Amelia Oliver, a single mother, is a client of your tax firm. She and her two-year-old son, Miguel, are U.S. citizens who lived together the entire year. Ms. Oliver provides 100% of her son's support through her full-time job as an occupational therapist. She pays for day care and contributes $3,000 to her employer's dependent care FSA (DCFSA), a pre-tax benefit account used to pay for eligible dependent care services. (The textbook refers to it as a dependent care assistance program.) Your intern prepared Ms. Oliver's tax return, and you will review it. Analyzing a completed tax return will help you visualize how one error can cascade through the return.

Directions

First, review Ms. Oliver's provided tax return for accuracy. Use the data provided in the Client Data document. You may find it helpful to manually calculate taxable income.

Then, draft an email to the intern describing the error and explaining the reason for making changes. These reasons will include applying the rules of Section (61)a and explaining taxable income.

Specifically, you must address the following criteria:

1. Main Error: Describe the main error found in the return.
2. Changed Calculations: Explain how the main error led to incorrect tax return calculations that will be changed.
3. Applying the Rules: Explain how to apply the rules of Section (61)a to determine taxable items.
4. Taxable Income: Explain when an item of income is taxable under both the cash and accrual methods of accounting.

was withheld. Employer-provided adoption benefits from Form 8839, line 29. . If you did not g Wages from Form 8919, line 6. . . 1g get a Form 1h W-2. see h Other earned income (see instructions). instructions. i Nontaxable combat pay election (see instructions) z Add lines fa through 1h. 75, 452.00 Attach Sch. B 2a Tax-exempt interest . . . 2a b Taxable interest 2b if required. 3a Qualified dividends 3a b Ordinary dividends . 3b 4a IRA distributions 4a b Taxable amount 4b Standard 5a Pensions and annuities b Taxable amount 5b Deduction for - 6a Social security benefits . 6a b Taxable amount 6b Single or Married filing c If you elect to use the lump-sum election method, check here (see instructions) separately. $12,950 7 Capital gain or (loss). Attach Schedule D if required. If not required, check here 7 Married filing Other income from Schedule 1, line 10. . . . . . . B 17,200.00 jointly or 9 92, 652.00 Qualifying Add lines 1z, 2b, 3b, 4b, 5b, 6b, 7, and 8. This is your total income . surviving spouse, 10 Adjustments to income from Schedule 1, line 26 . . 10 $25,900 Head of 11 Subtract line 10 from line 9. This is your adjusted gross income 11 92, 652.00 household Standard deduction or itemized deductions (from Schedule A) . 12 12, 950.00 $19.400 12 If you checked 13 Qualified business income deduction from Form 8995 or Form 8995-A 13 any box under 14 14 Standard Add lines 12 and 13. . 12, 950.00 15 79, 702.00 Deduction. 15 Subtract line 14 from line 11. If zero or less, enter -0-. This is your taxable income see instructions. For Disclosure, Privacy Act, and Paperwork Reduction Act Notice, see separate Instructions. Form 1040 (2022) JSA 241210 1.000 Form 1040 (2022) Page 2 Tax and Tax (see instructions). Check if any from Form(s): 1|8814 2| 4972 30 16 13, 157.00 16 Credits 17 Amount from Schedule 2, line 3 . . 17 18 Add lines 16 and 17. . . 18 13, 157.00 19 Child tax credit or credit for other dependents from Schedule 8812 19 2, 000.00 20 Amount from Schedule 3, line 8 . 20 21 Add lines 19 and 20. . 21 2, 000.00 22 Subtract line 21 from line 18. If zero or less, enter -0- . 22 11, 157.00 23 Other taxes, including self-employment tax, from Schedule 2, line 21 231040 Department of the Treasury - Internal Revenue Service U.S. Individual Income Tax Return 2022 OMB No. 1545-0074 IRS Use Only - Do not write or staple in this space. Filing Status X Single Married filing Jointly |Married filing separately (MFS) Head of household (HOH) Qualifying surviving spouse (OSS) Check only If you checked the MFS box, enter the name of your spouse. If you checked the HOH or OSS box, enter the child's name if the qualifying one box. person is a child but not your dependent: Your first name and middle initial Last name Your social security number AMELIA OLIVER 999-99-9999 If joint return, spouse's first name and middle initial Last name Spouse's social security number Home address (number and street). If you have a P.O. box, see instructions. Apt. no. Presidential Election Campaign 4566 CANTALOUPE LANE 121 Check here if you, or your City, town, or post office. If you have a foreign address, also complete spaces below. | State ZIP code spouse if filing jointly, want $3 to go to this fund. Checking