ENROLLED – SIXTH SIMULATION

#1. Which of the following types of income is not subject to self-employment tax?

Net income from a sole proprietorship

Distributions from an S Corporation

Guaranteed payments to a partner

Income from freelance graphic design work

#2. What is the standard deduction for a taxpayer who is 65 or older and filing as Single for tax year 2024?

$13,850

$14,700

$15,700

$16,550

#3. A corporation that timely filed Form 7004 receives an automatic extension. What is the extended due date for a calendar-year C Corporation’s Form 1120?

September 15

October 15

November 15

December 15

#4. Which of the following taxpayers must file Form 8938, Statement of Specified Foreign Financial Assets?

A U.S. citizen with $40,000 in a Canadian retirement account

A U.S. resident alien with $75,000 in a foreign savings account and no other assets

A U.S. citizen living abroad with foreign assets exceeding $200,000

A nonresident alien with $300,000 in foreign mutual funds

#5. A taxpayer failed to file a tax return for three years. Which of the following is true regarding IRS collection statute expiration dates (CSED)?

The statute is 3 years from the original due date

The statute is 6 years from the due date

The statute never starts until the return is filed

The statute is 10 years regardless

#6. Which of the following expenses is not deductible as a business expense on Schedule C?

Advertising

Political contributions

Office supplies

Business insurance

#7. Which of the following best describes the purpose of Circular 230?

To provide tax brackets

To regulate tax return processing

To govern the practice of tax professionals before the IRS

To establish income thresholds for tax credits

#8. When must a sole proprietor file a Form 1099-NEC?

When paying an employee more than $600

When paying an independent contractor $600 or more

When giving a gift to a client

When paying rent for office space

#9. An employee’s Form W-2 shows $7,000 in state income tax withheld. Where is this amount reported on their federal return?

As a refundable credit

As an itemized deduction

As a business expense

It is not reported

#10. How many years must a taxpayer keep records supporting income and deductions?

1 year

3 years

5 years

7 years

#11. A taxpayer receives a CP2000 notice. What is this notice typically about?

Identity theft

Unreported income

Levy or lien

Earned income credit

#12. Which of the following is not an example of passive income?

Rental real estate income

Dividends from stocks

Limited partnership interest

Royalties

#13. Which of these taxpayers may use the cash method of accounting?

A corporation with average gross receipts over $30 million

A tax shelter

A qualified personal service corporation

A farming corporation

#14. Which of the following may represent a taxpayer before the IRS in an audit?

A CPA

A PTIN holder

A notary public

An actuary

#15. The failure-to-pay penalty is generally:

0.5% per month of the unpaid tax

5% per month of the unpaid tax

$100 flat fee

10% annually

#16. A partner contributes property to a partnership. What is the partner’s initial basis?

The fair market value of the property

The amount of liabilities assumed by the partnership

The partner’s adjusted basis in the property contributed

Zero

#17. For purposes of the Kiddie Tax, which of the following is true in 2024?

Applies only to earned income

Applies to all children under 18

Applies to unearned income over $2,600

Applies regardless of student status

#18. Which IRS form is used to apply for an Offer in Compromise?

Form 1040-X

Form 656

Form 433-F

Form 843

#19. A taxpayer operates a cash-basis sole proprietorship. They receive a $1,000 check on Dec 30, 2024, but deposit it in Jan 2025. When is the income reported?

2024

2025

Either year

Never

#20. In which situation must a taxpayer use Form 2555 instead of Form 1116?

To claim foreign tax paid on dividends

To exclude foreign earned income

To claim foreign tax credit

To deduct foreign property tax

#21. If a taxpayer takes a distribution from a traditional IRA before age 59½, which of the following is usually true?

It is tax-free

It is subject to 20% penalty

It is fully taxable and subject to 10% early withdrawal penalty

It is reported on Schedule C

#22. What is the maximum amount of capital loss an individual can deduct against ordinary income in one tax year?

$1,000

$3,000

$5,000

Unlimited

#23. Which of the following is an allowable itemized deduction in 2024?

