AFTR Final Exam 2026

Question 1 of 100

For TY2026, the standard deduction for a married couple filing jointly is:

$29,200

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$30,000

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$31,500

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$32,200

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Question 2 of 100

The standard deduction for a single filer for TY2026 is:

$14,600

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$15,000

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$16,100

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$17,500

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Question 3 of 100

Per Notice 2026-10, the optional standard mileage rate for business use of a vehicle in TY2026 is:

67.0 cents per mile

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70.0 cents per mile

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72.5 cents per mile

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75.0 cents per mile

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Question 4 of 100

Of the 72.5-cent TY2026 business standard mileage rate, how much per mile is treated as depreciation?

28 cents

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30 cents

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33 cents

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35 cents

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Question 5 of 100

Beginning with TY2025, third-party settlement organizations such as PayPal, Venmo Business, and Etsy are required to issue Form 1099-K to payees who receive what minimum amount?

$5,000

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$2,500

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$600

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$20,000 and 200 transactions

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Question 6 of 100

Of the 72.5-cent TY2026 business standard mileage rate, how much per mile is treated as depreciation?

28 cents

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30 cents

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33 cents

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35 cents

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Question 7 of 100

A client sold used clothing on Poshmark and received a Form 1099-K showing $3,200. She originally paid more than $3,200 for all items. How should this be reported?

Not reported — personal property sales are not taxable

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Reported as $3,200 of ordinary income on Schedule 1

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Reported as gross proceeds with basis offsetting the amount — no taxable gain, and personal losses are not deductible

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Excluded from gross income because the amount is under $5,000

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Question 8 of 100

The One Big Beautiful Bill Act (OBBBA, P.L. 119-21) was signed into law on:

January 1, 2025

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April 15, 2025

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July 4, 2025

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December 31, 2025

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Question 9 of 100

Under the OBBBA, the SALT deduction cap for TY2026 for a taxpayer with AGI under $500,000 is:

$10,000

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$20,000

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$30,000

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$40,000

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Question 10 of 100

The OBBBA SALT cap of $40,000 begins to phase out when the taxpayer’s MAGI exceeds:

$250,000

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$350,000

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$500,000

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$750,000

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Question 11 of 100

Under new IRC §224 (OBBBA), the maximum deduction for qualified tip income for TY2026 is:

$10,000

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$15,000

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$25,000

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$30,000

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Question 12 of 100

The tip income deduction under IRC §224 is available for which tax years?

TY2026 only

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TY2026 through TY2030

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TY2025 through TY2028 only — it sunsets after TY2028 unless extended

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Permanently effective beginning TY2026

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Question 13 of 100

Betty has three qualifying children and files her federal income tax return as HOH. What is the completed phaseout amount for 2025 to qualify for EITC ?

$50,434

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$61,555

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$64,430

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$68,675

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Question 14 of 100

All of the following carry value as forms of Earned Income, EXCEPT

wages

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interest on saving

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business/self-employment income

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nontaxable combat pay

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Question 15 of 100

Which of the following is TRUE regarding Form 1040-ES, Estimated Tax for Individuals?

Form 1040-ES is used by individuals who have no withholding from their wages or other sources of income.

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Form 1040-ES must be filed quarterly regardless of whether the taxpayer owes taxes or not.

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Form 1040-ES can only be used by self-employed individuals to report income.

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Form 1040-ES is only required if you have income from investments, such as interest or dividends.

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Question 16 of 100

Which of the following scenarios correctly describes what is deductible under the Educator Expense Deduction for 2026?

An eligible educator buys a set of exercise mats for use in a health class teaching students how to stretch. These exercise mats are deductible under the Educator Expense Deduction.

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An eligible educator buys educational charts and books on healthy eating and nutrition for use in a health class. These materials are deductible under the Educator Expense Deduction.

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An eligible educator buys dumbbells and treadmills for use in a physical education class. These items are deductible under the Educator Expense Deduction as long as they are used for general fitness instruction.

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An eligible educator buys exercise mats and sporting equipment for a physical education class. These items are deductible under the Educator Expense Deduction as long as they are used for health education.

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Question 17 of 100

Which of the following statements is true regarding IRA contribution limits for 2026?

The contribution limit for Traditional and Roth IRAs in 2026 is $6,000, with no additional catch-up contributions allowed.

