2021 Puerto Rico VITA Certification Test Level I:
Resources to Help You Successfully Complete Your Certification Test Level I:
- IRS Publication 1321 – 2021 RETURNS Instructions For Bona Fide Residents Of Puerto Rico Who Must File A U.S. Individual Income Tax Return Form 1040 or Form 1040-SR, needed to answer questions correctly;
- IRS Publication 4695(PR) – 2021 VITA Puerto Rico Volunteer Test for Volunteers;
- IRS Publication 4696(PR) – 2021 VITA Puerto Rico Resource Guide;
Table of Contents Level I and Level II:
| Test Contents | Certification |
|---|---|
| Filing Requirements | Level I |
| Source of Income | Level I |
| Standard Deduction | Level I |
| Refundable Child Tax Credit | Level I |
| Adjustments to Income | Level II |
| Itemized Deductions | Level II |
| Social Security Benefits | Level II |
| Foreign Tax Credit | Level II |
| Self Employment Tax | Level II |
If you are a bona fide resident of Puerto Rico who will file a U.S. Federal Income Tax Return, Form 1040, and claim an exclusion for income earned in Puerto Rico, you will have to make certain adjustments on your return. These special instructions explain the adjustments, and how to make them on your return.
This is an open-book test. You may use Publication 4696(PR), VITA/TCE Puerto Rico Resource Guide, and any other materials that you will use as a volunteer. Please complete the test on your own. You should round all fractions to four decimal places.
This publication is designed to assist you in preparing an accurate paper or software-prepared return using TaxSlayer. It is divided into three major sections—Level I, Level II, and Software Hints.
IRS Publication 4696(PR), VITA/TCE Puerto Rico Resource Guide 2021 RETURNS, provides worksheets,
charts, credit eligibility rules, and TaxSlayer® Pro Desktop User Guide.
Always take Publication 4696(PR) to the VITA/TCE tax preparation site with you.
It is a key reference used during the certification and return preparation processes. Free Download From IRS Website;
IRS Publication 4696(PR), VITA/TCE Puerto Rico Resource Guide 2021 RETURNS, provides worksheets,
charts, credit eligibility rules, and TaxSlayer® Pro Desktop User Guide.
Always take Publication 4696(PR) to the VITA/TCE tax preparation site with you. It is a key reference used during the certification and return preparation processes.
Link and Learn - 2021 VITA Puerto Rico Level I English Exam:
2021 Puerto Rico Exam – Level I 100% Pass Proof and Level II – English Exam 93% Pass Proof:
The Puerto Rico Level I certification has 15 questions and 2 scenarios. The first 5 questions are designed how to figure the standard deductions to U.S. income.
Use your reference materials VITA Publication 4696(PR) Puerto Rico Resource Guide and Publication 1321 Instructions for Bona Fide Residents of Puerto Rico to answer correctly.
The 2 scenarios require the completion of specific tax forms and schedules. Round all fractions to four decimal places.
5 questions figuring the standard deductions to U.S. income:
Interview Note: Lauren was a resident of Puerto Rico during 2021. 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.
1. What is the allowable portion of the standard deduction that Lauren can claim?A. $10,668 B. $12,400 C. $12,550; D. $14,250
Questions 1 – 5 Explanation: Standard deduction calculation using Worksheet For Puerto Rico Filers Who Do Not Itemize Deductions.
Reference: IRS Publication 1321 2021 Page 3.
Interview Note: German and Elena were residents of Puerto Rico in 2021. 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.
2. What is German and Elena's standard deduction?A. $24,800 B. $25,000 C. $26,100 D. $27,800
Interview Note: Marco is 40 years old, Head of Household, and a resident of Puerto Rico during 2021. Marco has a son who is his dependent.
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.
3. What is the allowable portion of Marco’s standard deduction?
A. $12,550 B. $14,700 C. $15,980 And the Correct Answr. D. $18,800
Question 3 Puerto Rico 2021 Standard Deduction Calculation Worksheet:
Interview Note: Frank is a bona fide resident of Puerto Rico, who received Social Security benefits and pension income from the University of Puerto Rico. Does Sebastian have U.S. source income?
4. Does Sebastian have U.S. source income?A. Yes, he has U.S. source income.
B. No, he does not have U.S. source income.
Question 4 Explanation; Reference Table 1: Determining Source of Income p4696(PR) Page 9.
