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REG CPA Practice Questions: Identifying Qualified Dependents
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May 3, 2024
In this video, we walk through 5 REG CPA exam practice questions going over the requirements for qualifying children and qualifying relative dependents. Important Links Link to the free study training webinar mentioned in the video: https://www.superfastcpa.com/strategic-study See the full post for this video: https://www.superfastcpa.com/reg-cpa-practice-questions-explained-identifying-qualified-dependents/ See the other REG walkthrough videos here: https://www.superfastcpa.com/free-reg-cpa-practice-question-walkthroughs/ 00:00 Intro 00:43 Question 1: General Qualifying Dependent Rules 02:27 Question 2: Qualifying Child Rules 05:11 Question 3: Qualifying Relative Rules 08:32 Question 4: Determining Who is a Qualifying Child 10:23 Question 5: Determining Who is a Qualifying Relative 12:16 Pillar Topics
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Welcome to another reg walkthrough video
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I'm Logan, and in today's video, we're going to be going over identifying qualified
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dependence for tax purposes. And we're going to be doing that, the Superfast CPA way, which is diving straight into questions
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to learn the material. If this is the first thing you're seeing from us, or if you don't know much about our strategies
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make sure you go to superfast CPA.com and check out our free one-hour webinar training
0:22
where we go over the six key ingredients to passing the CPA exam. It's only one hour long, it's free, and it will save you so much time struggling with your
0:30
Also, if you like the idea of going through questions as your main learning material
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make sure you check out our Super Fast CPA app where we have five question mini quizzes that
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you can take throughout the day to continually be practicing. With all that said, let's dive straight into the questions
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Okay, here's question one. Which of the following statements is not true according to the general rules for claiming
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dependence on a US tax return? Okay, this is the first question of the video
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We don't really know much about what the rules are for dependents in the US
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So let's go ahead and look at the answer to start learning. Okay, so the one that's not true is that a person can be claimed as a dependent on more than one tax return
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if the individual is claiming them agree to share the dependency exemption
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Okay, so this isn't true. So let's go ahead and read what the criteria are. When claiming a dependent on a U.S. tax return, several key criteria must be met
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The dependent must be a U.S. citizen, resident alien, or national, or resident of Canada or Mexico
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It's not permissible for a person to be claimed as a dependent on more than one tax return
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except in rare and specific circumstances, and for the CPA exam, that's not going to be important
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Additionally, a dependent themselves cannot claim anyone else as a dependent on their tax return
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Importantly, spouses are not eligible to be claimed as dependents if you're filing jointly
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So if you file separately, then sometimes you can claim a spouse as a dependent, but again, that's not a very likely scenario
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So just know that if you're married filing jointly, you can't claim your spouse as a dependent
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Finally, for someone to qualify as a dependent, they must either be a qualifying child or a qualifying
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relative according to IRS definitions. And we're going to learn about those two things, qualifying child and qualifying relative definitions
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in the next questions. But these are the basic requirements no matter what, whether they're a child or a qualifying relative
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These are the basic things that have to be met for somebody to be counted as a dependent on your tax return
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So now that we've learned the basics, let's go ahead and go to the next question
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to learn more. Okay, here's question two. Robert is a single taxpayer with three children
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The first, David, is a 20-year-old full-time college student who earned $4,000 during the summer
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but lived with Robert for the rest of the year. The second, Emma, is a 25-year-old professional
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dancer who lives independently and earned $40,000 last year. Emma has not been a full-time
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student since turning 22. The third, Lily, is a 17-year-old high school student who lives with Robert
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full-time. Robert provided more than half of the support for David and Lily, but not for Emma
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Which of Robert's children qualify as dependents under the qualifying child criteria? This is something
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all new. We don't know what the qualifications are, so let's dive straight into the answer to start
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learning how this works. Okay, and the answer is both David and Lily, so let's learn why. A qualifying
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child for tax purposes must meet specific criteria. So these are extra criteria on top of what we
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learned before. They should have a defined relationship with the taxpayers, such as being their
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son, daughter, stepchild, foster child, sibling or descendant of any of these, including
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adopted children So basically they have to be your child or stepchild or adopted child or they can even be your grandchild of one of the above The child must be under the age of 19 That is a very specific
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wording right there under the age of 19. That doesn't include 19. So basically it's saying all the
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way through 18 they can be counted as your dependent. But once they turn 19, then they won't unless
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they meet this under 24 if a full time student requirement. And let's read that again. Or
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under 24 if a full-time student for at least part of five months of the year, or any age
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if permanently and totally disabled. They must live with the taxpayer for more than half of the
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year, though there are some exceptions to this requirement. And again, that's that five-month
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rule that I was just barely talking about. The child cannot provide more than half of their own
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financial support during the year. Lastly, the child cannot file a joint return for the year unless
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it is only to claim a refund of tax withheld or paid. So essentially, they're not going to be