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You can contribute up to $7,500 to a Traditional IRA and a Roth IRA combined if you are 50 or older.

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The contribution limit for both Traditional and Roth IRAs combined in 2026 is $6,500, with an additional $1,000 catch-up contribution allowed for individuals aged 50 and older.

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The combined contribution limit for Traditional and Roth IRAs in 2026 is $7,000, and there is no catch-up contribution allowed for people aged 50 or older

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Question 18 of 100

For the 2025 tax year, which of the following scenarios describes alimony payments where the payer would be able to deduct the payments on their federal income tax return?

Payments made under a divorce agreement executed in 2022.

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Payments made under a separation agreement executed in 2019.

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Payments made under a divorce decree executed in 2018 that was modified in 2020 to expressly state the alimony would be non-deductible.

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Payments made under a legal separation agreement executed in 2017 that has not been modified since 2018.

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Question 19 of 100

For the 2025 tax year, if you receive digital assets as income (e.g., from staking rewards, mining activities, or as payment for services rendered), where would this income primarily be reported on your federal income tax return?

Directly on Form 8949, Sales and Other Dispositions of Capital Assets.

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As a non-taxable event, requiring no specific reporting.

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As ordinary income on Schedule 1 (Form 1040), or on Schedule C (Form 1040) if it constitutes business income.

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On a new, dedicated "Digital Asset Income" form, separate from existing schedules.

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Question 20 of 100

What is a net operating loss (NOL)?

When a taxpayer can't pay their taxes due to bankruptcy or insolvency

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When a taxpayer's short-term gains exceed their long-term losses

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When a taxpayer chooses to take a certain deduction rather than add up all of their losses

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When a taxpayer's deductions for the tax year are more than their income

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Question 21 of 100

Which of the following statements is true when taking a deduction for the interest paid on a mortgage debt?

The homeowner's premiums along with the interest is deductible.

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A deduction is taken on 50% of the interest paid.

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Home equity interest is deductible only if the proceeds were used to buy, build or substantially improve your home.

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The interest is not deductible.

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Question 22 of 100

Which of the following statements is MOST ACCURATE regarding the recordkeeping and documentation requirements for claiming deductions on Schedule A (Form 1040)?

Taxpayers are generally required to keep records supporting their deductions for 1 year after filing, as the IRS typically audits within that timeframe.

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For a cash contribution of $250 or more to a qualified charity, a canceled check alone is sufficient documentation for IRS purposes.

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All documentation, such as receipts and acknowledgments, must be submitted to the IRS along with Schedule A when filing your tax return.

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The primary purpose of keeping records is to substantiate the amount and validity of deductions claimed in case of an IRS audit, and records should include proof of payment, amount, date, payee, and description.

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Question 23 of 100

Which of the following statements is incorrect with respect to a taxpayer itemizing on their 2024 tax return?

Amounts paid for qualified long term services are not deductible medical expenses

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A taxpayer can choose between state income taxes and states sales taxes to deduct as an itemized deduction

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A taxpayer cannot deduct hobby expenses as an itemized deduction

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There is a limitation on the amount a taxpayer can claim as an itemized deduction for state and local taxes

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Question 24 of 100

The $10,000 limit on the amount of deduction for state and local tax is not for which filing status?

married filing jointly status

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single

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head of household

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Married Filing Separately

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Question 25 of 100

Which of the following statements accurately reflects the rules for claiming a casualty loss deduction due to a federally declared disaster for tax years 2018 through 2025?

Only taxpayers who itemize deductions can claim a casualty loss deduction, regardless of the disaster's federal status

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Taxpayers can claim a casualty loss deduction for any personal property loss, even if the event is not a federally declared disaster.

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Taxpayers affected by a federally declared disaster can claim a casualty loss deduction without itemizing deductions, subject to specific conditions

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Casualty loss deductions are only available for business or income-producing property losses, not personal-use property.

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Question 26 of 100

In 2025, a taxpayer has an adjusted gross income (AGI) of $100,000 and makes a $70,000 cash contribution to a qualified public charity. The IRS allows a deduction for cash contributions up to 60% of AGI in a given year. What is the maximum deduction allowed in 2025, and what happens to the excess contribution?

$70,000 is fully deductible in 2025; no carryforward applies.

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$60,000 is deductible in 2025; $10,000 is carried forward for up to 5 years.

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$50,000 is deductible in 2025; $20,000 is carried forward for 3 years.

