincoln's standard deduction on their Form 1040 for tax year 2022 is $25,900.
a. True b. False Answer
20. Which of the following expenses qualify for the American opportunity credit?
a. Required course related books and equipment
b. Tuition
c. Parking pass
d. Both a and b Answer
21. The Lincolns can claim the credit for other dependents for their daughter Safari.
a. True Answer
b. False
22. How much federal income tax withholding is reported on the Lincolns' Form 1040?
a. $1,935
b. $3,000
c. $4,935
d. $7,035 Answer

Joanne Oak – Interview Notes:

2022 SCENARIO 8 JOANNE OAK FEDERAL RETURN CUSTOMER'S DOCUMENTS:

alt="2022 OAK FORM 1099-T TUITION STATEMENT"

2022 SCENARIO 8 JOANNE OAK FEDERAL RETURN LIST OF FORMS;

Form 8879 document:
Form 8879 is the declaration document and signature authorization for an e-filed return filed by an electronic return originator (ERO).
Complete this form when:
• The Practitioner PIN method is used.
• The taxpayer authorizes the ERO to enter or generate the taxpayer’s personal identification number (PIN) on his/her e-filed individual income tax return.

alt="2022 OAK FORM 1040 LINE 16 TAX WORKSHEET QUALIFIED DIVIDENTS AND CAPITAL GAIN TAX"

"

IRS Determining Your Qualified Business Income Instructions for Form 8995:

IRS Qualified business income for Form 8995 equals to Net Profit Schedule C Line 31 = 6457 minus Deduction for one-half of Self-Employment Tax Schedule SE Line 13 = 456.

6457 - 456 = 6001 Enter on line 1(c) the net qualified business income or (loss) for the trade, business, or aggregation reported in the corresponding row.

2022 SCENARIO 8 OAK FEDERAL RETURN DETAILED SUMMARY WITH EXPLANATIONS:
FILING STATUS: 1 (SINGLE)
TOTAL INCOME: 48444
EXPLANATION: (FORM 1040 LINE 9 48444 = 36050 W-2 + 12 INTEREST + 225 DIVIDENTS + 2500 IRA + SCHEDULE C 6457 + SCHEDULE D 3200)
TOTAL ADJUSTMENTS TO INCOME: 2956
EXPLANATION: (FORM 1040 LINE 10 2956 = DEDUCTABLE SELF-EMPLOYMENT TAX SCHEDULE 1 LINE 15 456 + STUDENT LOAN INTEREST SCHEDULE 1 LINE 25 2500)
ADJUSTED GROSS INCOME (AGI): 45488
EXPLANATION: (FORM 1040 LINE 11 45488 = 48444 MINUS 2956)
STANDARD DEDUCTION: 12950
TAXABLE INCOME: 31332
EXPLANATION: (FORM 1040 LINE 15 31332 = 45488 (AGI) - 12950 - 1206 QUALIFIED BUSINESS DEDUCTION LINE 13 FORM 1040)
TAX: 3242
EXPLANATION: (CALCULATED USING QUALIFIED DIVIDENTS AND CAPITAL GAIN TAX WORKSHEET—Line 16)
CREDITS: 480
EXPLANATION: (FORM 1040 LINE 20 FROM EDUCATION CREDIT SCHEDULE 3 LINE 3)
OTHER TAXES: 1162
EXPLANATION: (1162 FORM 1040 LINE 23 OTHER TAXES FROM SCHEDULE 2 LINE 21 = SCHEDULE 2 LINE 4 SELF-EMPLOYMENT TAX 912 + SCHEDULE 2 LINE 8 ADDITIONAL TAX ON IRA 250))
TOTAL TAX: 3924
EXPLONATION: (FORM 1040 LINE 24 3924 = TAX 3242 - 480 FROM SCHEDULE 3 LINE 20 EDUCATION CREDIT + 1162 OTHR TAX FROM SCHEDULE 2 LINE 23)
TOTAL PAYMENTS: 3050
EXPLANATION: (3050 = 2800 FORM W-2 + 250 FORM 1099-R)
AMOUNT DUE: 874
EXPLANATION: (874 = TOTAL TAX 3924 FORM 1040 LINE 24 - TOTAL PAYMENTS 3050 FORM 1040 LINE 33)

