ENROLLED – FIFTH SIMULATION

#1. Which of the following is not considered earned income for purposes of the Earned Income Credit (EIC)?

Tips reported to an employer

Union strike benefits

Unemployment compensation

Wages from a part-time job

#2. A taxpayer sold their main home and realized a gain of $240,000. They are single and owned and lived in the home for 3 years. How much of the gain is taxable?

$0

$40,000

$240,000

$250,000

#3. Which of the following is true regarding the depreciation of listed property?

You must always use MACRS straight-line

Listed property must be depreciated using the ADS method

Use of listed property more than 50% for business allows accelerated depreciation

Listed property is not depreciable

#4. A C corporation has gross receipts of $4 million and expenses of $5 million, including a $1.2 million charitable contribution. What is the deductible charitable contribution?

$1.2 million

$400,000

$500,000

$600,000

#5. The primary purpose of Circular 230 is to:

Establish tax preparation pricing guidelines

Define IRS examination procedures

Regulate practice before the IRS

Provide tax law updates

#6. Which of the following taxpayers must file a tax return?

A 25-year-old single person earning $10,000 in wages

A 68-year-old married taxpayer filing jointly with $30,000 total income

A self-employed individual with $450 in net earnings

A dependent with $15,000 in earned income

#7. What is the maximum Section 179 deduction a business can claim in 2024?

$1,160,000

$1,050,000

$1,200,000

$2,500,000

#8. A tax practitioner receives an IRS notice for a client. What is the first step the practitioner should take?

File a petition with the Tax Court

Contact the IRS agent directly

Inform the client and obtain written authorization to respond

Ignore it until the client calls

#9. A taxpayer received a 1099-G reporting a $2,000 state tax refund. The taxpayer itemized deductions last year. What determines if the refund is taxable?

Whether the taxpayer used the standard deduction

Whether the taxpayer’s state tax deduction exceeded the refund

The amount of the refund

The filing status

#10. What is the due date for filing a partnership return (Form 1065) for a calendar-year business without extension?

April 15

March 15

January 31

May 15

#11. For purposes of the Child Tax Credit, which of the following is a qualifying child?

A 21-year-old full-time college student

A 17-year-old dependent who lives with the taxpayer

A 7-year-old grandchild who lives abroad

A 16-year-old nephew who lives with the taxpayer

#12. A taxpayer inherited property in 2024. What is the basis of the inherited property?

Original cost to the decedent

Zero

Fair market value at date of death

Fair market value at date of inheritance

#13. Which of the following is required to claim Head of Household filing status?

Taxpayer must be unmarried and pay more than half the cost of keeping up a home

Taxpayer must live alone

Taxpayer must be over age 65

Taxpayer must have no dependents

#14. Which of the following is an example of a capital asset?

Accounts receivable from a business

Inventory held for sale

A taxpayer’s home

Machinery used in trade or business

#15. Which of the following penalties may be imposed on a tax preparer for failure to exercise due diligence for EIC?

$560

$1,000

$500

$600

#16. An LLC with two members files its taxes as:

Sole proprietorship

S corporation

Partnership

C corporation

#17. In which scenario is a taxpayer allowed to deduct medical expenses?

When they exceed 7.5% of AGI

For cosmetic surgery only

Only with a health savings account

Always, regardless of amount

#18. What is the backup withholding rate in 2024?

28%

24%

30%

15%

#19. Which of the following is not subject to self-employment tax?

Schedule C income

Rental income from passive activity

Income from freelance work

Net profit from farming

#20. A tax preparer may not disclose client information without:

Verbal approval

Written consent

IRS notice

Circular 230 update

#21. Which of the following is true regarding net operating losses (NOLs) for individuals?

NOLs can only be carried forward

NOLs must be carried back 2 years

NOLs cannot offset capital gains

NOLs must be used in the year incurred

#22. A tax preparer advertises a guaranteed refund. What Circular 230 rule may be violated?

Due diligence

Conflicts of interest

Misleading advertising

Best practices

#23. Which form is used to report nonemployee compensation?

W-2

1099-DIV

1099-MISC

1099-NEC

#24. A client requests a copy of their tax return file. What is the preparer’s obligation?

Provide a copy upon request without charge

May charge a fee

Deny access until payment is made

Not required to retain it

#25. Which of the following would not be considered a ‘tax shelter’?

An oil and gas limited partnership

A municipal bond fund

A syndicated conservation easement

A marketed transaction promising large deductions

#26. A sole proprietor buys a $3,000 computer used 80% for business. What is the depreciable basis?

$3,000

$2,400

$600

$0

#27. What triggers the Passive Activity Loss (PAL) limitation?

Real estate income

Self-employment income

Losses from activities in which the taxpayer does not materially participate

Schedule C income

#28. What is the standard mileage rate for business use of a vehicle in 2024?

56.5 cents

62.5 cents

65.5 cents

67 cents

#29. A tax preparer prepares a fraudulent return. Which penalty may the IRS impose?

Accuracy-related penalty

Civil fraud penalty

Trust fund recovery penalty

Criminal perjury penalty

#30. An S corporation has excess passive income. What may happen?