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$60,000 is deductible in 2025; $10,000 is forfeited.

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Question 27 of 100

Some municipal bonds are considered triple exempt, and are considered interest income, how would the interest be reported on the tax return?

The interest income would be reported as tax-exempt interest on Form 1040, Line 2a.

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The interest would be reported as other income.

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The taxpayer would not report the interest income for 3 year from the received date of 1099-Int

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The interest income would be reported as tax-exempt interest on Form 1040, Line 2a.

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Question 28 of 100

There are certain reporting requirements when an individual engage in foreign accounts or transactions. A taxpayer must complete Schedule B, Part III on Form 1040 if any of the following occurs except:

The taxpayer is over age 65

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The taxpayer had a foreign account

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The taxpayer either received distributions from or granted/transferred funds to a foreign account

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The taxpayer had more than $1,500 of taxable interest or dividends

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Question 29 of 100

Jimmy and Cheryl have foreign financial accounts totaling $12,500 for Tax Year 2025. They live in the United States and file jointly. Which statement about their FBAR and Form 8938 filing requirements is correct?

They must file FBAR because their accounts exceed $10,000, and they must file Form 8938 because their accounts exceed $100,000.

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They must file FBAR but do not have to file Form 8938 because their total foreign assets do not exceed the $100,000 threshold for joint filers living in the U.S.

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They only need to file Form 8938 because it replaces the FBAR filing requirement.

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They do not need to file either FBAR or Form 8938 because they earned no income from their foreign accounts.

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Question 30 of 100

Which of the following is a key element in determining the gross income reported on Schedule C for a sole proprietorship?

The owner's personal living expenses paid from business profits.

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The cost of goods sold (COGS) directly related to the business revenue.

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The amount of self-employment tax paid on the business profits.

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The net profit of the business after deducting all business expenses.

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Question 31 of 100

Under the simplified method of calculating the taxpayer’s deduction for business use of their home, what should be included in that calculation?

square footage of the space regularly and exclusively used for business, childcare, or storage of inventory or product

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wear and tear of furniture in the home due to increased time spent in there for work

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the full amount of mortgage interest, cost of utilities, and home maintenance fees for the building

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a percentage of the cost for meals eaten at home during workdays

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Question 32 of 100

In 2025, Katie, a self-employed consultant, incurred $500 in business meal expenses while taking a client out to discuss a potential project. She also spent $300 on tickets to a sporting event to entertain a different client. Assuming these expenses were properly documented and directly related to her business, what is the total amount Katie can deduct for these expenses on her Schedule C?

$800

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$400

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$250

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650

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Question 33 of 100

There is a presumption that an activity is engaged for profit if the activity…

generates a profit within ten years

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generates a profit in at least 1 out of 3 consecutive years

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generates a profit in at least 3 out of 5 consecutive years.

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has a loss for the 5 consecutive years

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Question 34 of 100

Katie operates a photography business as a sole proprietorship, and she reports her income and expenses on Schedule C. Which of the following statements accurately reflects the IRS’s general record-keeping requirements for her business?

Katie only needs to keep records for expenses that she plans to deduct, not for all income received.

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She must keep all supporting documents, such as receipts, invoices, and bank statements, for a minimum of one year after the tax return due date.

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She should keep records for three years from the date she filed her original return or two years from the date she paid the tax, whichever date is later.

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Electronic records are not sufficient; all original records must be maintained in paper format.

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Question 35 of 100

What is the main difference between Form 8949 and Schedule D?

Form 8949 is filed with a 1120 and Sch D is filed with Form 1040

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Form 8949 is a detailed itemization of gains from sales of capital assets. Schedule D is a summary of all capital gains.

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Schedule D is for short term capital gains

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Form 8949 is for long term gains

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Question 36 of 100

For a taxpayer filing single in the taxable year 2025, what is the modified adjusted gross income (MAGI) range within which the $2,500 maximum deduction for student loan interest will be gradually reduced, as specified in Rev. Proc. 2024-40(.30)?

$0 to $85,000

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$85,000 or more

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Between $85,000 and $100,000

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$100,000 or more

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Question 37 of 100

Certain types of student loan forgiveness are tax-free. This includes:

If a student was falsely certified for a loan by the school

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Cancellation due to death or permanent and total disability

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Teachers who meet certain criteria and work in low-income schools for a set period

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All of the above

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Question 38 of 100

Which of these statements about the tax treatment of digital assets is false?