2022 SCENARIO 8 OAK FEDERAL RETURN	SUMMARY
FILING STATUS:	1 (SINGLE)
TOTAL INCOME:	48444
TOTAL ADJUSTMENTS TO INCOME:	2956
ADJUSTED GROSS INCOME:	45488
STANDARD DEDUCTION:	12950
TAXABLE INCOME:	31332
TAX:	3242
CREDITS:	480
OTHER TAXES:	1162
TOTAL TAX:	3924
TOTAL PAYMENTS:	3050
AMOUNT DUE:	874

Advanced Scenario 8: Joanne Oak – Test Questions;

23. What is the net long term capital gain reported on Joanne's Schedule D?
a. $2,450 Answer
b. $2,100
c. $1,750
d. $350
Joanne Oak – Question 23 Explanation:
$2,100 + $350 = $2,450

Capital Gain Distributions Line 13: Enter on Schedule D, line 13, the total capital gain distributions paid to you during the year, regardless of how long you held your investment. This amount is shown in box 2a of Form 1099-DIV below.

Capital Gain Distributions Line 18: If there is an amount in box 2d of the Form 1099-DIV, include that amount on line 4 of the 28% Rate Gain Worksheet in these instructions if you complete line 18 of Schedule D.

24. Which of the following can be claimed as a business expense on Joanne's Schedule C?
a. Car washes
b. Tickets for illegal parking
c. Tolls Answer
d. Snacks and lunches
Joanne Oak – Question 24 Explanation:
Tolls: You can deduct the standard mileage rate, as well as business-related tolls and parking fees. Oct 6, 2022
Snacks and lunches: For 2021 and 2022 only, businesses can generally deduct the full cost of business-related food and beverages purchased from a restaurant. Otherwise, the limit is usually 50% of the cost of the meal. Jun 14, 2022

25. What is the amount Joanne can take as a student loan interest deduction on her Form 1040, Schedule 1? $__________________. 2500 Answer
Joanne Oak – Question 25 Explanation:
Student loan interest is interest you paid during the year on a qualified student loan. It includes both required and voluntarily pre-paid interest payments. You may deduct the lesser of $2,500 or the amount of interest you actually paid during the year.
26. How many miles can Joanne use to calculate her standard mileage deduction?
a. 1,500
b. 2,500 Answer
c. 4,000
d. 11,000
Joanne Oak – Question 26 Explanation:
If you take the standard mileage rate:
• Multiply the business standard mileage rate from January 1, 2022, to June 30, 2022, by 58.5 cents a mile;
• Multiply the business standard mileage rate from July 1, 2022, to December 31, 2022, by 62.5 cents a mile; and
• Add to this amount your parking fees and tolls; and
• Enter the total on line 9.
27. What is the amount of Joanne's lifetime learning credit? $_______________. 480 Answer.
Joanne Oak – Question 27 Explanation:
How to figure the amount of Lifetime Learning Credit and Qualified Expenses:
Tuition and required enrollment fees (including amounts required to be paid to the institution for course-related books, supplies, and equipment). The amount of the credit is 20 percent of the first $10,000 of qualified education expenses or a maximum of $2,000 per return. Lifetime learning credit equals 20% of qualified education expenses. 2400 Tuition x .20 = 480 Answer.

28. Joanne will have to pay $________ 10 additional tax because she received the early distribution from her IRA.
Joanne Oak – Question 28 Explanation:
Joanne will be subject to the additional 10% tax if no exception applies. Because, Joanne used only a portion of the IRA distribution for the qualified higher education expenses, she has to pay additional $250 tax penalty for the IRA early distribution. Also, please note, there is an error, the $10 should have been $250.
29. How can Joanne prevent having a balance due next year?
a. She can increase the withholding on her Form W-4.
b. She can make estimated tax payments.
c. She can use the IRS withholding calculator to estimate her withholding for next year.
d. All of the above Answer
Joanne Oak – Question 29 Explanation:
Having enough tax withheld or making quarterly estimated tax payments during the year can help Joanne avoid problems at tax time. Another way to pay taxes is to pay-as-you-go. This means that you need to pay most of your tax during the year, as you receive income, rather than paying at the end of the year.