a MANCHESTER HN 03103 box below will not change Foreign country name Foreign province/state/county Foreign postal code | your tax or refund. YOU Spouse Digital At any time during 2022, did you: (a) receive (as a reward, award, or payment for property or services); or (b) sell, Assets exchange, gift, or otherwise dispose of a digital asset (or a financial interest in a digital asset)? (See instructions.) Yes X No Standard Someone can claim: | | You as a dependent | | Your spouse as a dependent Deduction Spouse itemizes on a separate relum or you were a dual-status alien Age/Blindness You: Were born before January 2, 1958 Are blind Spouse: Was born before January 2, 1958 Is blind Dependents (see instructions): (2) Social security (3) Relationship (4) Check the box if qualifies for (see instructions): Last name number to you If more (1) First name Child tax credit Credit for other deper than four MIGUEL OLIVER 999-99-9991 SON X dependents see instructions and check here. Income la Total amount from Form(s) W-2, box 1 (see instructions) 1a 75, 452.00 b Household employee wages not reported on Form(s) W-2 . . 1b Attach Form(s) W-2 here. Also c Tip income not reported on line fa (see instructions) . 1c attach Forms d Medicaid waiver payments not reported on Form(s) W-2 (see instructions) . . 1d W-2G and 1099-R if tax Taxable dependent care benefits from Form 2441, line 26. was withheld. f Employer-provided adoption benefits from Form 8839, line 29. if If you did not g Wages from Form 8919, line 6. . . . . 1g get a Form 1h W-2. see h Other earned income (see instructions). . instructions. i Nontaxable combat pay election (see instructions) z Add lines 1a through 1h. 1z 75, 452.00 Attach Sch. B Tax-exempt interest . Taxable interest 2hForm 1040 (2022) Page 2 Tax and 16 Tax (see instructions). Check if any from Form(s): 1|8814 2|4972 3 16 13, 157.00 Credits 17 Amount from Schedule 2, line 3 . . 17 18 Add lines 16 and 17. . . . 18 13, 157.00 19 Child tax credit or credit for other dependents from Schedule 8812 . 19 2, 000.00 20 Amount from Schedule 3, line 8 . . 20 21 Add lines 19 and 20. . . 21 2, 000.00 22 Subtract line 21 from line 18. If zero or less, enter -0- . 22 11, 157.00 23 Other taxes, including self-employment tax, from Schedule 2, line 21 23 24 Add lines 22 and 23. This is your total tax . . 24 11, 157.00 Payments 25 Federal income tax withheld from: a Form(s) W-2 25a 10, 523.00 b Form(s) 1099 25b c Other forms (see instructions) 25c d Add lines 25a through 25c 25d 10, 523.00 If you have a 126 2022 estimated tax payments and amount applied from 2021 relum 26 qualifying child, 27 Earned income credit (EIC) . . . 27 attach Sch. EIC. 28 Additional child tax credit from Schedule 8812. 28 29 American opportunity credit from Form 8863, line 8 29 30 Reserved for future use . . . . 30 31 Amount from Schedule 3, line 15 . 31 32 Add lines 27, 28, 29, and 31. These are your total other payments and refundable credits 32 33 Add lines 25d, 26, and 32. These are your total payments 33 10, 523.00 Refund 34 If line 33 is more than line 24, subtract line 24 from line 33. This is the amount you overpaid. 34 35 a Amount of line 34 you want refunded to you. If Form 8888 is attached, check here . 35a Direct deposit? b Routing number c Type: |Checking Savings See instructions. d Account number 36 Amount of line 34 you want applied to your 2023 estimated tax . 36 Amount 37 Subtract line 33 from line 24. This is the amount you owe. You Owe For details on how to pay, go to www.irs. gowPayments or see instructions. 37 634.00 38 Estimated tax penalty (see instructions). . 38 Third Party Do you want to allow another person to discuss this return with the IRS? See Designee instructions Yes. Complete below. No Designee's Phone Personal identification name no. number (PIN)belief, they are true, correct, and complete. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge. Here Your signature Date Your occupation If the IRS sent you an Identity Protection PIN, enter it here Joint return? OCCUPATIONAL THERAPIST (see inst.) See instructions. Spouse's signature. If a joint retum, both must sign. Date Spouse's occupation Keep a copy for If the IRS sent your spouse an your records. Identity Protection PIN, enter it here (see inst.) Phone no. Email address Preparer's name Preparer's signature Date PTIN Check if: Paid Self-employed Preparer Firm's name Phone no Use Only Firm's address Firm's EIN Go to www.irs. gowForm1040 for instructions and the latest information. Form 1040 (2022) JSA 241220 1.000SCHEDULE 1 Additional Income and Adjustments to Income OMB No. 1545-0074 (Form 1040) Attach to Form 1040, 1040-SR, or 1040-NR. 2022 Department of the Treasury Go to www.irs.gowForm1040 for instructions and the latest information. Attachment Internal Revenue Service Sequence No. 0 1 Name(8) shown on Form 1040, 1040-SR, or 1040-NR Your social security number AMELIA OLIVER 999-99-9999 Part I Additional Income 1 Taxable refunds, credits, or offsets of state and local income taxes 2a Alimony received . . . 