Virtual currency is treated as property and not as currency for federal tax purposes

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A taxpayer who “mines” virtual currency realizes gross income upon receipt

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Virtual currency received by an independent contractor, or an employee constitutes income

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For federal tax purposes, virtual currency is treated as other income.

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Question 39 of 100

All of the following statements are true about unemployment compensation, except:

Unemployment is a social insurance designed provide benefits to most individuals out of work

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Unemployment compensation is taxable and reported as income on Schedule 1.

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Recipients have to meet eligibility requirements to qualify.

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Some or all of the benefits may be excluded from income in certain situations

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Question 40 of 100

New IRS 1099K reporting requirements for payment networks like Paypal, Cashapp and Venmo will apply for tax year 2025. Based on the new requirements, which of the following will likely not receive a 1099K?

James who does not have a business uses Paypal to pay for his online orders. He spent $2500 in 2025.

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Frances who has a small sporting goods store and accept payment cards. Orders totaled $6000 in 2025.

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Billy accepts payment cards as a form of payment for his internet auction site, he estimated he received 8000 for payments in 2025

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Tammy, a tax preparer received Paypal payments totaling $3000 for her services in 2025

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Question 41 of 100

All of the following statements are correct regarding ABLE plans except

Beneficiary controls the Fund

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Can have unlimited accounts in the Beneficiary's name

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Limited to only one account per Beneficiary

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Contributions to an ABLE account are not tax deductible.

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Question 42 of 100

How might the information reported on Form 1099-QA, Distributions From ABLE Accounts, be affected by the changes introduced in Section 124 of the SECURE 2.0 Act?

Form 1099-QA will now include a field indicating the beneficiary's age of onset of disability.

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The threshold for issuing Form 1099-QA will increase due to the expanded eligibility for ABLE accounts.

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Starting with distributions made in the 2026 tax year, a potentially larger pool of individuals may receive Form 1099-QA due to the increased age of onset for ABLE account eligibility.

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The format of Form 1099-QA will be significantly revised to reflect the new age limit of 46

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Question 43 of 100

Which of the following expenses is generally considered a qualified education expense for a Section 529 plan?

Monthly rent for an apartment while the beneficiary attends college less than half-time.

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Repayment of a parent's student loans.

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Tuition and fees for enrollment at an eligible university where the beneficiary is a full-time student.

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The cost of a new car for the beneficiary to commute to campus.

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Question 44 of 100

Distributions from qualified retirement plans made to a person before he or she reaches 59½ are subject to additional tax of:

5%

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10%

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15%

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20%

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Question 45 of 100

What is the difference between a pension and annuity? Select one:

Pensions are a savings pot the the guarantor pays into throughout their life; annuities are insurance products that a person buys as a lump sum for income security later in life

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One is a type of retirement plan and the other is related to stocks or bonds

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Pensions are insurance products that a person buys as a lump sum for income security later in life; annuities are a savings pot the the guarantor pays into throughout their life.

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There is no difference; they are synonyms for the same retirement plan

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Question 46 of 100

Regarding Roth IRAs, unless an exception applies, an additional tax of what percent must be paid on the taxable part of any distributions that are not qualified distributions?

50%

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12%

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15%

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10%

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Question 47 of 100

According to the Secure 2.0 Act, Section 109, which of the following statements is true?

The Act changed the RMD age to 73 for persons born in 1960

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There were no significant changes to Roth accounts.

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Section 109 allows those aged 60-63 to make higher catch-up contributions to workplace retirement plans.

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RMDs will revert back to age 72

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Question 48 of 100

Under IRS rules, which of the following situations typically results in a 10% early withdrawal penalty from a Traditional IRA

aking a distribution at age 62 to pay for college tuition.

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Withdrawing funds at age 45 to take a vacation.

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Taking a qualified first-time homebuyer withdrawal of $10,000 at age 35.

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Rolling over funds from one Traditional IRA to another within 60 days.

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Question 49 of 100

Which of the following statements is true regarding IRS Form 1099-SA, Distributions From an HSA, Archer MSA, or Medicare Advantage MSA?

Form 1099-SA is filed by the taxpayer to report annual contributions to an Archer MSA.

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Distributions reported on Form 1099-SA must be entered on Form 8853 if they are from an Archer MSA.