Nothing

The S election may be terminated

The corporate tax rate increases

The basis of stockholders is reduced

#31. An enrolled agent is suspended. What must they do?

Retake the SEE

Cease practice before the IRS

File an appeal immediately

Notify their clients only

#32. A taxpayer exchanges property under Section 1031. What is the result?

Recognize gain immediately

No gain or loss is recognized

Basis resets to FMV

Ordinary gain recognized

#33. Who may represent a taxpayer in an audit without a power of attorney?

A friend

Any CPA

An immediate family member

The person who prepared the return and is an enrolled agent

#34. A taxpayer failed to file for 3 years. The IRS may assess tax for how long?

3 years

6 years

10 years

Indefinitely

#35. A business makes estimated tax payments quarterly. When is the first payment due?

January 31

March 15

April 15

June 15

#36. What form is used to report a change of accounting method?

Form 3115

Form 8829

Form 1125-A

Form 4562

#37. A taxpayer has a casualty loss on personal-use property. What must be true to deduct it?

Loss must exceed $500

It must occur in a federally declared disaster area

Insurance reimbursement is not required

Any personal loss qualifies

#38. A partner receives a guaranteed payment. How is it treated?

Not deductible

Treated as a distribution

Deductible by the partnership and ordinary income to the partner

Tax-free to the partner

#39. Which of the following is NOT a qualified retirement plan?

401(k)

SIMPLE IRA

Roth IRA

Defined benefit pension

#40. Who must file Form 8867?

Any taxpayer claiming a refundable credit

Any tax preparer who prepares a return claiming EIC, CTC, AOTC, or HOH

Only CPAs

Any taxpayer with children

#41. What is the statute of limitations for claiming a refund?

1 year

2 years

3 years

5 years

#42. The wash sale rule applies to:

Mutual fund dividends

Sale of stock at a loss followed by repurchase within 30 days

Sale of collectibles

Business income

#43. Which of the following is a refundable credit?

Child and dependent care credit

Lifetime learning credit

Saver’s credit

Additional child tax credit

#44. A C corporation must file Form 1120 by:

The 15th day of the 3rd month after year-end

March 31

April 15

The 15th day of the 4th month after year-end

#45. What is the penalty for failure to file a return on time if no extension was requested and tax is due?

0.5% per month

5% per month

$205

25% of tax due

#46. The purpose of a CP2000 notice is to:

Notify of refund

Confirm payment

Report a proposed tax adjustment due to mismatched income

Confirm an audit

#47. A qualifying child must:

Be under 19 or under 24 if a student

Be a U.S. resident alien for at least 2 years

Have earned income

File a joint return with spouse

#48. What entity is required to issue Schedule K-1?

Sole proprietorship

S corporation

C corporation

Trust only

#49. Which of the following is NOT practice before the IRS?

Representing clients at audit

Preparing a tax return

Signing a tax return as preparer

Filing a power of attorney

#50. An enrolled agent must renew their status every:

Year

2 years

3 years

5 years

#51. Which of the following is not considered earned income for purposes of the Earned Income Credit (EIC)?

Tips reported to an employer

Union strike benefits

Unemployment compensation

Wages from a part-time job

#52. A taxpayer sold their main home and realized a gain of $240,000. They are single and owned and lived in the home for 3 years. How much of the gain is taxable?

$0

$40,000

$240,000

$250,000

#53. Which of the following is true regarding the depreciation of listed property?

You must always use MACRS straight-line

Listed property must be depreciated using the ADS method

Use of listed property more than 50% for business allows accelerated depreciation

Listed property is not depreciable

#54. A C corporation has gross receipts of $4 million and expenses of $5 million, including a $1.2 million charitable contribution. What is the deductible charitable contribution?

$1.2 million

$400,000

$500,000

$600,000

#55. The primary purpose of Circular 230 is to:

Establish tax preparation pricing guidelines

Define IRS examination procedures

Regulate practice before the IRS

Provide tax law updates

#56. Which of the following taxpayers must file a tax return?

A 25-year-old single person earning $10,000 in wages

A 68-year-old married taxpayer filing jointly with $30,000 total income

A self-employed individual with $450 in net earnings

A dependent with $15,000 in earned income

#57. What is the maximum Section 179 deduction a business can claim in 2024?

$1,160,000

$1,050,000

$1,200,000

$2,500,000

#58. A tax practitioner receives an IRS notice for a client. What is the first step the practitioner should take?

File a petition with the Tax Court

Contact the IRS agent directly

Inform the client and obtain written authorization to respond

Ignore it until the client calls

#59. A taxpayer received a 1099-G reporting a $2,000 state tax refund. The taxpayer itemized deductions last year. What determines if the refund is taxable?

Whether the taxpayer used the standard deduction

Whether the taxpayer’s state tax deduction exceeded the refund

The amount of the refund

The filing status

#60. What is the due date for filing a partnership return (Form 1065) for a calendar-year business without extension?

April 15

March 15

January 31

May 15

#61. For purposes of the Child Tax Credit, which of the following is a qualifying child?