Advanced Scenario 8: Joanne Oak – Retest Questions;

23. Joanne's net long-term capital gain reported on Schedule D is $_______. 2450 Answer.
(2100 + 350 = 2450).
24. Joanne cannot claim the $150 for illegal parking tickets as a business expense on Schedule C.
a. True Answer b. False
25. What is the amount Joanne can take as a student loan interest deduction on her Form 1040, Schedule 1?
a. $3,250
b. $2,500 Answer
c. $750
d. $0
26. How many miles can Joanne use to calculate her standard mileage deduction? ______________. 2500 Answr
27. Joanne meets the qualifications to claim the Lifetime Learning Credit.
a. True Answer b. False
28. What is Joanne's additional 10% tax on the early withdrawal from her IRA?
a. $0
b. $10Answer
c. $240
d. $250
29. Joanne can make estimated tax payments to avoid owing tax next year.
a. True Answer
b. False

Thomas Polk – Interview Notes:

2022 SCENARIO 9 THOMAS POLK – LIST OF TAXPAYER’S DOCUMENTS:
FORM W-2
FORM 1099-INT (INTEREST INCOME)
FORM 1095-A (HEALTH INSURANCE MARKETPLACE STATEMENT)
DOWNTOWN DAY CARE STATEMENT (CHILDCARE EXPENSES)

2022 SCENARIO 9 THOMAS POLK – LIST OF TAX RETURN FORMS:
FORM 8879 (E-FILE SIGNATURE AUTHORIZATION)
FORM 1040 (TAX RETURN)
SCHEDULE 1 (ADDITIONAL INCOME AND ADJUSTMENTS TO INCOME)
SCHEDULE 3 (ADDITIONAL CREDITS AND PAYMENTS)
SCHEDULE B (INTEREST AND DIVIDENTS INCOME)
FORM 2441 (CHILD CARE CREDIT)
FORM 2441 (CHILD CARE CREDIT) LINE 10 CREDIT LIMIT WORKSHEET
SCHEDULE EIC (EARNED INCOME CREDIT)
WORKSHEET A – 2022 EIC FORM 1040 – LINE 27
SCHEDULE 8812 (CHILD TAX CREDIT AND ADITIONAL CHILD TAX CREDIT)
SCHEDULE 8812 LINE 13 CREDIT LIMIT WORKSHEET
FORM 8880 (RETIREMENT SAVINGS CREDIT)
FORM 8962 (PREMIUM TAX CREDIT)
2022 SCENARIO 9 POLK – IRS RETURN: SUMMARY
FILING STATUS 4 (HEAD OF HOUSEHOLD)
INCOME 41130
ADJUSTMENTS TO INCOME 26
ADJUSTED GROSS INCOME AGI 41104
DEDUCTIONS 19400
TAXABLE INCOME 21704
TAX 2314 (FROM IRS 2022 TAX TABLE)
CREDITS 2314
PAYMENTS 3264
REFUND 3264

Advanced Scenario 9: Thomas Polk – Test Questions;

30. What is Thomas's most advantageous filing status?
a. Single
b. Married Filing Separately
c. Head of Household Answer
d. Qualifying Surviving Spouse (QSS)
Thomas Polk – Question 30 Explanation:
Surviving spouses who have an eligible child may be able to use the Qualifying Surviving Spouse status in the two tax years following the year of the spouse’s death. Thomas was widowed in 2019. 2022 is the third year after 2019 therefore Thomas’s most advantageous filing status is Head of Household.
31. Thomas's adjusted gross income on his Form 1040 is $__________. 41104 Answer.
Thomas Polk – Question 31 Explanation:
On 2022 tax return, your AGI is on line 11 of the Form 1040. And it equals to line 10 Adjustments to Income from Schedule 1, line 26 subtracted from Total Income on line 9 of your Form 1040.
32. Thomas can claim the following credits on his tax return.
a. Child Tax Credit
b. Child and Dependent Care Credit
c. Premium Tax Credit
d. All of the above Answer
Thomas Polk – Question 32 Explanation:
33. Thomas's Retirement Savings Contributions Credit on Form 8880 is $___________. 100 Answer.
Thomas Polk – Question 33 Explanation:
Form W-2 Box 12a D is for 401(k) contributions You may be able to claim the Saver's Credit, Form 1040 Schedule 3, line 4. Line 11 Adjusted Gross Income (AGI).
34. The total amount of Thomas's advanced payment of premium tax credit for 2022 is $___________. 4656 Answer.
Thomas Polk – Question 34 Explanation:
35. Thomas's child and dependent care credit from Form 2441 is reported as a non-refundable credit on Form 1040, Schedule 3.
a. True Anawer b. False
Thomas Polk – Question 35 Explanation:

For 2022, the credit for child and dependent care expenses is nonrefundable and you may claim the credit on qualifying employment-related expenses of up to $3,000 if you had one qualifying person, or $6,000 if you had two or more qualifying persons.

The maximum credit is 35% of your employment-related expenses if your adjusted gross income is $15,000 or less. Reference: IRS Publication 503 2022 Child and Dependent Care Expenses.