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Distributions from an Archer MSA are never taxable, so Form 1099-SA is for informational purposes only.

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Form 1099-SA is only used for reporting employer contributions to a Medical Savings Account.

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Question 50 of 100

Which of the following statements is TRUE regarding payment of tax when a taxpayer cannot pay by the due date?

Taxpayers must always pay the full amount owed on the due date or face criminal penalties.

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Filing Form 4868 gives taxpayers an extension of time to pay their taxes.

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Taxpayers may request additional time to pay due to financial hardship by filing Form 1127.

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The IRS does not offer installment agreements for unpaid tax balances.

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Question 51 of 100

According to IRS Publication 5199, what is the main purpose of filing Form 14039, Identity Theft Affidavit, with the IRS?

To request an extension to file your tax return if your identity has been stolen.

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To report to the Social Security Administration that your Social Security number has been compromised.

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To officially notify the IRS that you are a victim of tax-related identity theft and request their assistance.

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To dispute an incorrect tax assessment or penalty you received from the

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Question 52 of 100

According to IRS Notice 2025-05, which of the following statements is generally true regarding the choice between using the standard mileage rate and actual expenses for deducting vehicle costs?

Taxpayers must use the actual expense method in the first year a vehicle is used for business and can switch to the standard mileage rate in later years.

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If a taxpayer leases a vehicle and uses the actual expense method, they can switch to the standard mileage rate at any lease renewal.

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Employees can claim a miscellaneous itemized deduction for unreimbursed vehicle expenses incurred for their employer.

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If the standard mileage rate is chosen in the first year a vehicle is used for business, the taxpayer can choose between the standard rate and actual expenses in subsequent years.

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Question 53 of 100

A U.S. citizen lives and works in Germany for all of 2025, earning $145,000 in wages from a German employer. She qualifies for the Foreign Earned Income Exclusion under the bona fide residence test and files a timely return. She has no housing exclusion. According to Rev. Proc. 2024-40(.39), which of the following is the correct way to report this income and exclusion on her 2025 U.S. tax return?

Report the full $145,000 as gross income on Form 1040, then deduct $130,000 on Schedule A as an itemized deduction.

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Report the full $145,000 as gross income on Form 1040, then claim a $130,000 foreign tax credit using Form 1116.

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Complete Form 2555 to calculate and exclude $130,000, report the remaining $15,000 on Schedule 1 (line 8), and transfer it to Form 1040.

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Complete Form 2555 to exclude $130,000, report the excluded amount on Schedule 1 (line 8), and include only the remaining $15,000 as taxable income on Form 1040

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Question 54 of 100

Which of the following moving expenses can members of the Armed Forces deduct?

Movement of one's household goods and personal effects to the place of enlistment

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Packing, crating and shipping of household goods

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Travel and lodging to the new location

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All of the above

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Question 55 of 100

Luz worked as a server in a restaurant throughout the 2025 tax year. She received $5,000 in cash tips from customers but did not report $1,500 of these tips to her employer. When Luz files her 2025 tax return, which of the following will be the primary purpose of Form 4137 regarding these unreported tips?

To claim a tax credit for the Social Security and Medicare taxes she paid on the reported tips.

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To report the full $5,000 in cash tips she received to the IRS.

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To calculate and pay the Social Security and Medicare taxes owed on the $1,500 in unreported tips.

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To request an extension of time to report her tip income to her employer.

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Question 56 of 100

A taxpayer purchased a computer in 2025 and used it 35% for business. May she take a Section 179 deduction for 35% of the cost of the computer?

Yes, because it is used in a business.

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No, because no Section 179 is allowed if business use is less than 50%

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No, because the computer was purchased in 2024

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Yes, because property is always depreciable.

