Tax University

Sample Quiz

Try a small set of original sample questions.

Original EA-style practice

These sample questions are written to train exam skills without copying official or commercial question banks. The full bank should expand this same format across every exam topic.

Part 1 | Filing status | Exam ready

Lena is unmarried on the last day of the year. Her 9-year-old son lived with her all year. Lena paid 70 percent of the cost of keeping up the home, and no one else can claim the child. If all other requirements are met, which filing status is most likely available to Lena?

A. Single only

B. Head of household

C. Married filing separately

D. Qualifying surviving spouse

Answer: B. Head of household

Solution: Head of household is generally available when an unmarried taxpayer pays more than half the cost of keeping up a home for a qualifying person. The facts give an unmarried taxpayer, a qualifying child, full-year residence, and more than half of household costs.

Why each choice works or fails

A: Single is not the best answer because a more favorable filing status may be available when the qualifying person and household-cost tests are met.

B: Correct. The facts support head of household if no hidden limitation applies.

C: Married filing separately is not available because Lena is unmarried on the last day of the year.

D: Qualifying surviving spouse requires facts about a deceased spouse and a limited period after death. Those facts are absent.

Skill: Apply filing status rules from household facts rather than choosing from marital status alone.

Reference: IRS Publication 501

Tax year: Current federal rules - verify annual thresholds

Part 1 | Income | Working

A taxpayer received $48,000 in wages, $600 of municipal bond interest from a state bond, $2,000 from a former spouse as child support, and $1,200 of unemployment compensation. Which item is generally included in gross income?

A. Municipal bond interest

B. Child support received

C. Unemployment compensation

D. A nontaxable gift from a parent

Answer: C. Unemployment compensation

Solution: Unemployment compensation is generally taxable for federal income tax purposes. Wages are also taxable, but among the listed answer choices, unemployment compensation is the best taxable item.

Why each choice works or fails

A: Municipal bond interest is generally excluded from federal gross income, though it may still be reported or affect other items.

B: Child support received is generally not taxable to the recipient.

C: Correct. Unemployment compensation is generally included in gross income.

D: A true gift is generally excluded from the recipient's gross income.

Skill: Separate taxable income from common exclusions.

Reference: IRC Section 61; IRS Publication 525

Tax year: Current federal rules

Part 1 | Deductions and credits | Exam ready

Marcus has $82,000 of wages. He is deciding whether to itemize. He also qualifies for a $1,500 nonrefundable credit and had $7,000 of federal withholding. Which statement best describes the order of these items on an individual return?

A. The credit reduces adjusted gross income before deductions are considered.

B. The deduction reduces taxable income, the credit reduces tax, and withholding is treated as a payment.

C. Withholding is an itemized deduction, and the credit is a payment.

D. Credits, deductions, and payments are all applied at the same stage.

Answer: B. The deduction reduces taxable income, the credit reduces tax, and withholding is treated as a payment.

Solution: The return flow matters. Income is reduced by deductions to determine taxable income. Tax is then computed. Credits reduce tax. Withholding and estimated payments are payments against the final liability.

Why each choice works or fails

A: A nonrefundable credit does not reduce adjusted gross income.

B: Correct. This answer keeps deductions, credits, and payments in their proper places.

C: Federal withholding is a payment, not an itemized deduction.

D: These items do not apply at the same stage.

Skill: Understand tax return mechanics instead of memorizing labels.

Reference: IRS Form 1040 instructions

Tax year: Current federal rules - verify annual thresholds

Part 1 | Property transactions | Exam ready

Nora bought investment land for $90,000 and later paid $12,000 for permanent improvements. She sold the land for $125,000 and paid $5,000 of selling expenses. What is the gain before considering character or holding period?

A. $18,000

B. $23,000

C. $30,000

D. $35,000

Answer: A. $18,000

Solution: Adjusted basis is $102,000: original cost of $90,000 plus $12,000 of improvements. Amount realized is $120,000: sales price of $125,000 minus $5,000 selling expenses. Gain is $120,000 minus $102,000, or $18,000.

Why each choice works or fails

A: Correct. It uses adjusted basis and reduces sales proceeds by selling expenses.

B: This ignores one adjustment or uses an incorrect amount realized.

C: This likely subtracts original cost but ignores improvements and selling expenses.

D: This likely subtracts only original cost from selling price and ignores both improvements and selling expenses.

Skill: Compute gain using adjusted basis and amount realized.

Reference: IRS Publication 551

Tax year: Current federal rules

Part 1 | Retirement distributions | Working

A 42-year-old taxpayer takes a taxable distribution from a traditional IRA and no exception to the early distribution rules applies. What federal consequence may apply in addition to regular income tax?