30. Thomas is eligible to claim the Qualifying Widower filing status.
a. True b. False Answer
31. What is Thomas's adjusted gross income on his Form 1040?
a. $41,130
b. $41,104 Answer
c. $41,000
d. $21,704
32. Thomas is eligible to claim the credit for other dependents in 2022.
a. True b. False Answer
33. Thomas qualifies to claim a retirement savings contribution credit.
a. True Anawer b. False
34. What is the total amount of advanced payment of premium tax credit that Thomas received in 2022?
a. $7,224
b. $5,352
c. $4,656 Answer
d. $388
35. Thomas's child and dependent care credit is refundable in 2022.
a. True b. False Answer

The first five questions are about how to calculate the allowable portion of standard deductions to U.S. income. Use your VITA Puerto Rico Resource Guide Publication 4696PR and Publication 1321 to answer the questions.

1. Lauren was a resident of Puerto Rico during 2022. She is single and under 65 years of age. She works as a U.S. government employee and her salary was $34,000. She also received income of $6,000 from a part-time job in Puerto Rico not subject to U.S. tax. What is the allowable portion of the standard deduction that Lauren can claim?
a. $11,008 ANSWER
2. German and Elena were residents of Puerto Rico in 2022. They are age 72 and file a joint return. German is retired from the U.S. Postal Service and Elena is retired from the U.S. Veterans Affairs. Their taxable pensions were $28,000 and $42,000, respectively What is German and Elena’s standard deduction?
d. $28,700 ANSWER
3. Marco is 40 years old, qualifies to file Head of Household, and a resident of Puerto Rico during 2022. He informed you that he received the following sources of income: $12,500 for a job he performed in the state of Florida; $23,200 received from the federal government for services performed in Puerto Rico. He also received $6,300 from a part-time job in Puerto Rico that is exempt from federal income tax. What is the allowable portion of Marco’s standard deduction?
b. $16,490 ANSWER
Calculation: $12,500 and $23,200 and $6,300 35700/42000=0.85
Head of household under 65 enter $19,400x.85=$16490
4. Camilo is a bona fide resident of Puerto Rico, who received Social Security benefits and pension income from the University of Puerto Rico. Does Camilo have U.S. source income?
a. Yes, he has U.S. source income. ANSWER
5. Paloma is single and received unemployment benefits from the Puerto Rico Department of Labor reported on a Form 1099-G. What is the factor determining source of income for unemployment?
c. Unemployment compensation is generally considered sourced where the taxpayer performed the underlying services. ANSWER

6. What is the amount of the Additional Child Tax credit on line 3, Part II, in Form 1040-PR?
b. $3,000 ANSWER
7. What filing status can Kenya use?
a. Head of Household ANSWER
8. Kenya can file Form 1040-PR or Form 1040-SS to claim the Additional Child Tax credit.
a. True ANSWER
9. The IRS issues an Identity Protection Personal Identification Number (IP PIN) to protect and confirm taxpayer identity when submitting a tax return. Should the IP PIN be included on the Form 1040SS or Form 1040PR?
a. Yes ANSWER
10. Kenya must have earned income to be able to claim the Additional Child Tax Credit.
a. True ANSWER

11. What filing status can Antoni and Marta claim on their return?
b. Married Filing Jointly ANSWER
12. How many dependents are eligible for the Additional Child Tax Credit (ACTC)?
b. 3 ANSWER
13. How much is the Additional Child Tax Credit that Antoni and Marta are entitled to receive?
b. $3,213 ANSWER
14. Which of the following income must be reported on Form 1040 PR or Form 1040 SS, Part II, Line 1 to calculate the modified adjusted gross income?
a. Wages and Unemployment
b. Taxable Pension and Annuities
c. Taxable Social Securities Benefits
d. All of the above. ANSWER
15. Which form should be completed by Antoni and Marta to claim the Additional Child Tax Credit?
c. Form 1040-PR or Form 1040-SS ANSWER

1. The first five questions are for figuring the allowable portion of itemized deductions to U.S. income;
2. And for calculating the source of pension income for service performed in the U.S.;
3. And for determining the taxable portion of Social Security benefits.
4. Use your Publication 4696(PR) VITA Puerto Rico Resource Guide and Publication 1321 Special Instructions For Bona Fide Residents Of Puerto Rico Who Must File A U.S. Individual Income Tax Return (Form 1040 or Form 1040-SR) to answer the questions.