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Question 57 of 100

A traditional IRA distribution taken before age 59½ is generally subject to:

A 5% early distribution penalty

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Ordinary income tax plus a 10% additional tax — unless an exception applies

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A 20% withholding tax that satisfies all tax liability

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No tax if the distribution is under $10,000

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Question 58 of 100

Unemployment compensation received during TY2026 is:

Excluded from gross income if the taxpayer is actively seeking work

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Partially taxable — only the first $10,200 is excluded

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Fully taxable — included in gross income in the year received

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Taxable only for taxpayers with AGI over $50,000

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Question 59 of 100

Under the TCJA (permanent under OBBBA), alimony paid under a divorce agreement executed after December 31, 2018 is:

Deductible by the payor and taxable to the recipient

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Not deductible by the payor and not included in the recipient's gross income

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Deductible by the payor but not taxable to the recipient

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Taxable to the recipient but not deductible by the payor if paid under a court order

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Question 60 of 100

On Schedule C, gross income is generally:

Gross receipts minus returns and allowances

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Gross receipts minus all business expenses

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Gross profit plus other business income

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Net profit reported on Line 31

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Question 61 of 100

A rideshare driver receives a Form 1099-K showing $22,000 in gross payments. The platform retained $3,500 in fees and deposited $18,500. What amount is reported on Schedule C Line 1a?

$18,500 (net deposits received)

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$22,000 (gross amount per 1099-K)

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$3,500 (fees retained by the platform)

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$0 — 1099-K amounts go directly on Form 1040

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Question 62 of 100

The home office simplified method allows a deduction of $5 per square foot up to a maximum of 300 square feet. The maximum deduction under the simplified method is:

$1,000

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$1,500

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$2,000

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$2,500

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Question 63 of 100

A long-term capital gain from the sale of stock held more than one year is generally taxed at which rates for TY2026?

Ordinary income tax rates — same as wages and salaries

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0%, 15%, or 20% based on the taxpayer's taxable income level

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A flat 15% rate regardless of income

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10% for all taxpayers in the 22% bracket or below

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Question 64 of 100

For TY2026, a single taxpayer generally qualifies for the 0% long-term capital gains rate if taxable income is:

Up to $48,350

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Up to $64,750

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Up to $96,700

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Over $533,400

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Question 65 of 100

Medical expenses are deductible on Schedule A only to the extent they exceed what percentage of the taxpayer’s AGI?

2%

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5%

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7.5%

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10%

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Question 66 of 100

The Earned Income Tax Credit is NOT available to a taxpayer who:

Has one qualifying child

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Has earned income from self-employment

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Has investment income over the applicable threshold ($12,200 for TY2026)

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Files as Head of Household

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Question 67 of 100

Unlike the American Opportunity Credit, the Lifetime Learning Credit:

Is available only for the first four years of post-secondary education

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Has a 40% refundable portion

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Has no year limit, is nonrefundable, and is available for any year of higher education or job skills courses

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Requires at least half-time enrollment in a degree program

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Question 68 of 100

A taxpayer mines cryptocurrency and receives 0.5 Bitcoin when Bitcoin’s fair market value is $60,000. The taxpayer must recognize:

No income — cryptocurrency is property, not income, when first acquired

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$30,000 of long-term capital gain

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$30,000 of ordinary income (the FMV at the time of receipt)

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Income only when the Bitcoin is sold or exchanged

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Question 69 of 100

A taxpayer purchased Bitcoin for $5,000 and later exchanged it for Ethereum when Bitcoin’s FMV was $8,000. This exchange is:

Not a taxable event — cryptocurrency exchanges are like-kind exchanges under IRC §1031

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A taxable event — the taxpayer recognizes a $3,000 capital gain at the time of the exchange

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Taxable only when the Ethereum received is eventually sold for cash

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A wash sale that defers the gain

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Question 70 of 100

The AMT is triggered when a taxpayer’s tentative minimum tax exceeds their regular tax. Which of the following is a preference item that increases AMT income?

W-2 wages

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Capital gains taxed at preferential rates

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Accelerated depreciation in excess of straight-line on real property placed in service before 1987

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The standard deduction

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Question 71 of 100

The Qualified Business Income deduction under IRC §199A allows eligible sole proprietors to deduct up to what percentage of their qualified business income for TY2026?

15%

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18%

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20% — the §199A rate remains 20% under the final signed OBBBA

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23% — this rate was proposed in early House drafts but rejected before the OBBBA was signed

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Question 72 of 100

The Kiddie Tax applies to a child’s unearned income over $2,700. Which child is subject to the Kiddie Tax?