Federal income tax

Personal credit card interest

Mortgage interest on primary residence

Commuting expenses

#24. Which business entity is generally not subject to double taxation?

C Corporation

S Corporation

LLC taxed as a C Corp

PSC

#25. Which of the following statements about depreciation is correct?

Land is depreciable

Residential rental property is depreciated over 27.5 years

Passenger autos can be depreciated over 10 years

Section 179 can be used on real estate

#26. What does IRS Form 2848 authorize?

Payment plan request

Taxpayer identity verification

Power of Attorney

Automatic filing extension

#27. A taxpayer receives a CP504 notice. What is the IRS likely to do next?

Suspend collections

Issue a refund

File a lien

Audit the taxpayer

#28. The S corporation built-in gains tax applies if the S election was made:

At any time in the past

After a C corporation owned appreciated assets

During a loss year

With no shareholders

#29. Which of the following forms reports a partner’s share of income, deductions, and credits?

Form 1120

Form 1099-K

Schedule K-1 (Form 1065)

Form 1040 Schedule C

#30. When a taxpayer files an appeal with the IRS Office of Appeals, which of the following is true?

The taxpayer waives their right to Tax Court

The Appeals Office is independent from Examination

The case is automatically sent to criminal investigation

The appeal must go through the courts

#31. How is alimony treated for divorces finalized after 2018?

Deductible by payer and taxable to recipient

Tax-free for both parties

Taxable to recipient

Nontaxable to recipient, nondeductible by payer

#32. When is a taxpayer considered materially participating in an activity?

If they invest over $500,000

If they perform 100+ hours of services

If they participate more than 500 hours

If they make all management decisions

#33. The penalty for willful failure to file FBAR can be up to:

$1,000

$10,000

$100,000

The greater of $100,000 or 50% of account balance

#34. Which of the following is subject to backup withholding?

Wages

Salaries

Interest payments to unverified payees

Qualified dividends

#35. A taxpayer owns 100% of an S Corp and takes a $90,000 distribution. His basis is $60,000. What amount is taxable?

$0

$30,000

$60,000

$90,000

#36. What is the maximum HSA contribution for a family plan in 2024 (under age 55)?

$3,850

$4,850

$7,750

$8,300

#37. Which of these IRS notices is a Final Notice of Intent to Levy?

CP504

CP14

LT11

CP2000

#38. An EA must renew their enrollment every:

Year

2 years

3 years

5 years

#39. When may the IRS legally contact a third party (e.g., bank or employer) about a taxpayer’s situation without notifying them?

Always

With a court order

With taxpayer’s consent

If prior notice has been given within the past year

#40. How is cancellation of debt (COD) income generally treated?

Always nontaxable

Taxable unless an exclusion applies

Deductible

Treated as a capital gain

#41. Which of the following requires filing Form 8832?

Electing S corporation status

Changing an LLC’s classification

Applying for an EIN

Filing an extension

#42. The IRS may revoke a PTIN for all except:

Filing fraudulent returns

Not using e-file

Misuse of client information

Incompetence

#43. The hobby loss rules are intended to:

Prevent underpayment of estimated tax

Prevent deductions from activities not engaged in for profit

Increase standard deductions

Simplify accounting

#44. A taxpayer overpays tax and requests a refund after 4 years. What is the result?

Refund issued

Refund with interest

Refund denied due to statute of limitations

Refund granted only if return was filed early

#45. Which of the following is a for AGI deduction?

Charitable contributions

Medical expenses

Student loan interest

State income taxes

#46. Which item is not subject to the Net Investment Income Tax (NIIT)?

Interest

Rental income

Wages

Capital gains

#47. An employer’s share of FICA taxes on wages is:

6.2% Social Security + 1.45% Medicare

7.5% flat

12.4% total

15.3% total

#48. An enrolled agent must complete how many CPE hours every 3 years?

48

72

100

120

#49. Which of the following income items must be reported on a Schedule B?