2a b Date of original divorce or separation agreement (see instructions ): 3 Business income or (loss). Attach Schedule C . . . 3 Other gains or (losses). Attach Form 4797. . . Rental real estate, royalties, partnerships, $ corporations, trusts, etc. Attach Schedule E 5 Farm income or (loss). Attach Schedule F . . 6 Unemployment compensation . . 7 8 Other income: a Net operating loss 8a b Gambling . . . . 8b c Cancellation of debt 8c d Foreign earned income exclusion from Form 2555 . 8d e Income from Form 8853 . . f Income from Form 8889 g Alaska Permanent Fund dividends . 8g h Jury duty pay . . 8h i Prizes and awards. . . Bi j Activity not engaged in for profit income Bj k Stock options . . 8k I Income from the rental of personal property if you engaged in the rental for profit but were not in the business of renting such property . . . . 81 m Olympic and Paralympic medals and USOC prize money (see instructions) . . . . 8 m n Section 951(a) inclusion (see instructions) 8n Section 951A(a) inclusion (see instructions). . 80 p Section 461(1) excess business loss adjustment 8p q Taxable distributions from an ABLE account (see instructions) . . . 8q Scholarship and fellowship grants not reported on Form W-2 . . 8r s Nontaxable amount of Medicaid waiver payments included on 1040. lined Foreign earned me exclusion from Form 2595 . . 8d Income from Form 8853 8e Income from Form 8889 . g Alaska Permanent Fund dividends 8g h Jury duty pay . . . 8h i Prizes and awards. Bi j Activity not engaged in for profit income Bj k Stock options . . 8k I Income from the rental of personal property if you engaged in the rental for profit but were not in the business of renting such property 81 m Olympic and Paralympic medals and USOC prize money (see instructions) . . . 8m n Section 951(a) inclusion (see instructions) Section 951A(a) inclusion (see instructions). . 80 p Section 461(1) excess business loss adjustment 8p Taxable distributions from an ABLE account (see instructions) . 8q r Scholarship and fellowship grants not reported on Form W-2 .8r Nontaxable amount of Medicaid waiver payments included on Form 1040, line 1a or 1d. . . . Bs t Pension or annuity from a nonqualifed deferred compensation plan or a nongovernmental section 457 plan . 8t u Wages earned while incarcerated . . 8u Other income. List type and amount: GIFT AND CONSULTING 8z 17, 200.00 9 Total other income. Add lines Ba through 8z . 9 17, 200.00 10 Combine lines 1 through 7 and 9. Enter here and on Form 1040, 1040-SR, or 1040-NR, line 8 10 17, 200.00 For Paperwork Reduction Act Notice, see your tax return instructions. Schedule 1 (Form 1040) 2022 JSA 241221 1.000Schedule 1 (Form 1040) 2022 Page 2 Part II Adjustments to Income 11 Educator expenses . . 11 12 Certain business expenses of reservists, performing artists, and fee-basis government officials. Attach Form 2106. . . . . 12 13 Health savings account deduction. Attach Form 8889 . 13 14 Moving expenses for members of the Armed Forces. Attach Form 3903 14 15 Deductible part of self-employment tax Attach Schedule SE 15 16 Self-employed SEP, SIMPLE, and qualified plans. . . 16 17 Self-employed health insurance deduction. 17 18 Penalty on early withdrawal of savings. . 18 19 a Alimony paid . . 19a b Recipient's SSN . . . c Date of original divorce or separation agreement (see instructions): 20 IRA deduction. . . 20 21 Student loan interest deduction . 21 22 Reserved for future use . 22 23 Archer MSA deduction . . 23 24 Other adjustments: a Jury duty pay (see instructions). . 24a b Deductible expenses related to income reported on line 81 from the rental of personal property engaged in for profit . . 24b c Nontaxable amount of the value of Olympic and Paralympic medals and USOC prize money reported on line 8m. . 24c d Reforestation amortization and expenses . . 24d e Repayment of supplemental unemployment benefits under the Trade Act of 1974 . . . . . . . . . . . . 240 f Contributions to section 501(c)(18)(D) pension plans. 24f g Contributions by certain chaplains to section 403(b) plans . 24g h Attorney fees and court costs for actions involving certain unlawful discrimination claims (see instructions) . . . 24h Attorney fees and court costs you paid in connection with an award from the IRS for information you provided that helped the IRS detect tax law violations . . 24i j Housing deduction from Form 2555. . 