A. Additional tax on early distributions

B. Self-employment tax

C. Gift tax to the account owner

D. No reporting is required if tax was withheld

Answer: A. Additional tax on early distributions

Solution: A taxable IRA distribution before the applicable age may be subject to an additional tax unless an exception applies. Withholding does not remove the reporting requirement.

Why each choice works or fails

A: Correct. Early taxable retirement distributions can carry an additional tax.

B: IRA distributions are not self-employment earnings.

C: Taking money from one's own IRA is not a gift to the account owner.

D: Withholding is only a payment. It does not eliminate reporting.

Skill: Recognize additional tax issues tied to retirement distributions.

Reference: IRS Publication 590-B

Tax year: Current federal rules

Part 1 | Filing and payments | Working

A taxpayer timely files an extension request but pays none of the expected balance until the extended due date. Which statement is most accurate?

A. The extension generally extends both filing and payment deadlines.

B. The extension generally extends the time to file, not the time to pay.

C. No penalties or interest can apply when an extension is filed.

D. The taxpayer is treated as having filed a refund claim only.

Answer: B. The extension generally extends the time to file, not the time to pay.

Solution: An extension to file generally does not extend the time to pay. If tax is not paid by the original due date, interest and possible penalties may apply even when the return is filed by the extended due date.

Why each choice works or fails

A: This is the common trap. The extension is mainly for filing, not paying.

B: Correct. Payment is generally due by the original due date.

C: Penalties or interest may still apply to unpaid tax.

D: An extension request is not a refund claim.

Skill: Separate filing deadlines from payment deadlines.

Reference: IRS extension guidance

Tax year: Current federal rules

Part 2 | Business entities | Working

A single-member LLC has not elected to be taxed as a corporation. The owner operates a consulting business. How is the business most commonly reported for federal income tax purposes?

A. On Form 1120 as a C corporation

B. On Schedule C with the owner's Form 1040

C. On Form 1065 as a partnership

D. No federal reporting is required because it is an LLC

Answer: B. On Schedule C with the owner's Form 1040

Solution: A single-member LLC that does not elect corporate tax treatment is generally disregarded for federal income tax purposes. A sole proprietor business is commonly reported on Schedule C.

Why each choice works or fails

A: Corporate filing would generally require a corporate election or classification.

B: Correct. The default federal treatment for a single-member LLC is commonly Schedule C reporting.

C: A partnership generally requires more than one owner.

D: LLC status does not eliminate federal tax reporting.

Skill: Connect LLC classification to federal return reporting.

Reference: IRS business structures guidance; Schedule C instructions

Tax year: Current federal rules

Part 2 | Business deductions | Exam ready

A graphic designer buys a new laptop used 80 percent for business and 20 percent for personal tasks. Which approach is most consistent with federal tax principles?

A. Deduct or recover only the business-use portion if the expense otherwise qualifies.

B. Deduct 100 percent because the laptop was purchased by a business owner.

C. Deduct none of it because any personal use destroys the deduction.

D. Claim it as a refundable credit.

Answer: A. Deduct or recover only the business-use portion if the expense otherwise qualifies.

Solution: Mixed-use property generally requires allocation between business and personal use. The business-use portion may be deductible or recovered through depreciation or an available election if all requirements are met.

Why each choice works or fails

A: Correct. Allocation is required when property is used partly for business and partly personally.

B: Business ownership alone does not make personal use deductible.

C: Personal use does not always eliminate the entire deduction; it may require allocation.

D: Equipment cost recovery is not a refundable credit.

Skill: Handle mixed-use business property without over-deducting.

Reference: IRS Publication 946; IRS Publication 535

Tax year: Current federal rules

Part 2 | Payroll taxes | Exam ready

An employer withheld federal income tax and employee Social Security and Medicare taxes from wages but used the money to pay rent instead of depositing it. Which statement best describes the risk?

A. The withheld taxes are trust fund taxes, and responsible person exposure may arise.

B. The taxes become deductible personal expenses of the employees.

C. The employer can ignore the deposit if Form 941 is filed.

D. Only the landlord has a federal payroll tax obligation.

Answer: A. The withheld taxes are trust fund taxes, and responsible person exposure may arise.

Solution: Amounts withheld from employees are held in trust for the government. Failure to deposit can create serious payroll tax collection issues, including possible trust fund recovery penalty exposure for responsible persons.

Why each choice works or fails

A: Correct. Withheld employment taxes are not ordinary business cash.

B: Employees do not deduct the employer's failure to deposit payroll taxes as personal expenses.

C: Filing the return does not cure a deposit failure.

D: The landlord receiving rent does not become responsible for the employer's payroll tax deposits.

Skill: Recognize trust fund payroll tax risk from practical facts.

Reference: IRS Publication 15; Trust Fund Recovery Penalty guidance

Tax year: Current federal rules