Sadly, I only had one person attempt my little quiz. Anyway, for those interested, you can take the quiz here. The answers and brief explanations are here:

1. (True or FALSE) A taxpayer must have a qualifying child in order to claim the earned income credit.

EXPLANATION: A person DOES NOT have to have a qualifying child in order to claim the earned income credit. Don't confuse the earned income credit with the child tax credit.

2. (True or FALSE) If a child is a qualifying child for more than one taxpayer, the taxpayers must apply the tiebreaker rules to decide which may claim the child.

EXPLANATION: The tiebreaker applies ONLY if the IRS receives two tax returns trying to claim the same child. Then, the IRS will apply the tiebreaker rule, giving it to the taxpayer who will gain the most economic benefit by claiming the child.

3. (TRUE or False) Taxable alimony received is considered compensation for purposes of contributing to an IRA.

EXPLANATION: Taxable alimony is considered income to those receiving it and a deduction to those paying it.

4. (Choose the correct answer from below) Fonda McGregor is an unmarried head of household with the following income for the year:

Wages $33,000
Bank Interest 300
Municipal Bond Interest 85
Lottery prize 200
Gift from father 3,000

Fonda contributed $1,250 to her traditional IRA, which she will deduct. Compute her AGI.

A. $32,250
B. $32,335
C. $34,950
D. $35,250

EXPLANATION: $33,000 + $300 + $200 - $1,250 IRA deductible contribution = $32,250 AGI)

5. Which of the following items cannot be deducted as a charitable contribution?

A. Cash donation to church
B. Cost of volunteer scout master uniform
C. Cost of raffle tickets purchased from a church
D. Fair Market Value (FMV) of property donated to Red Cross

6. A single taxpayer, age 52, has already filed her 2004 tax return. She would like to make the maximum allowable contribution to a Roth IRA for 2004 by April 15, 2005. Her tax return shows the following:

Wages $25,000
Traditional IRA contribution (all deductible) $1,200
Alimony paid $600

What maximum amount may she contribute to a Roth IRA for 2004?

A. $0
B. $1,800
C. $2,300
D. $3,500

EXPLANATION: The maximum contribution for IRAs for 2004 was $3,000 ($3,500 if over age 50). Since her income was clearly under the Modified AGI threshold of $45,000 for a single filer, she can deduct the full $1,200. She is also allowed to invest an additional $2,300 ($3,500 - $1,200) in a Roth IRA is chooses.

7. Which of the following items is not included when determining the total support of a qualifying relative?

A. Education expenses
B. Child care expenses
C. Life insurance premiums
D. Recreation expenses

EXPLANATION: Included in a list on page 33 of the IRS's Publication 17

8. Which of the following is not considered when determining the cost of maintenance of a home?

A. Insurance on the home
B. Utilities
C. Food consumed in the home
D. Mortgage principal payment

EXPLANATION: Cost of maintenance is associated with the Head of Household filing status. Although it isn't specifically mentioned, page 26 of Publication 17 lists costs to be included. In that list is "mortgage interest."

9. Daniel and Pat House, a married couple, were both 61 years old when Daniel died on January 1, 2004. Pat did not remarry. How many personal expemptions may Pat claim when filing her joint 2004 return?

A. One
B. Two
C. Three
D. Four

EXPLANATION: Daniel is considered alive (which also means that Daniel and Pat are married) for the 2004 tax year. Therefore, Pat is allowed to use her husband's exemption (as long as she doesn't remarry that year) for tax year in which he died.

10. Zoe Williams (17) is a dependent of her parents. She earned $1,475 wages from babysitting and $180 interest from her savings account. How much is the maximum she may contribute to a traditional or Roth IRA for 2004?

A. $0
B. $1,475
C. $1,655
D. $3,000

EXPLANATION: Roth IRA (or any IRA for that matter) is based on "earned income."

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