2.1 Adan and Eva are both under age 65 and bona fide residents of Puerto Rico who file a joint return. Adan had self-employed gross income of $30,000 from his business in Puerto Rico. Eva works for the federal government and her salary was $45,000. Before calculating the allowable portion of itemized deductions, they had the following eligible itemized deductions:
* Home mortgage interest: $10,600
* Real estate taxes: $1,400
* Charitable contributions: $750

1.) Total amount of itemized deductions: 10600+1400+750=$12,750
2.) Itemized deduction calculation: 45000/75000=0.6x12750=$7,650
3.) Standard deduction calculation: 45000/75000=0.6x25900=$15,540

What is the amount of calculated allowable itemized deductions that can be claimed?
a. $0
b. $5,100
c. $7,650 ANSWER
d. $12,750

Because your minimum income level at which you must file a tax return is based on the standard deduction for your filing status, you must first use the following worksheet to calculate your Modified Standard Deduction to determine if you have to file a U.S. income tax return:

Line 1: Married filing jointly both under 65 for 2022 enter $25,900 for STANDARD DEDUCTION.
Line 2:
a) Gross income subject to U.S. tax = $45,000.
b) Total gross income from all sources (including exempt P.R. Income) $30,000 + $45,000.
c) Divide 2a by 2b: $45,000 / $75,000 = 0.6.
d) MODIFIED STANDARD DEDUCTION and filing requirement:
Multiply STANDARD DEDUCTION line 1 by 2c: $25,900 x 0.6 = $15,540 and this is your Modified Standard Deduction.
Conclusion: Itemized deductions = $7,650 and less than $15,540 Modified Standard Deduction.

2.2 Calculate the allowable standard deduction for Adan and Eva (see exercise 2.1 above). Based on these calculations, the allowable standard deduction is higher than the allowable itemized deductions.
a. True ANSWER
b. False

2.3 Franklin is a single taxpayer, 63 years old, and a bona fide resident of Puerto Rico with no dependents. Franklin received a Form SSA-1099, Social Security benefits, showing $26,700 in box 3. He did not receive any other income. Use Publication 4696 (PR) TAB H - Social Security Benefits as your reference materials.
Is any part of his Social Security benefits subject to U.S. income tax?
a. Yes
b. No ANSWER

• $12,950 STANDERD DEDUCTION Single under 65.
• $26,700 SS SOCIAL SECURITY BENEFIT x 0.50 = $13,350.
• If social security benefits are the taxpayer’s only source of income, than the benefits are not taxable.
• Reference IRS 2022 Publication 915 Social Security and Equivalent Railroad Retirement Benefits.

2.4 In 2022, Alex, 85 years old, resident of Puerto Rico, received $26,000 from his U.S. Civil Service pension. The benefits of this pension are attributed to a 25-year career with the federal government, in the state of New York. Which amount of Alex’s pension is eligible to claim a Foreign Tax Credit on Form 1040?
a. $0 ANSWER
b. $15,600
c. $20,000
d. $26,000

Formula to Calculate the Foreign Tax on U.S. Pension:

• IRS, Which amount of U.S. Civil Service pension as a U.S. possession can be claimed as Foreign Tax Credit on Form 1040 as a Puerto Rico resident.
• For pension, unemployment, and disability fund payments and a foreign tax imposed on an individual to pay for retirement, old-age, No deduction or credit is allowed.
• For reference and more information, see IRS 2022 Publication 514 Foreign Tax Credit for Individuals.

2.5 Santiago is single, 70 years old and received Form SSA-1099 for 2022, which shows benefits of $19,000 in box 5. He also received the following income during 2022:
* Taxable pension from the University of Puerto Rico of $37,000.
* Salary of $5,000 from a company in Puerto Rico.
* Taxable IRA distribution of $4,000 from a bank in Puerto Rico.
Using Publication 915, Worksheet 1 and VITA/TCE Practice Lab https://vita. taxslayerpro.com/, what amount of his Social Security benefit is taxable to the United States?
a. $0
b. $16,150 ANSWER
c. $17,200
d. $19,000

Worksheet 1, Publication 915: Question 2.5 how to Figure Santiago’s Taxable Social Security Benefits. And $16,150 Proof.

You can also complete Worksheet 1 in Publication 915 2022, Page 16 shown below to see the proof for the ANSWER $16,150. Follow the Worksheet 1 for Santiago in question 2.5, how you can lower your taxable amount to $16,150. And so, figuring your taxable benefits using the Worksheet 1, pays for itself.