1. U.S. Social Security Benefits *U.S. Source income by definition (IRC Sec. 861).
*Bona Fide Residents of Puerto Rico should use Publication 915, Social Security Benefits and Equivalent Railroad Retirement Benefits, to determine how much of their Social Security Benefits may be taxable.
2. Pensions Contributions: Where services were performed that earned the pensions.
Interview Note: Carolina is single and received unemployment benefits from the Puerto Rico Department of Labor reported on a Form 1099-G.
5.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. And the correct answer!
D. None of the above
Question 5 Explanation: The table on page 2 of 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) describes the rules for determining the source of your income.
Unemployment Compensation for U.S. income tax purposes the source of income is where the taxpayer performed the services.
Level I Puerto Rico Test Scenario 1– Astoria Jones:
Interview Notes:
- Astoria Jones is employed as an executive secretary.
- Astoria is divorced with two children. Delmar is 3 years old and Lucas is 17 years old.
- Social Security numbers: Astoria Jones 133-00-XXXX, Delmar Jones, daughter, 599-00-XXXX and Lucas Jones, son, 598-00-XXXX.
- If she is entitled to a refund, Astoria would like to receive it via direct deposit.
- Astoria has a checking account from Any Town Credit Union Account Number: 54321 Routing Number: 123456789.
- Astoria has an Identity Protection Personal Identification Number (IP PIN).
- In 2021, Astoria received an Economic Impact Payment (EIP) from the U.S. territory tax agency (the Puerto Rico Department of Treasury) $1,400 for her, plus $1,400 for each qualifying child.
- Astoria has not received advance payments of the refundable child tax credit. She has always been a bona fide resident of Puerto Rico.
Based on the information provided by Astoria Jones, complete Form 1040-PR and the required forms and schedules to answer the following questions.
You are a volunteer at site S21014444.
Note: If you are using the Link and Learn Taxes Practice Lab, when entering Social Security numbers (SSNs) or Employer Identification Numbers (EINs), replace the Xs with any four digits of your choice.
Click here for a PDF of the Taxpayer Documents and Interview Notes for this exam.
6. What is the amount of the refundable child tax credit on line 3, Part II, in Form 1040-PR?A. $0 B. $3,443 C. $4,000 D. $6,600 And the correct answer!
Question 6 Explanation: A child’s age determines the amount and how to calculate click Here.
7. What filing status can Astoria use in Form 1040-PR?A. Head of Household And the correct answer!
B. Married Filing Jointly
C. Married Filing Separately
D. Qualifying Widow
8. Astoria was entitled to receive Advanced Child Tax Credit payments.
True
False And the correct answer!
Question 8 Explanation: Bona Fide residents of Puerto Rico are not eligible to receive advanced Child Tax Credit Payments. They must file a tax return (Form 1040 PR, Form 1040 SS or other Form 1040 series) in order to claim the credit.
Reference: Publication 4696(PR) 2021 Refundable Child Tax Credit page 13.
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 individual income tax return?True
False
Question 9 Explanation: The IRS Identity Protection Personal Identification Number (IP PIN) is a 6-digit number assigned to taxpayers to help prevent the misuse of their Social Security number on fraudulent federal income tax returns. A new IP PIN will be generated each year.
10. Astoria must have earned income in order to be able to claim the refundable child tax credit.True
False
Question 10 Explanation: Child Tax Credit is refundable even if no earned income and if taxpayer’s main home is in the U.S. or in the Puerto Rico for more than half the year. But not eligible to receive advance Child Tax Credit payments if main home in Puerto Rico.
Conclusion: Puerto Ricco income is foreign income and excluded income for U.S. income tax purposes. Therefore, if you're a bona fide resident of Puerto Rico with a U.S. filing obligation, generally won't report Puerto Rican source income on a U.S. income tax return.
Level I Puerto Rico Test Scenario 2 – Jordan Padua and Andrea Milan:
Interview Notes:
- Jordan Padua and Andrea Milan are married and bona fide residents of Puerto Rico.
- Jordan and Andrea’s SSNs are 581-00-XXXX and 582-00-XXXX respectively.
- Andrea received a total of $9,800 in unemployment compensation from the Puerto Rico Department of Labor.
- Jordan is an accountant for the Puerto Rico Tourism Company; his wages for this year were $42,000.
- His contributions for the Social Security and Medicare were $2,604 and $609, respectively.
- They have three children under 18 and an older child Henry, who is permanently and totally disabled.
- In 2021, they received an Economic Impact Payment (EIP) from the U.S. territory tax agency (the Puerto Rico Department of Treasury) $1,400 for each qualifying child.