A 19-year-old who is not a full-time student and earns $30,000 in wages

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A 17-year-old dependent who has $4,000 in dividend income from investments

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A 24-year-old graduate student who receives a scholarship

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An 18-year-old who has filed a joint return with their spouse

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Question 73 of 100

The Premium Tax Credit is available to taxpayers who purchase health insurance through:

Any employer group health plan

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Medicare or Medicaid

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A Health Insurance Marketplace (Exchange) and who meet the income requirements

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Any private insurer regardless of how the policy was purchased

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Question 74 of 100

Form 8962 is used to reconcile the Premium Tax Credit. If the taxpayer received more advance premium tax credit (APTC) during the year than they are entitled to based on actual income, they must:

File an amended return for the prior year

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Repay the excess APTC as additional tax on their Form 1040

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Carry forward the excess to the following year

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Nothing — excess APTC is forgiven if the taxpayer's income changed during the year

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Question 75 of 100

An ABLE account (Achieving a Better Life Experience) may be established for:

Any minor under age 18 with a savings goal

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Individuals whose disabling condition began before age 26, subject to income and other requirements

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Any person with a physical disability regardless of age of onset

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Elderly individuals who need long-term care assistance

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Question 76 of 100

Under current law, a net operating loss (NOL) generated in TY2026 may be carried forward:

2 years forward only

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5 years forward only

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Indefinitely — but limited to 80% of the taxable income in the carryforward year

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20 years forward with no percentage limitation

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Question 77 of 100

Which employer-provided fringe benefit is excluded from an employee’s gross income without any dollar limitation?

Employer-paid parking (capped at monthly limit)

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Group-term life insurance (excluded only for first $50,000)

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Health insurance premiums paid under a §106 plan

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Employee discount on employer's services (limited to 20%)

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Question 78 of 100

A lender forgives part of a taxpayer’s student loan and issues Form 1099-C. Under the general rule, the forgiven amount is:

Always tax-free

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Reported as a capital gain

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Taxable income unless a specific exclusion applies

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Subject only to self-employment tax

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Question 79 of 100

Under SECURE 2.0, a taxpayer may roll over funds from a 529 plan to a Roth IRA. The lifetime maximum rollover per beneficiary is:

$7,000

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$15,000

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$25,000

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The Inflation Reduction Act eliminated the PTC for individuals with incomes above 400% of the federal poverty line.

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Question 80 of 100

A taxpayer can avoid the underpayment of estimated tax penalty by paying at least what percentage of their prior year’s tax liability (for taxpayers with prior-year AGI of $150,000 or less)?

80% of prior year's tax

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85% of prior year's tax

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100% of prior year's tax

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110% of prior year's tax

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Question 81 of 100

81. For taxpayers with prior-year AGI over $150,000, the safe harbor percentage to avoid the underpayment penalty is:

100% of prior year's tax

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110% of prior year's tax

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115% of prior year's tax

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90% of the current year's tax

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Question 82 of 100

82. A taxpayer who cannot pay their full tax liability by the April 15 due date should:

Not file until they can pay — late filing penalties are less severe than underpayment penalties

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File on time or request an extension and pay as much as possible — interest and a failure-to-pay penalty will apply to any unpaid balance, but these are less severe than failure-to-file penalties

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Wait until the IRS sends a notice before filing

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File for bankruptcy to discharge the tax liability

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Question 83 of 100

83. Form 4868 grants an automatic extension to file. For TY2026, the extended filing deadline for individual returns is:

August 15, 2027

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September 15, 2027

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October 15, 2027

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December 31, 2027

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Question 84 of 100

84. Filing Form 4868 extends the time to FILE the return. It does NOT extend:

The time to file state returns

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The time to PAY any tax owed — tax is still due by the original April 15 deadline

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The time to make an IRA contribution for the extended return year

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The statute of limitations for IRS examination of the return

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Question 85 of 100

85. The Child and Dependent Care Credit under IRC §21 is:

Fully refundable — it can generate a refund even if the taxpayer has no tax liability

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Nonrefundable — it can reduce tax liability to $0 but cannot generate a refund

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Refundable for taxpayers with AGI under $40,000

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Deductible above-the-line as an adjustment to income

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Question 86 of 100

86. For the adoption of a child with special needs, the taxpayer may claim the maximum adoption credit regardless of actual expenses paid. This is true because:

The IRS waives expense requirements for special needs adoptions as an administrative matter

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Special needs adoptions are funded by the federal government, eliminating the expense requirement

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IRC §23 provides that the full credit is available in the year a special needs adoption is finalized — even if actual expenses were zero

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Special needs adoptions qualify for a 150% credit to compensate for the additional care costs