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able to file a joint return. These tests must all be passed for a child to be considered a qualifying
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child for the purposes of claiming tax dependencies. David meets the qualifying child criteria because he's
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under 24 and a full-time student for at least part of five months during the year. He lives with Robert
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more than half of the year and Robert provides more than half of his support and David's income does
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not disqualify him. Lily also qualifies because she is under 19, lives with Robert full-time
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and Robert provides more than half of her support. Emma, however, does not qualify as a qualifying child
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because she is over the age limit for children who are not full-time students, and does not meet the support criterion since she is financially independent
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So again, only David and Lily can be counted as qualifying child dependence
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So let's go ahead and go to the next question to learn about qualifying relative dependence
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Okay, here's question three. Matthew is reviewing his tax information to determine if he can claim any qualifying relatives as dependents
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He supports his 45-year-old brother, Alex, who lived with him the entire year
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Alex has been unemployed and earned no income. Matthew also supported his girlfriend, Laura
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who lived with him from January to May. Laura then moved out, got a job, and earned $5,000 for the
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rest of the year. She has no other significant sources of support. Matthew wants to know which
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if either, can be claimed as a qualifying relative. Assume that the income threshold for a
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qualifying relative for the given year is $4,500. We don't really know what that is, but it's given to
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us. Given the IRS rules for qualifying relatives, who can Matthew claim as a dependent
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Okay, so again, we don't know the rules here, which is why you go through questions and look at the answers, because that's the most efficient way to quickly learn what the rules are
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So let's go ahead and look at the answer. Okay, only Alex. So let's read through this
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To qualify as a dependent under the qualifying relative criteria, an individual must not be anyone's qualifying child and must meet three other specific tests
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So again, you can't be the qualifying child of somebody and also be a qualifying relative
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It's either or. They must either live with the taxpayer all year as a member of their household or be related to the taxpayer in one of the ways specified by the IRS, and we'll read about that in a second
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Their gross income for the year must be less than the established threshold for the given year, which in this case was $4,500, and the taxpayer must provide more than half of their total support for the year
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I just want to point out that $4,500 is not the actual current limit
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I believe in 2023, it was $4,700, but that's not what we're trying to teach you here
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I'm not trying to teach you the exact threshold because that's going to change with time
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You'll need to know that from your review course or from Googling it, but just know that there is
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a threshold for qualifying relatives that if their gross income is above that threshold
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then they can't be a qualifying relative. And then as far as this part right here where it says
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they either live with them all year or they are a specific relative these are the specific relatives right here This includes siblings half siblings parents grandparents step parents aunts uncles nieces nephews and certain in such as son daughter father mother brother and sister
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Adopted and foster family members are also included. So pretty much most of your family
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whether that's, you know, siblings or parents or grandparents or whatever, they can be a qualifying
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relative in this situation. So Alex can be claimed as a qualifying relative because
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he lived with Matthew all year, satisfying the member of household requirement, and also he's a relative
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so either way, he is not a qualifying child of any other taxpayer, he had no income, thus his gross
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income is below the threshold, and Matthew provide more than half of his financial support
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So Alex can count as a qualifying relative. Laura cannot be claimed because although Matthew provided
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support for part of the year, she did not live with him for the entire year as required by the member
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of household test, and her earnings exceeded the gross income limit for qualifying relatives
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more the fact that she moved out and supported herself for more than half of the year suggests that Matthew did not provide more than half of her total support for the year. So that's how the qualifying
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relative rule works. So again, there's the basic criteria that we went over in the first question
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Then we went over the criteria for a qualifying child. And now we've gone over the criteria for
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a qualifying relative. So for the last two questions of the video, let's see if you can apply what
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you've learned from those three questions to figure out who counts as a dependent or a qualifying
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child or a qualifying relative. Okay, here's question four. Linda is preparing her tax return and assessing who she can claim as dependents
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Her son, Derek, is 19 years old, not a student, and earned $3,000 from a part-time job while
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living with Linda the entire year. Her daughter, Rachel, is 23 years old, a full-time graduate student, and earned $1,500
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from a campus job. Rachel lived with Linda during school breaks across six months of the year
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Lastly, Linda's mother, who is a permanent resident of the U.S., and has no income
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lived with Linda the entire year. Linda provided the majority of support for all three individuals throughout the year
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Assume the gross income threshold for the year is 4,700. Based on the IRS rules for dependents, how many individuals can Linda claim as child dependence on her tax return
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Okay, you've learned all the rules so far. Take a second, pause the video, see if you can read through this and figure out who counts as a child dependent