A 21-year-old full-time college student

A 17-year-old dependent who lives with the taxpayer

A 7-year-old grandchild who lives abroad

A 16-year-old nephew who lives with the taxpayer

#62. A taxpayer inherited property in 2024. What is the basis of the inherited property?

Original cost to the decedent

Zero

Fair market value at date of death

Fair market value at date of inheritance

#63. Which of the following is required to claim Head of Household filing status?

Taxpayer must be unmarried and pay more than half the cost of keeping up a home

Taxpayer must live alone

Taxpayer must be over age 65

Taxpayer must have no dependents

ARE YOU READY?

LET’S PRACTICE!

Results

#1. Which of the following is not considered earned income for purposes of the Earned Income Credit (EIC)?

#2. A taxpayer sold their main home and realized a gain of $240,000. They are single and owned and lived in the home for 3 years. How much of the gain is taxable?

#3. Which of the following is true regarding the depreciation of listed property?

#4. A C corporation has gross receipts of $4 million and expenses of $5 million, including a $1.2 million charitable contribution. What is the deductible charitable contribution?

#5. The primary purpose of Circular 230 is to:

#6. Which of the following taxpayers must file a tax return?

#7. What is the maximum Section 179 deduction a business can claim in 2024?

#8. A tax practitioner receives an IRS notice for a client. What is the first step the practitioner should take?

#9. A taxpayer received a 1099-G reporting a $2,000 state tax refund. The taxpayer itemized deductions last year. What determines if the refund is taxable?

#10. What is the due date for filing a partnership return (Form 1065) for a calendar-year business without extension?

#11. For purposes of the Child Tax Credit, which of the following is a qualifying child?

#12. A taxpayer inherited property in 2024. What is the basis of the inherited property?

#13. Which of the following is required to claim Head of Household filing status?

#14. Which of the following is an example of a capital asset?

#15. Which of the following penalties may be imposed on a tax preparer for failure to exercise due diligence for EIC?

#16. An LLC with two members files its taxes as:

#17. In which scenario is a taxpayer allowed to deduct medical expenses?

#18. What is the backup withholding rate in 2024?

#19. Which of the following is not subject to self-employment tax?

#20. A tax preparer may not disclose client information without:

#21. Which of the following is true regarding net operating losses (NOLs) for individuals?

#22. A tax preparer advertises a guaranteed refund. What Circular 230 rule may be violated?

#23. Which form is used to report nonemployee compensation?

#24. A client requests a copy of their tax return file. What is the preparer’s obligation?

#25. Which of the following would not be considered a ‘tax shelter’?

#26. A sole proprietor buys a $3,000 computer used 80% for business. What is the depreciable basis?

#27. What triggers the Passive Activity Loss (PAL) limitation?

#28. What is the standard mileage rate for business use of a vehicle in 2024?

#29. A tax preparer prepares a fraudulent return. Which penalty may the IRS impose?

#30. An S corporation has excess passive income. What may happen?

#31. An enrolled agent is suspended. What must they do?

#32. A taxpayer exchanges property under Section 1031. What is the result?

#33. Who may represent a taxpayer in an audit without a power of attorney?

#34. A taxpayer failed to file for 3 years. The IRS may assess tax for how long?

#35. A business makes estimated tax payments quarterly. When is the first payment due?

#36. What form is used to report a change of accounting method?

#37. A taxpayer has a casualty loss on personal-use property. What must be true to deduct it?

#38. A partner receives a guaranteed payment. How is it treated?

#39. Which of the following is NOT a qualified retirement plan?

#40. Who must file Form 8867?

#41. What is the statute of limitations for claiming a refund?

#42. The wash sale rule applies to:

#43. Which of the following is a refundable credit?

#44. A C corporation must file Form 1120 by:

#45. What is the penalty for failure to file a return on time if no extension was requested and tax is due?

#46. The purpose of a CP2000 notice is to:

#47. A qualifying child must:

#48. What entity is required to issue Schedule K-1?

#49. Which of the following is NOT practice before the IRS?

#50. An enrolled agent must renew their status every:

#51. Which of the following is not considered earned income for purposes of the Earned Income Credit (EIC)?

#52. A taxpayer sold their main home and realized a gain of $240,000. They are single and owned and lived in the home for 3 years. How much of the gain is taxable?

#53. Which of the following is true regarding the depreciation of listed property?

#54. A C corporation has gross receipts of $4 million and expenses of $5 million, including a $1.2 million charitable contribution. What is the deductible charitable contribution?

#55. The primary purpose of Circular 230 is to:

#56. Which of the following taxpayers must file a tax return?

#57. What is the maximum Section 179 deduction a business can claim in 2024?

#58. A tax practitioner receives an IRS notice for a client. What is the first step the practitioner should take?

#59. A taxpayer received a 1099-G reporting a $2,000 state tax refund. The taxpayer itemized deductions last year. What determines if the refund is taxable?

#60. What is the due date for filing a partnership return (Form 1065) for a calendar-year business without extension?

#61. For purposes of the Child Tax Credit, which of the following is a qualifying child?

#62. A taxpayer inherited property in 2024. What is the basis of the inherited property?

#63. Which of the following is required to claim Head of Household filing status?