U.S Taxation calculations
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TaxReturnProject2.docxTax Return Project
BA 431, Fall 2017
Use the following information to prepare an individual tax return complete with appropriate schedules and attachments. In addition to the 1040 and schedules, please attach your work papers and calculations.
Taxpayer and Spouse:
Name: Wilbur Farnstrom Name: Ethel Farnstrom
Address: 3083 Honeysuckle Avenue Address: 3083 Honeysuckle Avenue
Dallas, OR 97338 Dallas, OR 97338
SS#: 123-45-6789 SS#: 234-56-7890
Birth date: 6/10/1959 Birth date: 2/12/1962
Status: Married, filing jointly Status: Married, filing jointly
Dependents:
Name: Edward Farnstrom, son Name: Grace Farnstrom, daughter
Address: 3083 Honeysuckle Avenue Address: 3083 Honeysuckle Avenue
Dallas, OR 97338 Dallas, OR 97338
SS#: 345-67-8901 SS#: 456-78-9012
Birth date: 10/11/1998 Birth date: 9/30/2000
Name: Howard Farnstrom, son
Address: 3083 Honeysuckle Avenue
Dallas, OR 97338
SS#: 567-89-1023
Birth date: 11/12/2004
Wilbur is employed as a Bank Manager and has W-2 income of $5,050 per month. Federal taxes of $289 per month are withheld from his gross pay.
Ethel is employed part-time as a Receptionist and has W-2 income of $2,100 per month. Federal taxes of $176 per month are withheld from her gross pay.
State income taxes totaling $215 per month and $138 per month have been withheld from their gross pay, respectively.
Ethel has a small transcription business that she runs from her home. She has dedicated a 4th bedroom in the family’s 3,200 square foot home to the business. The room measures 14 x 20. She reports income for this year of $9,300 from the small business. Ethel paid estimated quarterly taxes of $260 per month for three quarters. Costs relating to the home are as follows:
Annual Property taxes $3,600
Annual Mortgage Interest $10,700
Utilities $152 per month
Landline telephone $62 per month
Business telephone $94 per month
Office supplies $62 per month
The couple has received $221 in interest income on their savings account for the year. Every month, Wilbur deposits $250 to his IRA account and Ethel deposits $150 to her IRA account.
Wilbur takes prescription medication that costs $262 per month. The family incurred dental expenses this year of $2,325 and medical expenses of $5,625 for the year. Ethel went to the eye doctor this year and purchased eyeglasses with a cost to her of $410. Wilbur had to travel to visit a specialist for a heart condition to a city 325 miles from his home. He made the roundtrip twice this year.
The Farnstrom family attends Countryside Church each Sunday. They have an automated deduction from their checking account for contributions of $65 per week. The family traveled on behalf of their church this year. They kept a travel log that indicates they traveled 1,610 miles in charitable travel.
The employees of the bank where Wilbur works are represented by a union. Union dues are 1.6% of each employee’s gross pay. The full-time employees at the office where Ethel works are also represented by a union. Union dues are 1.3% of each full-time employees gross pay.
Ethel has some antique jewelry that has sentimental value. To ensure its safety, she has obtained a safe deposit box at Wilbur’s bank. The fee for the box is $28 per month. The Farnstrom’s store their tax returns and investment information in the box as well.
The couple takes their tax return to a CPA for preparation. The CPA worked on the returns for five hours at an hourly fee of $250 per hour.
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