Project #77111 - accounting-Tax return project

                                                                                    

                                                    Department of Accounting and Finance

                                                                  Tax Return Project - 2

 

Problems:                 Beth R. Jordan lives at 2322 Skyview Road, Mesa, AZ 85201. She is a tax accountant with        Tax Return Problem Mesa Manufacturing Company, 1203 Western Avenue, Mesa, AZ 85201 (employer identification number 11-1111111). She also writes computer software programs for tax practitioners and has a part-time tax practice. Beth is single and has no dependents. Beth

                                 was born on July 4, 1972, and her Social Security number is 123-45-6789. She wants to contribute $3 to the Presidential Election Campaign Fund.

                                 The following information is shown on Beth’s 2013 Wage and Tax Statement (Form W–2)

                                

                                

Line

Description

Amount

1

Wages, tips, other compensation

$65,000.00

2

Federal income tax withheld

10,500.00

3

Social Security wages

65,000.00

4

Social Security tax withheld

4,030.00

5

Medicare wages and tips

65,000.00

6

Medicare tax withheld

942.50

15

State

Arizona

16

State wages, tips, etc.

65,000.00

17

State income tax withheld

1,650.00

                                                Beth received interest of $1,300 from Arizona Federal Savings and Loan and $400 from Arizona State Bank. Each financial institution reported the interest income on a Form 1099–INT. She received qualified dividends of $800 from Blue Corporation, $750 from Green Corporation, and $650 from Orange Corporation. Each corporation reported Beth’s dividend payments on a Form 1099–DIV.

                                                Beth received a $1,100 income tax refund from the state of Arizona on April 29, 2013. On her 2012 Federal income tax return, she reported total itemized deductions of $8,200, which included $2,200 of state income tax withheld by her employer.

                                                Fees earned from her part-time tax practice totaled $3,800. She paid $600 to have the tax returns processed by a computerized tax return service.

                                                On February 8, 2013, Beth bought 500 shares of Gray Corporation common stock for $17.60 a share. On September 12, Beth sold the stock for $14 a share.

                                                Beth bought a used sport utility vehicle for $6,000 on June 5, 2013. She purchased the vehicle from her brother-in-law, who was unemployed and was in need of cash. On November 2, she sold the vehicle to a friend for $6,500.

                                                On January 2, 2013, Beth acquired 100 shares of Blue Corporation common stock for $30 a share. She sold the stock on December 19 for $55 a share.

                                                During 2013, Beth received royalties of $16,000 on a software program she had writ- ten. Beth incurred the following expenditures in connection with her software-writing activities

 

Cost of personal computer (100% business use)

$7,000

Cost of printer (100% business use)

2,000

Furniture

3,000

Supplies

650

Fee paid to computer consultant

3,500

 

 

                    Beth elected to deduct the maximum portion of the cost of the computer, printer, and furniture allowed under the provisions of § 179. These items were placed in service on January 15, 2013 and used 100 percent in her business.

                    Although her employer suggested that Beth attend a convention on current developments in corporate taxation, Beth was not reimbursed for the travel expenses of $1,420 she incurred in attending the conference. The $1,420 included $200 for meals.

                    During 2013, Beth paid $300 for prescription medicines and $2,875 in physician and hospital bills. Medical insurance premiums were paid by her employer. Beth paid real property taxes of $1,766 on her home. Interest on her home mortgage was $3,845, and interest paid to credit card companies totaled $320.

                    Beth contributed $30 each week to her church and $10 each week to the United Way. Professional dues and subscriptions totaled $350. Beth maintained her sales tax receipts, showing total taxes paid of $1,954

                    Beth paid $1,000 in estimated Federal income taxes throughout the year.

 

Part 1- Tax computation

Compute the 2013 net tax payable or refund due for Beth R. Jordan. If you use tax forms for your solution, you will need Forms 1040, 2106–EZ, and 4562 and Schedules A, B, C, D, and SE. Suggested software: H&R BLOCK Tax Software.

 

Part-2 Tax Planning

 

Beth is anticipating significant changes in her life in 2014, and she has asked you to esti- mate her taxable income and tax liability for that year. She just received word that she has been qualified to adopt a 2-year-old daughter. Beth expects that the adoption will be finalized in 2014 and that she will incur approximately $2,000 of adoption expenses. In addition, she expects to incur approximately $3,500 of child and dependent care expenses relating to the care of her new daughter, which will enable her to keep her job at Mesa Manufacturing. However, with the additional demands on her time because of her daughter, she has decided to discontinue her two part-time jobs (i.e., the part-time tax practice and her software business), and she will cease making estimated income tax payments. In your computations, assume that all other income and expenditures will remain at approximately the same levels as in 2013.

 

 

 

Changes to Problem:     Please change all year-ends to one year later (e.g., 2013 becomes 2014).

 

The following information should be helpful in your preparation of the tax return.

 

(1)        (a)                 Requirement:  Prepare the federal income tax return on the appropriate IRS forms.  (Even if you use a software program, you must turn in manual entries on IRS forms.)  Copies of those forms and instructions are also on reserve in the library and available at www.irs.gov.

            (b)                 Additional Requirements:  Prepare a brief top sheet summarizing the factual information in the format of the tax formula.

           

(2)        Strategy:  You might want to start with page 1 of the 1040 and manually make entries (pencil recommended).  You may then need to do subsidiary forms (e.g., Schedules C).  You might also want to work out the figures for the tax formula roughly first before beginning the return.

 

(3)        Check figures:                                     

            Adjusted gross income                            74,034                     Itemized deductions             9,834  

            Taxable income                                        60,250                

           

(4)        Check forms: (please include in your return):

 

(5)        Grading:

a.         Per the syllabus, this manual return is 10% of the grade; i.e., 33 points since the three exams are worth 300 points

            b.         Actual maximum, manual return, 43 points (10 points extra credit)

            c.         Forms: 1040 pages 1 and 2; Schedules A, B, C, D, S/E; Forms 4562, 2106, 8949; worksheet line 44( please download it from IRS.org website)

           

(6)        Additional helpful information

            a.         Please use the sequence numbers in the upper right-hand corner of the official IRS forms for the proper order

            b.         Do not calculate next year’s estimates or any late filing penalty or interest.

 

Notes on Jordan Problem

 

(1)        Complete 2 Schedules C.

(2)        Even if EZ could properly be used, please use 2106.

(3)        When completing 4562, please note depreciation is maximized and property is apparently not listed property.

 

(4)        Dividends are qualified

Subject Business
Due By (Pacific Time) 07/22/2015 10:00 am
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