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And when you're ready, come back and we will look at the answer. Okay, let's look at the answer. So only one person can be counted as a child dependent
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Let's read about that. Derek does not qualify as a dependent as a qualifying child because he is not a student and is not under the age of 19. Again, that can be a little tricky. It's specifically under the age of 19. However, he would meet the qualifying relative test because his gross income was below the given threshold and the fact he lived with her the whole year, most likely means she also provided for more than half of his support. But again, the question was child dependence. So Derek wouldn't count for that
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Rachel qualifies as a dependent under the qualifying child criteria because she is under 24
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A full-time student and despite not living with Linda the entire year, temporary absences such as for education are exceptions for the residency rules
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Linda's mother qualifies as a qualifying relative because she lived with Linda the whole year, has no income and thus is below the income threshold
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and Linda provided more than half of her support. Let's go ahead and go to the last question to apply this one more time
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Okay, here's the last question. Carlos is determining how many dependents he can claim on his tax return
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He has been financially supporting his 26-year-old brother, Miguel, who is not a student
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and made $2,000 last year working part-time. Miguel lived with Carlos all year
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Carlos also supported his 18 niece Anna a part college student who earned last year and lived with Carlos except for two months when she was traveling for a study program Finally Carlos has been taking care of his aunt who is a U citizen living with him the whole year without any income
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Carlos provided the majority of support for all three individuals. Assumed the income threshold
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for this year is $4,500. Based on the IRS rules for dependents, how many of these
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individuals can Carlos claim as qualifying relative dependence? All right, again, this is the last
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question, you've learned all the rules up to this point, pause the video, read through it again
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and see if you can get the correct answer, and when you're ready, come back, unpause the video, and we will look at the answer. Okay, here's the answer. Only two of them can be counted as
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qualifying relatives, so let's read about that. Miguel, although over the age limit for a
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qualifying child and not a student, meets the criteria for a qualifying relative because his
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income is below the threshold, he lived with Carlos the entire year, and Carlos provided
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more than half of his support. Anna does not qualify as a dependent either as a qualifying child
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or a qualifying relative. She is over the age limit for a qualifying child who is not a full-time
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student and her income exceeds the threshold for a qualifying relative. And again, because Anna is not
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his child, even though she's a student and she's a full-time student, because she's not his
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child, then she can't qualify for that full-time student exception. So she's not a qualifying relative
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because of her income. Carlos's aunt qualifies as a qualifying relative because she lived with Carlos
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the whole year, had no income and Carlos provided the majority of her. her support. Okay, we learned a lot from all these questions. Let's go ahead and do one more part
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of the super fast CPA strategy, which is something called pillar topics. Now, the idea behind
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pillar topics is as you're going through the questions to learn the material or even after you've
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gone through the questions for the day, you take a second and you think about the things that you learned
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from doing those questions. You will have noticed multiple things that came up that are obviously
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important according to your review course. These are the things that you saw three, four times in the
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questions and kept coming up, making it obvious that you need to know these things for the exam
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So let's go ahead and look at the pillar topics for this video. And here are the pillar
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topics for the video. So a qualifying dependent, and this is overall, has to be a U.S. citizen or
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resident. Essentially, you know, there are some other things where they can be a resident of Canada
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or Mexico, but overall, U.S. citizen or resident can't be claimed by anyone else, can't claim
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their own dependent, and you can't claim your spouse as a dependent in most situations. So that is
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the overall rules right there. And then they also have to be either a qualifying child or a qualifying
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relative. And for a qualifying child, they must be your child or a stepchild or a foster or adopted
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child or a sibling, you know, something along those lines, or the child of one of those. They have to be
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under 19 or under 24 if a full-time student. And they have to live with you for more than half of the
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year and you have to give them more than half of their support. And again, these are the basic rules
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right there. For a qualifying relative, they can't be a qualifying child. They have to live with you
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all year or be a relative. And again, we went over who qualifies as a relative, which it's most of
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your relatives. Their gross income has to be under a certain threshold, and they have to get more
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than half of their support from you. All right, so those are the pillar topics for the video
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As I finish up this video, I just want to give everyone one more reminder about the Superfast CPA
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training webinar that we have on superfast CPA.com, where we teach you the six key ingredients to passing the
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CPA exam. Also, if you liked going through the questions as your main learning material, make
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sure you check out our Super Fast CPA app where we have five question mini quizzes that you can
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easily take on your phone all throughout the day to continually be learning through questions
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If you liked this video, make sure to like it and leave a comment. I hope this was helpful, and I'll see you in the next video
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