Basic Course Scenarios and Test Questions

Directions

The first five scenarios do not require you to prepare a tax return. Read the interview
notes for each scenario carefully and use your training and resource materials to
answer the questions after the scenarios.

Basic Scenario 1: Olivia Otis

Interview Notes

• Olivia is single, 66 years old, and not blind.

• She paid all the cost of keeping up her home. She earned $55,000 in wages for
2019.
• Olivia provided all the support for her two grandchildren who lived with her all year.
Cora is 11 years old and Jack is 15 years old.
• She does not have enough deductions to itemize.
• Olivia, Cora, and Jack are all U.S. citizens with valid Social Security numbers.

Basic Scenario 1: Test Questions

1. What is the amount of Olivia’s standard deduction?

a. $18,350
b. $20,000
c. $24,400
d. $25,700

2. The maximum amount of child tax credit that Olivia is able to claim per qualifying
child for 2019 is:
a. $500
b. $1,000
c. $1,400
d. $2,000

Basic Scenarios 25
Basic Scenario 2: Felix and Isabella Franklin

Interview Notes

• Felix and Isabella Franklin have been married since 2016. Felix is a U.S. citizen
with a valid Social Security number. Isabella is a resident alien with an Individual
Taxpayer Identification Number (ITIN). They elect to file Married Filing Jointly.
• Felix worked in 2019 and earned wages of $40,000. Isabella worked part-time and
earned $10,000.
• They have two children: Rose, who is 3 years old, and Iris, who is 8 years old. Both
children were supported by their parents all year. Rose is a U.S. citizen and has a
valid Social Security number. Iris is a resident alien and has an ITIN.
• Felix and Isabella paid $5,000 in daycare for Rose and Iris. The statement from
the daycare provider includes the provider’s name, address, valid Employer
Identification Number, and the amount paid for Rose and Iris’s care.
• Felix, Isabella, Rose, and Iris lived together in the U.S. all year.

Basic Scenario 2: Test Questions

3. Are the Franklins eligible to claim the earned income credit?

a. Yes, because everyone has a taxpayer identification number.
b. Yes, because Felix has a Social Security number.
c. No, because Isabella has an ITIN.
d. No, because their income is too high.

4. Which credit(s) can the Franklins claim on their 2019 tax return?
a. Child and dependent care credit for both Rose and Iris
b. Child tax credit for Rose
c. Credit for other dependents for Iris
d. All of the above

26 Basic Scenarios
Basic Scenario 3: Henry Howard and Charlotte Criswell

Interview Notes

• Henry and Charlotte are both 28 years old.

• Henry and Charlotte separated in 2018 and their divorce was finalized in January
2019. During 2019, Charlotte paid Henry alimony payments of $12,000.
• Charlotte earned $85,000 in wages during 2019. Henry earned $13,000 in wages.
• Henry has two children from a previous relationship. Ethan is 9 and James is 6
years old and they lived with Henry for all of 2019. Ethan and James did not provide
over half of their own support.
• Henry paid all the rent, utilities, and household expenses.
• Henry, Charlotte, Ethan, and James are all U.S. citizens with valid Social Security
numbers.

Basic Scenario 3: Test Questions

5. Which of the following statements is true?

a. Henry must report the $12,000 alimony received as income and Charlotte can
claim alimony paid as an adjustment to income.
b. Henry is not required to report the $12,000 alimony received as income and
Charlotte cannot claim alimony paid as an adjustment to income.
c. Henry must report the $12,000 alimony received as income and Charlotte
cannot claim alimony paid as an adjustment to income.
d. Henry is not required to report the $12,000 alimony received as income and
Charlotte can claim alimony paid as an adjustment to income.

6. Who can claim Ethan and James as qualifying children for earned income credit?
a. Charlotte
b. Henry
c. Both Charlotte and Henry
d. Neither Charlotte or Henry

Basic Scenarios 27
Basic Scenario 4: Mark and Sue Malone

Interview Notes

• Mark and Sue are married and U.S. citizens with valid Social Security numbers.
• The Malones received wages and a large amount of taxable income not subject to
withholding.
• Mark did not have health insurance coverage for 2019 and Sue had health insur-
ance coverage through her employer.
• The Malones have a $2,500 balance due on their joint return and want advice on
how to prevent a balance due next year. They do not anticipate a change in their
sources of income and amounts received next year.

Basic Scenario 4: Test Questions

7. One of the ways Mark and Sue can prevent having a balance due next year is to
use the Tax Withholding Estimator at IRS.gov and then adjust their withholding.
a. True
b. False

8. Mark and Sue should not file their tax return until they can pay the entire balance
due.
a. True
b. False

9. Mark is required to make a shared responsibility payment because he did not have
health insurance in 2019.
a. True
b. False

28 Basic Scenarios
Basic Scenario 5: Aurora Davis

Interview Notes

• Aurora and Oscar separated in 2017 and divorced in October 2019. She earned
$40,000 in wages and paid more than half the cost of keeping up her home in 2019.
• Aurora and Oscar have a son, Milo, who is 17 years old and unmarried.
• Aurora signed Form 8332 (Release/Revocation of Release of Claim to Exemption
for Child by Custodial Parent) allowing Oscar to claim Milo in 2019.
• Milo is a full-time student working towards a degree in computer information
systems. Milo lived on campus during the school year and spent the summer at
home with his mother.
• Milo does not a have a felony drug conviction and is not a qualifying child for anyone
except Aurora.
• Aurora paid $5,000 of Milo’s tuition that was not covered by his scholarship.
• Aurora provided more than half of her son’s support and all the cost of his room and
board on campus.
• Milo’s only income was $3,800 in wages and $400 of dividend income. He had no
federal or state tax withholding.
• Aurora and Milo are U.S. citizens and have valid Social Security numbers.

Basic Scenario 5: Test Questions

10. Is Milo required to file a federal tax return?

a. Yes, because Milo’s gross income was more than the gross income limit
required to file a federal tax return.
b. Yes, because Milo had unearned income over the unearned income limit of
$1,100 required to file a federal income tax return.
c. No, because Milo had earned income that was under the earnings limit that
requires him to file a tax return.
d. No, because Milo didn’t have any federal or state income tax withholding.

Basic Scenarios 29
 11. Aurora’s most advantageous filing status for 2019 is Single.
a. True
b. False

12. Aurora cannot claim her son for the earned income credit because he did not live
with her for more than half the year and does not meet the residency test.
a. True. Milo only lived with his mother during the summer, which was less than
six months.
b. False. Attendance at school is considered a temporary absence and those
months are counted as time that Milo lived with her for the earned income
credit.

13. Milo is Oscar’s qualifying person for which of the following?

a. Head of Household filing status
b. Earned income credit
c. Credit for other dependents
d. Child tax credit

30 Basic Scenarios