Note: If you're a bona fide resident of Puerto Rico, you'll be able to exclude income from Puerto Rican sources (a company in Puerto Rico) on your U.S. income tax return.

2022 LEVEL II PUERTO RICO TEST - SCENARIO 1: CATALINA RAVAL QUESTIONS;

CATALINA RAVAL DOCUMENTS:
• Completed Intake/Interview and Quality Review Sheet;
• Form CSA 1099-R;
• Form SSA-1099;

CATALINA RAVAL INTERVIEW NOTE:
• Catalina Raval is 70 and was born on January 2, 1952.
• Catalina’s SSN is 123-00-XXXX and her grandson Lucas Cruz’s SSN is 124-00- XXXX.
• Her grandson, Lucas, was born on July 23, 2007, has lived with her for the last three years and qualifies her to file as Head of Household.
• Catalina pays the total cost of keeping up a home for herself and her grandson.
• She does not want to contribute to the presidential election campaign.
• If a refund or balance is due, Catalina would like a direct deposit to or direct debit from her checking account 67890; routing number 021904512.
• Her address and SSN are correct and were validated during the interview.
• Catalina is retired from the Civil Service Retirement System. She has a single life annuity and began receiving retirement benefits on January 5, 2010. The pension is attributed to services performed in New York. Catalina moved to Puerto Rico in 2010.
• Catalina receives Social Security benefits.
• According to the Simplified Method, Catalina can recover $2,667 of the cost of her pension tax free annually.

Please complete Form 1040, Publication 915, Worksheet 1, and the child tax worksheet to answer the following questions. You are a volunteer at site S21014444.

2.6 After considering the cost recovery of tax free amount; what is the taxable portion of Catalina’s pension?
a. $0
b. $15,000
c. $32,033 ANSWER
d. $34,700

SOLUTION:
2022 Catalinal’s Form 1099-R Statement of Annuity Paid Box 1 Gross distribution is $34,700.
Taxable portion or Catalina’s pension is $34,700 minus per Worksheet A Simplified Method, Catalina can recover $2,667 tax free annually = $32,033 and the Answer.

Worksheet A. Simplified Method Worksheet for Catalina Raval to figure the taxable part of her pension:

Reference: 2022 Publication 575 Pension and Annuity Income.
TIP: Form 1099-R. If you received payments of a life annuity in 2022, the payer shows your total contributions to the plan in Box 9b. Total Employee Contributions $68,900.00, of your 2022 Form 1099-R.

Annuity starting date defined: Your annuity starting date is the first day of the first period for which you received a payment. Catalina Raval, she has single life annuity started on January 5, 2010.
Therefore, 70 minus 12 years is 58 years old when Catalina started to receive retirement benefits. And from Table 1 58-60 the number 310 is the number to enter on line 3.

Simplified Method Worksheet—Lines 5a and 5b;

2.7 Can Catalina claim a foreign tax credit for the taxes paid to Puerto Rico on her pension attributed to services she performed in New York?
a. Yes
b. No ANSWER

2.8 What is the amount of Catalina’s standard deduction?
a. $4,000
b. $18,650
c. $19,400
d. $21,150 ANSWER

2.9 Is Catalina entitled to claim the Additional Child Tax Credit?
a. Yes
b. No ANSWER

2.10 The taxable amount of Catalina’s Social Security benefit (from the Publication 915 worksheet) is $9,470.80
a. Yes ANSWER
b. No

2.10 Catalina Raval Social Security $9,470.80 Taxable Benefit Proof using Publication 915 Worksheet 1.

CATALINA RAVAL 2022 Tax Return:

Important Note for 2.9 Question: The amount on line 12 is 2000 and no more than the amount on line 14 which is also 2000, and therefore you are not able to take the additional child tax credit on line 28 of the Form 1040-SR Payments section.

