Scenario 1: Donna and Becky Howard Interview Notes . Becky is 25 years old and unmarried. She has two children: Seth is 7 years old and Kathleen was born in 2021. They all lived with Donna, Becky's mother, in 2021. Seth and Kathleen's father do not live with them, and Becky has not signed a Form 8332 Becky works full-time and made $30,000 in 2021. The children attended daycare while she worked. She received a statement from her childcare provider showing that she paid $8,000 for the care of both children for the year. Donna is unmarried and earned $25,000 in 2021. Donna paid over half the costs of keeping up the home for herself, Becky and Becky's children. In 2020, Donna's adjusted gross income (AGI) was higher than Becky's and Becky allowed Donna to claim Seth as a dependent. Donna received a $2,800 third Economic Impact Payment (EIP 3) in 2021. Becky received an EIP 3 of $1,400. . Donna opted out of the advance payments of the Child Tax Credit. Becky did not receive any advance payments of the Child Tax Credit Becky, Donna, Seth, and Kathleen are all U.S. citizens with valid Social Security numbers and lived in the United States all year. Scenario 1: Retest Questions Seth and Kathleen are the qualifying children of more than one person and are subject to the tiebreaker rules. Donna cannot claim them as dependents for 2021. a. True b. False 2. Donna must file as Single and Becky may file as Head of Household. a. True, because Donna does not have a qualifying person for Head of Household b. True, because Becky has a qualifying person for Head of Household c. False, because Donna has a qualifying person for Head of Household d. False, Becky cannot claim Head of Household because she doesn't pay more than half the cost of keeping up the home and Donna doesn't have a qualifying person Qualified Experienced Volunteer 139 3. For 2021, what is the maximum refundable Child Tax Credit for a qualifying child under the age of six? 4. No one is eligible to claim a Recovery Rebate Credit for Seth because Donna received the EIP 3 for Seth in 2021. a. True b. FalseScenario 2: David Newberry and His Parents Directions This scenario does not require you to prepare a tax return. Refer to the interview notes here and the accompanying Form 1098-T on page 122 for the information needed to answer the questions that follow. Interview Notes . David is 19 years old and a full-time college sophomore majoring in physics. The college is an eligible educational institution. He resides on campus during the school year and lives with his parents during the summer. David spent $1,500 on books in 2021. . David's parents provided more than half of his support. David has never been convicted of a felony. . David received Form 1098-T as shown on the following page. The Box 5 amount is an unrestricted scholarship. David received no other income in 2021. David and his parents are U.S. citizens with valid Social Security numbers. . David and his parents came to the site to have their returns prepared. They want to maximize the tax benefits for the family. Scenario 2: Retest Questions 5. If his parents optimize use of the American opportunity credit, David will include $7,500 of his scholarship as taxable income. a. True b. False 6. For the purpose of determining if David has a filing requirement, taxable scholar- ship and fellowship grants are considered earned income. a. True b. False Qualified Experienced Volunteer Retest Questions 141Scenario 3: Sophia Woodru Directions This scenario does not require you to prepare a tax return. Refer to the interview notes here and the accompanying brokerage statement on page 125 for the information needed to answer the questions that follow. Interview Notes - Sophia is 20 years old, unmarried, and graduated from junior college in December 2020. - In 2021, she worked as a care provider for her disabled sister, Savannah, and received $15,200 in Medicaid waiver payments reported on Form W2 Box 1. - In June, Sophia sold some stock she inherited. She provided the brokerage state- ment showing all her stock sales for 2021. - Sophia is a U.S. citizen, has a Social Security number, and lived with Savannah in the U.S. all year. - Sophia provides all of her own support. Scenario 3: Retest Questions 7. Sophia's inherited stock sale is treated as a short-term transaction a. True b. False B. What is Sophia's total capital gain or loss? a. $400 b. $3,800 c. $4,1 00 d. $4,400 9. Sophia is eligible for the earned income credit. a. True b. False 10. Sophia must include the qualied Medicaid waiver payments in both gross income and earned income if she wishes to claim the Earned Income Credit. a. True b. False 142 Qualied Experienced Volunteer Retest Questions