Income tax accounting project

You have received the 2017 tax information for your clients Donald and Donna Dweeb. You have the following information regarding them and their family:

PERSONAL INFORMATION:

Donald D Dweeb born 10/11/75

Donna D Dweeb born 07/07/77

3 children:

Dwayne born 08/14/98 SSN 456-98-2105

Darren born 11/14/08 SSN 458-97-1956

Darlene born 2/21/13 SSN 455-99-8765

Other information: Donald’s eccentric uncle, Desmond Dweeb, lives with the Dweebs. His date of birth is 8/3/51. His SSN is 641-01-7597

INCOME:

1) Earned income:

Donald has a W2 attached

Donna has a 1099-MISC attached for her work as a consultant. She uses a room in her home for an office. The room is 340 sq feet and total sq footage of the house is 3,000 sq feet. The house was purchased 1/1/15 – total cost of the house plus improvements is $350,000 (allocate 15% to land). Additional home costs: homeowners’ insurance $1,050; home repairs $2,000; utilities $6,000; home security system $320.

Donna uses her personal car for her work. She paid $500 for business parking and tolls in 2017. She also traveled to professional conferences out of town at a cost of $1,800.

2) Interest and dividend income:

1099-Int and 1099-Div attached

3) Sale of stocks

SOLD 55 SHS. VANDELAY INDUSTRIES ON 9/5/17 RECEIVED $45,000.

SOLD 100 SHS. MITIGATED MIGRAINES INC 03/10/17. RECEIVED $25,000

ON 12/31/17, THEY WERE NOTIFIED THAT 100 SHS OF JOYS R US WAS WORTHLESS.

Note: the above info was reported on Form 1099B (NOT ATTACHED), but no cost basis was reported on it to the IRS or to the taxpayer.

They also have a $7,000 long-term capital loss carryforward from 2016.

4) Distribution from pension plan for Donald (see form 1099R ).

1099-R attached

5) Rental property: Single-family residence 100 Jerome Avenue Margate, NJ 08402

House purchased 1/1/12

Rental income received in 2017 = $12,500

Mortgage interest paid in 2017 = $ 8,200

Real estate tax paid in 2017 = $ 6,500

Repairs paid in 2017 = $ 2,700

Insurance paid in 2017 = $ 1,100

Utilities = $ 6000

Depreciation for 2017 = ???

DEDUCTIONS:

1) MEDICAL:

a. Medical insurance. Donna pays $1,800 per month from her business checkbook. Her policy covers the whole family.

b. Additional medical expenses for family in 2017 $4,300.

2) Taxes: In addition to taxes withheld on W2, Donna paid quarterly estimates as follows:

Federal $1,500 per quarter and PA $300 per quarter. Payments were made for both on 4/15, 6/15, 9/15/2017 and 1/15/18. No estimates paid for prior year in 2017. No balance due paid in 2017 for 2016.

3) Real estate taxes paid for home = $8,100

4) Mortgage interest paid in 2017 and reported on form 1098 Is $13,200.

5) Home equity interest paid reported on form 1098 = $1,250

6) Charity paid from Donald and Donna’s personal checkbook = $5,200 to church and other charitable organizations. Also gave $400 in old clothes and household items donated to Salvation Army.

7) Gave $500 in cash to neighbors who are down on their luck.

8) Donald used his car for his job and was not reimbursed by his employer.

9) He also paid $400 in parking and tolls and $3,000 for business meals.

10) On 3/15/17, Dweebs paid $900 to have 2016 income tax prepared.

11) Donald paid union dues of $950 in 2017 to Dummies & Mannequins Local #501

12) Dwayne Dweeb is a freshman in college. 1098T for tuition and fees paid in 2017 is attached.

Required:

· Using the information provided above, as well as the attached reporting forms, prepare a tax return for the Dweebs for 2017. If you feel that there is any missing information, let me know and I will provide you with answers. HINT: THERE IS MISSING INFO. LOOK AT THE AGES OF THE DEPENDENTS AND THINK ABOUT CREDITS TO WHICH THE DWEEBS MAY BE ENTITLED. THERE ARE ALSO OTHER AREAS FOR WHICH YOU NEED MORE INFO. THERE ARE AT LEAST 7 PIECES OF MISSING INFORMATION. MAKE SURE YOU ASK ME TO RECEIVE FULL CREDIT !

· Download all needed forms from irs.gov including: Forms 1040,2106, 2441,8949,8863,8829(pages 1 and 2) Schedules A, B, C, D,E ,SE. You will also need the “Qualified Dividends and Capital Gain Worksheet- Line 44 from the instructions to form 1040. MAKE SURE YOU ARE USING 2017 FORMS AND 2017 TAX TABLES.

· Print out a copy of the all forms and schedules.

· The completed tax return is due on by Friday May 4, 2018 at midnight (although it’s really due by Wednesday April 17 by midnight). TIMESHEETS AND GROUP EVALUATIONS ARE ALSO DUE AT THAT TIME.

· Remember, don’t wait until the last minute to complete this project - the Dweebs may be out of town and unable to answer any of your questions.

· THE RETURN MUST BE DONE MANUALLY – YOU ARE NOT PERMITTED TO USE TAX SOFTWARE (E.G. TURBOTAX) OR ENLIST THE AID OF PARENTS, OTHER RELATIVES OR FRIENDS WHO ARE CPA’S OR TAX ATTORNEYS. YOU MAY ASK ME AS MANY QUESTIONS AS YOU LIKE AND SUBMIT DRAFT COPIES FOR ME TO REVIEW (UP TO 2 TIMES). DRAFT COPIES MAY NOT BE SUBMITTED LATER THAN WEDNESDAY MAY 2, 2018.