2.9 Question Answer Proof:
Catalina cannot claim the Additional Child Tax Credit.

2022 LEVEL II PUERTO RICO TEST - SCENARIO 2: MARTIN BESOS AND MARINA RAMBLA QUESTIONS;

TAXPAYER DOCUMENTS:
* Completed Interview and Quality Review Sheet;
* Forms W-2 for Martin Besos;

* Forms W-2 for Marina Rambla;
INTERVIEW NOTES:
* Martin Besos and Marina Rambla are married, filing a joint return, and have two dependent children under the age of 17.
* Marina’s mother, Carolina Rambla, lives with them. She is permanently and totally disabled. Carolina received Social Security benefits that are not taxable and were not used for her support.
* The children qualify for claiming both the non refundable and refundable child tax credit.
* The Social Security number for Martin is 134-00-1234 (date of birth: 09/23/1972) and for Marina is 135-00-1234 (date of birth: 01/25/1970).
* They have a daughter, Crystal (date of birth: 05/13/2012; SSN: 136-00-1234), and a son, Louis (date of birth: 02/15/2014; SSN: 137-00-1234). Carolina Rambla’s SSN is 138-00-1234 (date of birth: 03/30/1948).
* They do not itemize deductions.
* The Puerto Rico tax liability for 2022 is $4,100.
* Martin and Marina provided the entire cost of maintaining the household and all the support for their children and for Carolina.
* They have contributions to a retirement plan (401k), use Form 8880 to determine if they are elegible for the Saver’s credit.
* If a refund or balance is due, Martin and Marina would like a direct deposit to or direct debit from their checking account 53890; routing number 067901234.

2022 LEVEL 2 PUERTO RICO Test - Scenario 2: MARTIN BESOS AND MARINA RAMBLA QUESTIONS:
Complete the Form 1040 and schedules. Based on the information provided by Martin and Marina answer the following questions. You are a volunteer at site S21014444.

2.11 Martin and Marina’s total income shown on line 1 of Form 1040 is:
a. $0
b. $76,912 ANSWER
c. $78,859
d. $80,251

2.12 Martin and Marina are eligible to claim which of the following non-refundable credits on their 2022 tax return?
a. Other Dependent Credit
b. Foreign tax credit
c. Child Tax Credit
d. All of the above ANSWER

IRS – Foreign Tax Credit is not eligible on U.S. Source Income, Important Note:

2.12 Error: Question 2.12 b. Foreign tax credit not eligible for Foreign Tax Credit.

And here is the Proof:
IRS, can you claim Foreign Tax Credit on U.S. Source Income?
Important Note:
The foreign tax credit can only reduce U.S. taxes on foreign source income. The foreign tax credit cannot reduce U.S. taxes on U.S. source income.
IRS Reference: Publication 514 2022 Foreign Tax Credit for Individuals – IRS.

IRS, how to Claim the Foreign Tax Credit?

If you paid or accrued foreign taxes to a foreign country or Puerto Rico, U.S. possession and are subject to U.S. tax on the same income, you may be able to take either a credit or an itemized deduction for those taxes.
Foreign Tax taken as a deduction: Deduct foreign taxes on Schedule A (Form 1040), Itemized Deductions.
Foreign Tax taken as a credit: You can file Form 1116. Foreign income taxes reduce your U.S. tax liability. In most cases, it is to your advantage to take foreign income taxes as a tax credit by filing Form 1116.

IRS, what is Puerto Rico Foreign Tax Credit?

Puerto Rico foreign tax credit allows a taxpayer to take a tax credit for taxes paid to a foreign government in Puerto Rico on foreign source income in Puerto Rico that is also subject to U.S. tax.

For the foreign tax credit purposes, taxes paid to U.S. Possessions are considered foreign taxes. For the purpose of the foreign tax credit, the U.S. possessions include Puerto Rico.

IRS, how Puerto Rico qualifies for the Foreign Earned Income for the Foreign Tax Credit?

The source of your earned income is the place (Puerto Rico) where you performed the services for which you received the income. Foreign Earned Income is the income you received for performing personal services in a foreign country (Puerto Rico).

Puerto Rico Bone Fide Residents Guide How to File Your IRS Form 1116?

Publication 514 Foreign Tax Credit for Individuals, for more information on what foreign taxes qualify for the foreign tax credit.
Publication 570 Tax Guide for Individuals with Income from U.S. Possessions Taxes on income from Puerto Rico exempt from U.S. tax.

What is Puerto Rico the U.S. Territory also called U.S. Possession?

You may need to file Form 8898, Statement for Individuals Who Begin or End Bona Fide Residence of Puerto Rico the U.S. Territory also called U.S. Possession, if you became or ended to be a Bona Fide resident of Puerto Rico.

2.13 What is the amount of Foreign Taxes that should be entered on line 8 in Form 1116?
a. $0
b. $2,750
c. $3,259
d. $4,100 ANSWER

IRS, is income earned from U.S. source and taxed by both U.S. and Puerto Rico eligible for Foreign Tax Credit?