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Question 87 of 100

87. Mortgage points paid on the purchase of a principal residence are generally:

Fully deductible in the year paid if they represent prepaid interest for the purchase of the taxpayer's principal residence and meet all IRS requirements

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Always amortized over the life of the loan

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Never deductible after the TCJA

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Deductible only to the extent they exceed 2% of the loan amount

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Question 88 of 100

88. Self-employment tax is calculated on Schedule SE using what percentage of net SE earnings as the base?

100% of net SE income

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95% of net SE income

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92.35% of net SE income (to simulate the employer deduction available to W-2 employees)

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90% of net SE income

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Question 89 of 100

89. The deductible half of self-employment tax is taken:

As an itemized deduction on Schedule A

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As a business deduction on Schedule C

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As an above-the-line adjustment on Schedule 1, reducing AGI

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As a credit on Schedule 3

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Question 90 of 100

90. A U.S. person with a financial interest in or signature authority over foreign financial accounts with an aggregate value exceeding $10,000 at any time during the year must file:

Form 8938 (FATCA Statement of Specified Foreign Financial Assets)

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FinCEN Report 114 (FBAR) — filed electronically with FinCEN by April 15 (with automatic extension to October 15)

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Form 2555 (Foreign Earned Income Exclusion)

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No form is required — foreign accounts are reported on Schedule B only

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Question 91 of 100

91. The QBI deduction under IRC §199A is NOT available to income from:

A sole proprietor's Schedule C income

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A rental income qualifying as a trade or business

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W-2 wages from employment — employee compensation is never qualified business income

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A partnership's ordinary business income passed through to the partner

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Question 92 of 100

92. Estimated tax payments for TY2027 are due on which quarterly dates?

$10

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$20

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$30

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$40

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Question 93 of 100

93. A capital loss that exceeds capital gains for the year can be deducted against ordinary income up to what annual limit?

$1,000

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$2,000

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$3,000 ($1,500 if married filing separately)

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$5,000

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Question 94 of 100

94. When a business asset is sold for more than its depreciated basis but less than its original cost, the gain attributable to the depreciation previously taken is generally treated as:

Long-term capital gain taxed at preferential rates

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Ordinary income subject to depreciation recapture rules under IRC §1245 or §1250

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A tax-free recovery of basis

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Passive income subject to Form 8582 limitations

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Question 95 of 100

95. A non-qualified distribution from a 529 plan is subject to:

A 10% penalty on the entire distribution

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Ordinary income tax on the entire distribution

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Ordinary income tax on the earnings portion plus a 10% additional tax on the earnings portion

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A 20% additional tax on the earnings portion

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Question 96 of 100

96. A taxpayer who made non-deductible contributions to a traditional IRA must track their basis using:

To determine the exact amount of Social Security taxes she paid during her working years.

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To report the total amount of Social Security benefits she received so the IRS can determine how much, if any, is taxable.

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To claim an exemption from federal income tax on her Social Security benefits.

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To calculate the amount of Medicare premiums that will be deducted from her future Social Security payments.

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Question 97 of 100

97. A sole proprietor who has no employees and uses their home as their principal place of business may deduct home office expenses on:

Schedule A as an itemized deduction

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Schedule C Line 30 — home office deduction (using either simplified or regular method)

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Form 2106 as an employee business expense

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$1,000

Correct Incorrect Correct answer

Question 98 of 100

The Retirement Savings Contributions Credit (Saver’s Credit) is available to low and moderate income taxpayers who contribute to:

A health savings account only

Correct Incorrect Correct answer

$122,500

Correct Incorrect Correct answer

$125,000

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$118,750

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Question 99 of 100

Under the TCJA (permanent under OBBBA), hobby income is reported on Schedule 1 as other income and hobby expenses are:

Deductible on Schedule A as a 2% miscellaneous itemized deduction

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Not deductible at all — the 2% miscellaneous deduction category is suspended, and hobby losses may not offset hobby income

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Deductible up to the amount of hobby income on Schedule C

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Deductible as a business loss if the activity generated income for at least 2 of the last 5 years

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Question 100 of 100

A W-4 submitted to an employer after December 31, 2019 uses:

The old allowance system (personal exemptions × $4,300)

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The redesigned W-4 with Steps 1-5 — claiming dollar amounts for credits and deductions instead of allowances

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A flat withholding percentage selected by the employee

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The same format as prior years — the redesign was delayed indefinitely

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