- Edward Padua, born 3-12-2016, Son, SSN: 583-00-XXXX 5Ys.
- Maria Padua, born 3-12-2016, Daughter, SSN: 584-00-XXXX 5Ys.
- Barbara Padua, born 4-15-2012, Daughter, SSN: 585-00-XXXX 9Ys.
- Henry Padua, born 6-01-2000, Son, SSN: 586-00-XXXX 21Ys.
Based on the information provided by Jordan and Andrea, complete Form 1040-PR and the required forms and schedules to answer the following questions.
You are a volunteer at site S21014444.
Note: If you are using the Link and Learn Taxes Practice Lab, when entering Social Security numbers (SSNs) or Employer Identification Numbers (EINs), replace the Xs with any four digits of your choice.
Click here for a PDF of the Taxpayer Documents and Interview Notes for this exam.
11. What filing status can Jordan and Andrea claim on their return?A. Single
B. Married Filing Jointly And the correct answer!
C. Head of Household
D. None of the above
12. How many dependents are eligible for the refundable child tax credit?
A. 0
B. 3 And the correct answer!
C. 4
D. 5
13. How much is the refundable child tax credit that Andrea and Jordan are entitled to receive?
A. $3,213
B. $4,200
C. $5,925
D. $10,200 And the correct 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 Interest
B. Taxable Pension and Annuities
C. Taxable Social Securities Benefits
D. All of the above. And the correct answer!
15. Which form should be completed by Andrea and Jordan to claim the refundable child tax credit?
A. Form 870
B. Schedule 8812
C. Form 1040-PR or Form 1040-SS And the correct answer!
D. All of the above.
Link and Learn - 2021 VITA Puerto Rico Level II English Exam:
The First 5 Queations Summary:
The first five questions are designed to measure key competencies related to figuring the allowable portion of itemized deductions to U.S. income;
How to calculate the source of pension income for service performed partly in the U.S. and partly in Puerto Rico;
How to determine the taxable portion of Social Security benefits;
Use VITA Puerto Rico Resource Guide 4696(PR), and Publication 1321 to answer the questions. Round all fractions to four decimal places.
Interview Notes:
• 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: $5,600;
- Real estate taxes: $1,400;
- Charitable contributions: $750;
Question 2.1 Explanation: Allowable Portion of Deduction – Formula and Calculation.
1. $5,600 Home mortgage interest:gross income subject to Federal tax $45,000 / divided by
gross income from all sources $75,000 = 0.6 x multiply by
deduction $5,600 = $3,360 allowable portion of deduction.
2. $1,400 Real estate taxes:
$1,400 Real estate taxes x multiply by 0.6 = $840 allowable portion of deduction.
3. $700 Charitable contributions:
$700 Charitable contributions x multiply by 0.6 = $450 allowable portion of deduction.
4. Allowable Portion of Deduction = $4,650 and the correct answer. ($3,360 + $840 + $450)
2.2 Question Explanation:
Formula: Gross income subject to Federal tax $45,000 / gross income from all sources $75,000 = 0.6 xU.S. STANDARD DEDUCTION Married filing jointly or Qualifying widow(er) = $25,100
PR Calculated allowable portion of STANDARD DEDUCTION $25,100 x 0.6 = $15,060 and greater than $4,650.
b. No the correct answer
Question 2.3 Explanation:
Bona Fide Residents of Puerto Rico should use Publication 915 to determine how much of their Social Security Benefits may be taxable.
Gross income subject to U.S. tax (include taxable social security benefits); use Worksheet 1 of Pub. 915 to compute your taxable social security benefits).
Your Base amount is: $25,000 / divided by 2 equals = $12,500 and less than $25,300 and if you are single, head of household, or qualifying widow(er);
Worksheet A. You can use Worksheet A to figure the amount of income to compare with your base amount. This is a quick way to check whether some of your benefits may be taxable.
Always take Publication 4696(PR) to the VITA/TCE tax preparation site with you.It is a key reference used during the certification and return preparation processes. Free Download From IRS Website;
b. $15,600 the correct answer
Question 2.4 Explanation:
15 / 25 = 0.6 x 26000 = $15,600 the correct answer.
Foreign Tax Credit how to Calculation Formula:
Your foreign tax credit cannot be more than your total U.S. tax liability multiplied by a fraction. The numerator of the fraction is your taxable income from sources outside the United States. The denominator is your total taxable income from U.S. and foreign sources.
Therefore 15 / 25 = 0.6 x 26000 = $15,600 the correct answer.
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