VITA/TCE Advanced Certification Test Question 28 for tax year 2014
VITA Advanced Test Question No. 28
VITA/TCE Advanced Certification Test Question 28 for 2014
In the 2014 Advanced Certification Course for the VITA tax program, sponsored by the Internal Revenue Service, there is the following question found in IRS booklet form 6744 VITA/TCE Volunteer Assistor’s Test/Retest for 2014 Returns.
Question 28 on Advanced Scenarios Page 95: How much of the $17,500 gross distribution reported on Form 1099-R is taxable in 2014?
The following information from Advanced Scenario 8, Page 84: Elliot and Kathy Blackburn, Interview Notes is necessary to answer the question.
Elliot retired from the local school district and began receiving retirement income in November, 2010. No distributions were received prior to his retirement. Eliot and Kathy selected a joint survivor annuity for these payments. Eliot has recovered $1,320 tax free through 2013.
Eliot’s 1099R for tax year 2014 from the Hickory Corporation is found on Advanced Scenarios Page 89. Box 1: Gross Distribution shows $17,500. We need to figure the taxable amount of this distribution that goes into Box 2a.
Eliot has received $1,320 from November, 2010 through December, 2013. Therefore he received benefits for 2 months in 2010; 12 months in 2011; 12 months in 2012 and 12 months in 2013 for a total of 38 months.
We divide the 38 months into the $1,320 that Eliot has received tax free.
[$1,320 divided by 38 months] = $34.7368 per month.
We multiply $34.74 per month times 12 months in 2014. [$34.74 times 12] = $416.84
We then subtract $417 from the $17,500 distribution. [$17,500 minus $417] = $17,083 which is the taxable amount that goes in Box 2a. The answer is $17,083.
To check this answer go to Question 28 on the Advanced Scenario 8: Retest Questions on Advanced Scenario Page 113. Question 28: How much of the $17,500 gross distribution reported on Form 1099-R from the Hickory Corporation is taxable in 2014?
There is a choice of answers: a) $16,786; b) $17,016; c) $17,083; d) $17,134.
The answer is c) $17,083.
When a student studies for this advanced certification exam, the student should do all 40 questions in the test section and all 40 questions in the retest section together. The retest questions help the student re-enforce answers. The exam is open book and the choice of questions only comes from the test and retest sections.