Tax return project

ACCT$413$–$Tax$Return$Assignment$ Beth$Vermeer$8$Fall$2015$

$ Facts:$ !

Bob!(age!40)!and!Susan!(age!37)!are!married!taxpayers!and!they!file!jointly.!!Both!

have!excellent!vision.!!They!live!at!42!South!Street,!Philadelphia,!PA!19324!!!Bob’s!

social!security!number!is!888J88J9898!and!Susan’s!social!security!number!is!333J

33J3222.!!Neither!Bob!nor!Susan!wishes!for!$3!to!go!to!the!presidential!election!

campaign!fund.!!

!

Bob!and!Susan!provide!all!of!the!support!for!their!dependent!children!listed!below:!

! Hope! ! daughter! social!security!number!111J11J1111! age:!5! !

! Joy! ! daughter! social!security!number!222J22J2222! age:!3!

! Bobby!! son! ! social!security!number!333J33J3333! age:!1!

!

Bob!and!Susan!also!provide!all!the!support!of!Bob’s!cousin,!Joe,!who!lived!with!them!

for!the!last!9!months!of!2014!and!earned!$2,100!from!a!partJtime!job!in!2014.!!Joe!is!

25!years!old!and!his!social!security!number!is!444J44J4444.!!!

!

Bob!and!Susan!provide!you!with!the!following!information!about!their!income!for!

2014:!

!

• Bob!works!for!Lehigh!Brothers.!!Last!year,!he!earned!taxable!wages!of! $164,000.!!His!WJ2!also!shows!the!following!withholdings!for!the!

year:!$22,000!of!federal!income!tax,!$8,700!of!state!income!tax,!$7,254!

of!social!security!taxes,!and!$2,378!of!medicare!taxes.!!

• Bob!also!worked!a!second!job!with!PartJtime!Plumbers.!!Last!year,!he! earned!taxable!wages!of!$25,000!and!his!WJ2!shows!the!following!

withholdings:!$4,500!of!federal!income!tax,!$1,000!state!income!tax,!

$1,550!of!social!security!taxes,!and!$363!of!medicare!taxes.!!

• Susan!works!partJtime!as!a!lawyer!with!Dewey,!Cheatem!&!Howe.!! Last!year,!she!earned!taxable!wages!of!$92,000!and!her!WJ2!shows!

the!following!withholdings:!$12,000!of!federal!income!tax,!$7,000!of!

state!income!tax,!$5,704!of!social!security!taxes,!and!$1,334!of!

medicare!taxes.!

• Both!Bob!and!Susan!are!eligible!for!and!participate!in!a!qualified! retirement!plan!through!their!employers.!!

!

!

!

!

!

• Susan!also!consults!partJtime!and!operates!as!a!one!member!LLC! under!the!business!name!Legal!Solutions.!!Her!business!information!is!

as!follows:!

o Consulting!revenues!! ! ! $43,000! o Professional!malpractice!insurance!! $8,000! o Advertising!expenses! ! ! $1,000! o Supplies!expenses! ! ! ! $5,000! o Meals!and!entertainment!(client!meetings)!$6,000! o Travel!expenses! ! ! ! $!7,000! o Professional!licensing!fees!(paid!to!PA)! $!1,200! o Parking!fines!(paid!to!PA)! ! ! $!750! o Office!expenses! ! ! ! $3,400! o Computer!(placed!in!service!6/15/14)! $4,500!

! She!would!like!to!take!the!maximum!depreciation! allowable!on!this!asset!in!2014!

o Cell!phone!(placed!in!service!11/12/14)! $!390! ! Business!use!percentage:!80%! ! She!does!not!want!to!take!Section!179!or!bonus!

depreciation!on!this!asset!

o SUV!weighing!4,800!pounds!! ! $38,000! ! Placed!in!service!8/10/14! ! Business!use!percentage:!100%! ! She!does!not!want!to!take!Section!179!or!bonus!

depreciation!on!this!asset!

• Bob!and!Susan!also!own!a!rental!property!and!provide!the!following! information!to!you:!

o Rental!income! $30,000! o Mortgage!interest! $12,000! o Real!estate!taxes! $5,000! o Utilities! ! $2,000! o Gift!to!Congressman!who!helped!them!get!rental!zoning!for!the!

property! ! $1,500!

o The!rental!house!was!purchased!on!March!3,!2014!and! immediately!rented.!!The!home!was!purchased!for!$220,000.!

o The!address!is!:!123!Easy!Street,!Country,!TX!76132! • In!addition!to!the!above!information,!Bob!and!Susan!provide!you!with!

the!following!information:!

o Paid!home!mortgage!interest!on!home!residence!$18,700! ($400,000!loan!principal)!

o Paid!interest!on!a!home!equity!loan!used!to!pay!for!a!family! vacation!to!Europe!($100,000!equity!loan!taken!out!when!FMV!

of!home!was!$600,000)! ! ! ! $5,200!

o Paid!real!estate!taxes!on!home!residence! ! $7,500! o Paid!medical!insurance!premiums!and!coJpays! $6,100! o Cash!donations!to!church! ! ! ! $10,500!

o Clothing!donations!to!Goodwill!($10,000!purchase!price!and!$! 2,000!thrift!value)!

o Donation!of!Disney!Stock!to!St.!Jude’s!(a!qualified!charity)!–!the! stock’s!FMV!at!date!of!donation!is!$7,000!and!it!was!purchased!

on!3/1/10!for!$4,000!

o Cash!donation!to!school!auction!(received!tickets!to!a! Broadway!play!in!return!valued!at!$400)! ! $750!

o Received!a!state!income!tax!refund!of!$615!from!their!2013!tax! return!and!applied!it!to!their!2014!tax!liability!

o Paid!$17,000!per!child!for!child!and!dependent!care!expenses! during!the!year!to!The!Caring!Center,!3000!Oak!Street,!

Philadelphia,!PA!19004;!EIN!#22J1111111!

!

Required:$ !

Prepare!Bob!and!Susan’s!Form!1040!for!2014!by!hand.!Please!do!not!use!any!tax!

software!for!this!assignment.!Also,!please!make!note!of!any!issues!and/or!

recommendations!that!you!have!for!Bob!and!Susan.!

!

What$to$turn$in$(be$sure$to$follow$the$proper$order$of$attachment):$ !

Form!1040!

Schedules!A,!C,!E,!SE!

!

And!the!following!forms!(to!help!you!finish!the!return):!

!

Form!2441!

Form!4562!

Form!6251!

Form!8283!

Form!8959!

!

Notes!on!any!issues!(concerns)!and/or!recommendations!that!you!have!for!Bob!and!

Susan!on!a!word!document!attached!to!the!back!of!the!return.!

!

!

***$Please$turn$in$a$stapled$copy$of$your$tax$return$packet$(with$all$forms$in$ appropriate$order)$at$the$beginning$of$class$–$Your$full$name$should$be$at$the$ very$top$of$the$page$on$the$front$page$of$the$packet.$***$ !

!

Due$Date:$ !

Thursday,!December!10,!2014!(beginning!of!class)!

!