2.13 Error: 2.13 d. What is the amount of Foreign Taxes that should be entered on line 8 in Form 1116?

Important Note: IRS – Foreign tax credit is not eligible on U.S. Source Income for Foreign Tax Credit.

U.S. Possessions (Puerto Rico):
For the Foreign Tax Credit purposes, all qualified taxes paid to U.S. possessions (Puerto Rico) are considered foreign taxes. For this purpose, U.S. possessions include Puerto Rico.
You File Joint Return:
If you file a joint return, you can claim the credit based on the total of any foreign income tax paid or accrued by you and your spouse.

2.14 Which of the following items are included in the total payments on Martin and Marina’s tax return?
a. Federal income tax withheld from Form W-2
b. Additional child tax credit
c. Child Tax Credit
d. Both a and b ANSWER

2.14 Error: Question 2.14 b. Additional child tax credit is not included in the Total Payments on Martin and Marina’s tax return.

2.15 What is the taxable income reported on Form 1040?
a. $0
b. $51,012 ANSWER
c. $52,959
d. $72,958

2022 PR LEVEL 2 W-2 MARTIN BESOS
2022 PR LEVEL 2 W-2 MARINA RAMBLA

Martin Besos and Marina Rambla 2022 Tax Return:

Filing an Extension Using Practice Lab TaxSlayer Pro Software – Form 4868 Application for Extension.

How To File Your Extension Form 4868 in 3 Simple Steps – Instructions For Using Free Tax Software Practice Lab – TaxSlayer Pro:

Application for Extension for Joanne Oak:

In Practice Lab - TaxSlayer Pro Step-by-Step:

IRS Form 4868 - Application for Extension for Joanne Oak:

• IRS Form 4868 – Application for Extension for Joanne Oak is the application for an automatic extension of time to file your individual income tax return.
• You may request up to an additional 6 months to file your U.S. individual income tax return. If you file the Form 4868 electronically, be sure to have a copy of your prior year's return;

info – You'll be asked to provide your prior year's adjusted gross income (AGI) amount for verification purposes. On your 2021 tax return, your AGI is on line 11 of the IRS Form 1040.

• Once you file, you'll receive an electronic acknowledgement that the IRS has accepted your filing. Keep this for your records.

File an extension in a three simple steps:

1. Enter your information:
1a) Fill out the required information for your total Tax Liability.
1b) Your total amount already paid for your Current Tax Year.
1c) And the amount you’re paying to the IRS with your Extension.

1a. Tax Liability:
• Use your current tax liability amount. This is your total tax liability for the tax year.

1b. Amounts previously paid for current tax year:
• This is any amount of taxes you have already paid for the tax year (such as estimated quarterly tax payments or any tax withholdings).

1c. Amount Paid with Extension:
This is the amount you are going to pay to the IRS with your extension. Note: This amount is only for your federal taxes due.

2. You have three options to pay your tax amount due to the IRS.

2a) Pay with Electronic withdrawal from your checking account:
• Enter the amount you would like to pay, check the box indicating that you are paying your balance due electronically.
• You will then enter your banking information, the date you would like the transaction to take place and re-enter the amount to pay for confirmation.
• When you submit your extension, the withdrawal information will be sent to the bank.

2b) Pay with Debit or Credit Card:
• If you do not wish to use your bank account, you can go to the IRS website and pay by debit or credit card.
• You can also pay by phone using the electronic federal tax payment system.
• Check IRS.gov/payments (make a payment) for more information.

2c) Mail in your payment with your Extension Form 4868:
• You can print your Extension Form 4868 and mail it with your payment by check or money order.
• Don’t send cash. Make your check or money order payable to 'United States Treasury'.

Explanation:
• Total Tax Liability is $3924 = $3050 + $874;
• Totaling the amount paid for current tax year and that is Total Payments on the IRS Form 1040 Line 33 and that equals to $3050.
• And the amount paid with the IRS Form 4868 that equals to $874.

3. E-file your extension:
• Start by selecting e-File from the navigation bar. You will then be given the option to file your return (Form 1040 and supporting schedules).
• Or to file your Extension (Form 4868).
• Complete the extension e-File process.

Automatic 60 Day Extension to File:
• Taxpayers whose main home is located in a federal disaster area are now automatically provided an extension of time to file returns abd pay taxes.
• Extension of time to file begins on the first date specified in a federal disaster declaration and ending 60 days after the last date specified in that federal disaster declaration.
• Impacted taxpayers no longer need to wait for the IRS to announce postponed deadlines.
• This automatic relief applies to federal disaster declarations issued after December 20, 2019.