Tax Preparation IRS Rules, Retirement, and Special Topics 3

Question 1

Which IRS program provides free tax preparation assistance to low-income and elderly taxpayers?

Accepted Answer

VITA (Volunteer Income Tax Assistance)

Answer

VITA (Volunteer Income Tax Assistance) offers free tax preparation by IRS-certified volunteers to taxpayers with income below $67,000, people with disabilities, and limited English speakers.

Question 2

An Individual Taxpayer Identification Number (ITIN) is issued to:

Accepted Answer

Nonresident and resident aliens who are not eligible for an SSN

Answer

ITINs are issued by the IRS to foreign nationals and others who need a taxpayer ID for US tax purposes but are not eligible for a Social Security Number.

Question 3

The exclusion of gain from the sale of a primary residence applies to gains up to:

Accepted Answer

$250,000 (single) / $500,000 (MFJ)

Answer

Under Section 121, taxpayers may exclude up to $250,000 ($500,000 for MFJ) of gain from the sale of a primary residence if ownership and use tests are met.

Question 4

Passive activity losses can generally be deducted only against:

Accepted Answer

Passive income from other activities

Answer

Passive activity losses can only offset passive income; unused passive losses are suspended and carried forward until the activity is disposed of.

Question 5

The $25,000 rental activity loss allowance for active participants phases out for AGI between:

Accepted Answer

$100,000 and $150,000

Answer

The $25,000 special allowance for rental real estate losses for active participants phases out for AGI between $100,000 and $150,000.

Tax Preparation Practice Test

Tax Preparation Practice Test

Tax Preparation IRS Rules, Retirement, and Special Topics 3