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Home └NLT Pro Network Community Preparer Training └Chapter 3: Understanding Dependents and Credits in Tax Preparation

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Chapter 3: Understanding Dependents and Credits in Tax Preparation

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This section explains how dependents impact tax returns and eligibility for key credits. It covers criteria for qualifying dependents, including children and relatives, and outlines essential credits like the Child Tax Credit, Earned Income Tax Credit, and the Credit for Other Dependents, helping tax preparers maximize tax benefits for their clients.

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1. Which of the following does NOT affect your filing status?
Marital status Number of dependents Age Whether you have qualifying children
2. How much is the maximum Child Tax Credit per qualifying child for tax year 2024? A. $1,000 B. $2,000 C. $3,000 D. $4,000
$1,000 $2,000 $3,000 $4,000
3. The Earned Income Tax Credit (EITC) is available to taxpayers who:
Have investment income over $10,000 Have earned income from wages or self-employment Are claimed as dependents on another tax return File as Married Filing Separately
4. A child of divorced parents usually qualifies as a dependent for the parent who:
Pays the most child support Claims the child first Has custody for the majority of the year Earns more money
5. Which of the following is NOT a test used to determine if someone qualifies as a dependent?
Residency Test Income Test Relationship Test Support Test
6. For a Multiple Support Agreement, a person must contribute at least what percentage of the dependent’s support to claim the dependent?
10% 20% 30% 50%
7. Which of the following filing statuses provides the highest standard deduction?
Single Head of Household Married Filing Separately Qualifying Widow(er) with Dependent Child
8. The Child Tax Credit starts to phase out for Married Filing Jointly taxpayers with AGI exceeding:
$200,000 $250,000 $400,000 $450,000
9. The Credit for Other Dependents offers a credit of up to:
$500 per qualifying dependent $2,000 per qualifying dependent $1,000 per qualifying dependent $300 per qualifying dependent
10. To file as Head of Household, a taxpayer must:
Be unmarried on the last day of the tax year Pay less than half the cost of maintaining a home Have no dependents File jointly with their spouse
11. Which of the following dependents would NOT qualify a taxpayer for the Child Tax Credit?
A child under 17 who lived with the taxpayer for over half the year A 25-year-old full-time student who provides more than half of their own support A stepchild who is a U.S. citizen and lives with the taxpayer full time A biological child with a valid Social Security number
12. At what income level does the Child Tax Credit begin to phase out for single filers?
$75,000 $100,000 $150,000 $200,000
13. Which test is used to determine if a relative qualifies as a dependent?
Gross Income Test Joint Return Test Age Test Physical Presence Test
14. The IRS tool used to help determine if someone qualifies as your dependent is called:
Publication 501 Form 8332 Interactive Tax Assistant IRS EITC Calculator
15. One common mistake when claiming dependents involves:
Forgetting to include gross income on the tax return Misinterpreting the Support Test Claiming a spouse as a dependent Reporting qualified child care expenses
16. A widow(er) with a dependent child can continue to file as Qualifying Widow(er) for how many years after their spouse’s death?
1 year 2 years 3 years 5 years
17. To claim the Child and Dependent Care Credit, a taxpayer must:
Have qualifying care expenses for dependents under 13 Have earned income under $30,000 File as Single or Head of Household Provide care to any adult dependent
18. What should you do if you are unsure whether a dependent qualifies for a tax credit?
Claim the credit and wait for the IRS to approve it Consult the IRS Interactive Tax Assistant or a tax professional File an amended return after the deadline Ignore the dependent and proceed without the credit
19. The phase-out for the Earned Income Tax Credit (EITC) depends on:
The number of qualifying children The taxpayer’s investment income The amount of tax withheld The taxpayer’s filing status
20. If both parents claim the same child on separate tax returns, what is likely to happen?
The IRS will automatically assign the child to the lower-income parent Both parents will receive a reduced Child Tax Credit The IRS will reject one of the claims Both claims will be accepted if the child qualifies for both
21. Which of the following statements about the Additional Child Tax Credit (ACTC) is TRUE?
It is non-refundable It can be claimed only if the taxpayer has no tax liability It allows for a partial refund if the Child Tax Credit exceeds tax liability It is available to taxpayers with no children
22. The Earned Income Tax Credit (EITC) begins to phase out at an AGI of approximately:
$10,000 $25,000 $39,000 $59,000
23. Dependents can impact your tax return in all the following ways EXCEPT:
Determining your eligibility for certain credits Affecting your filing status Increasing your taxable income Lowering your tax liability through exemptions or credits
24. The maximum credit for the Child and Dependent Care Credit is based on:
The taxpayer’s filing status The taxpayer’s gross income The number of qualifying persons The taxpayer’s age
25. A child qualifies as a dependent under the Child Tax Credit if they:
Are under age 17 Have gross income of less than $4,700 Provide more than half of their own support Live with you for at least three months
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