Wages

Qualified dividends and interest

Capital gains

State tax refunds

#50. Who is responsible for signing a corporate tax return (Form 1120)?

Any employee

The bookkeeper

An officer of the corporation

The CPA who prepared it

ARE YOU READY?

LET’S PRACTICE!

Results

#1. Which of the following types of income is not subject to self-employment tax?

#2. What is the standard deduction for a taxpayer who is 65 or older and filing as Single for tax year 2024?

#3. A corporation that timely filed Form 7004 receives an automatic extension. What is the extended due date for a calendar-year C Corporation’s Form 1120?

#4. Which of the following taxpayers must file Form 8938, Statement of Specified Foreign Financial Assets?

#5. A taxpayer failed to file a tax return for three years. Which of the following is true regarding IRS collection statute expiration dates (CSED)?

#6. Which of the following expenses is not deductible as a business expense on Schedule C?

#7. Which of the following best describes the purpose of Circular 230?

#8. When must a sole proprietor file a Form 1099-NEC?

#9. An employee’s Form W-2 shows $7,000 in state income tax withheld. Where is this amount reported on their federal return?

#10. How many years must a taxpayer keep records supporting income and deductions?

#11. A taxpayer receives a CP2000 notice. What is this notice typically about?

#12. Which of the following is not an example of passive income?

#13. Which of these taxpayers may use the cash method of accounting?

#14. Which of the following may represent a taxpayer before the IRS in an audit?

#15. The failure-to-pay penalty is generally:

#16. A partner contributes property to a partnership. What is the partner’s initial basis?

#17. For purposes of the Kiddie Tax, which of the following is true in 2024?

#18. Which IRS form is used to apply for an Offer in Compromise?

#19. A taxpayer operates a cash-basis sole proprietorship. They receive a $1,000 check on Dec 30, 2024, but deposit it in Jan 2025. When is the income reported?

#20. In which situation must a taxpayer use Form 2555 instead of Form 1116?

#21. If a taxpayer takes a distribution from a traditional IRA before age 59½, which of the following is usually true?

#22. What is the maximum amount of capital loss an individual can deduct against ordinary income in one tax year?

#23. Which of the following is an allowable itemized deduction in 2024?

#24. Which business entity is generally not subject to double taxation?

#25. Which of the following statements about depreciation is correct?

#26. What does IRS Form 2848 authorize?

#27. A taxpayer receives a CP504 notice. What is the IRS likely to do next?

#28. The S corporation built-in gains tax applies if the S election was made:

#29. Which of the following forms reports a partner’s share of income, deductions, and credits?

#30. When a taxpayer files an appeal with the IRS Office of Appeals, which of the following is true?

#31. How is alimony treated for divorces finalized after 2018?

#32. When is a taxpayer considered materially participating in an activity?

#33. The penalty for willful failure to file FBAR can be up to:

#34. Which of the following is subject to backup withholding?

#35. A taxpayer owns 100% of an S Corp and takes a $90,000 distribution. His basis is $60,000. What amount is taxable?

#36. What is the maximum HSA contribution for a family plan in 2024 (under age 55)?

#37. Which of these IRS notices is a Final Notice of Intent to Levy?

#38. An EA must renew their enrollment every:

#39. When may the IRS legally contact a third party (e.g., bank or employer) about a taxpayer’s situation without notifying them?

#40. How is cancellation of debt (COD) income generally treated?

#41. Which of the following requires filing Form 8832?

#42. The IRS may revoke a PTIN for all except:

#43. The hobby loss rules are intended to:

#44. A taxpayer overpays tax and requests a refund after 4 years. What is the result?

#45. Which of the following is a for AGI deduction?

#46. Which item is not subject to the Net Investment Income Tax (NIIT)?

#47. An employer’s share of FICA taxes on wages is:

#48. An enrolled agent must complete how many CPE hours every 3 years?

#49. Which of the following income items must be reported on a Schedule B?

#50. Who is responsible for signing a corporate tax return (Form 1120)?