24j k Excess deductions of section 67(e) expenses from Schedule K-1 (Form 1041). . . . 24k z Other adjustments. List type and amount: 24zSCHEDULE 8812 Credits for Qualifying Children OMB No. 1545-0074 (Form 1040) and Other Dependents Attach to Form 1040, 1040-SR, or 1040-NR. 2022 Department of the Treasury Internal Revenue Service Go to www.irs.gow/Schedule8812 for instructions and the latest information. Attachment Sequence No. 47 Name(8) shown on retum Your social security number AMELIA OLIVER 999-99-9999 Part I Child Tax Credit and Credit for Other Dependents Enter the amount from line 11 of your Form 1040, 1040-SR, or 1040-NR 92, 652.00 Enter income from Puerto Rico that you excluded . 2 a b Enter the amounts from lines 45 and 50 of your Form 2555 . 2b Enter the amount from line 15 of your Form 4563. 2c Add lines 2a through 2c. 2d Add lines 1 and 2d . . 3 92, 652.00 Number of qualifying children under age 17 with the required social security number Multiply line 4 by $2,000 . . 2, 000.00 Number of other dependents, including any qualifying children who are not under age 17 or who do not have the required social security number . . Caution: Do not include yourself, your spouse, or anyone who is not a U.S. citizen, U.S. national, or U.S. resident alien. Also, do not include anyone you included on line 4. Multiply line 6 by $500 Add lines 5 and 7 . . B 2,000.00 Enter the amount shown below for your filing status. . Married filing jointly - $400,000 . All other filing statuses - $200,000 9 200, 000.00 Subtract line 9 from line 3. . If zero or less, enter -0-. . If more than zero and not a multiple of $1,000, enter the next multiple of $1,000. For example, if the result is $425, enter $1,000; if the result is $1,025, enter $2,000, etc. 10 11 Multiply line 10 by 5% (0.05) . 11 12 Is the amount on line 8 more than the amount on line 11?. . 12 2, 000.00 No. STOP. You cannot take the child tax credit, credit for other dependents, or additional child tax credit. Skip Parts II-A and II-B. Enter -0- on lines 14 and 27. X Yes. Subtract line 11 from line 8. Enter the result. 13 Enter the amount from the Credit Limit Worksheet A. . . . . . . . 13 2, 000.00 14 Enter the smaller of line 12 or 13. This is your child tax credit and credit for other dependents 14 2, 000.00 Enter this amount on Form 1040, 1040-SR, or 1040-NR, line 19 If the amount on line 12 is more than the amount on line 14, you may be able to take the additional child tax credit on Form 1040, 1040-SR, or 1040-NR, line 28. Complete your Form 1040, 1040-SR, or 1040-NR through line 27 (also complete Schedule 3, line 11) before completing Part II-A. For Paperwork Reduction Act Notice, see your tax return instructions. Schedule 8812 (Form 1040) 2022Schedule 8812 (Form 1040) 2022 Page 2 Part II-A Additional Child Tax Credit for All Filers Caution: If you file Form 2555, you cannot claim the additional child tax credit. 15 Check this box if you do not want to claim the additional child tax credit. Skip Parts II-A and II-B. Enter -0- on line 27. . a Subtract line 14 from line 12. If zero, stop here; you cannot take the additional child tax credit. Skip Parts II-A and II-B. Enter -0- on line 27. . . . . 16a b Number of qualifying children under 17 with the required social security number: U x $1,500. Enter the result. If zero, stop here; you cannot claim the additional child tax credit. Skip Parts II-A and II-B. Enter -0- on line 27 . . 16b TIP: The number of children you use for this line is the same as the number of children you used for line 4. 17 Enter the smaller of line 16a or line 16b . 17 aEarned income (see instructions) . . b Nontaxable combat pay (see instructions) . . 18b 19 Is the amount on line 18a more than $2,500? No. Leave line 19 blank and enter -0- on line 20. Yes. Subtract $2,500 from the amount on line 18a. Enter the result 19 20 Multiply the amount on line 19 by 15% (0.15) and enter the result 20 Next. On line 16b, is the amount $4,500 or more? No. If you are a bona fide resident of Puerto Rico, go to line 21. Otherwise, skip Part II-B and enter the smaller of line 17 or line 20 on line 27. Yes. If line 20 is equal to or more than line 17, skip Part II-B and enter the amount from line 17 on line 27. Otherwise, go to line 21. Part II-B Certain Filers Who Have Three or More Qualifying Children and Bona Fide Residents of Puerto Rico 21 Withheld social security, Medicare, and Additional Medicare taxes from Form(s) W-2. boxes 4 and 6. If married filing jointly, include your spouse's amounts with yours. If your employer withheld or you paid Additional Medicare Tax or tier 1 RRTA taxes, see instructions. . . 21 22 Enter the total of the amounts from Schedule 1 (Form 1040), line 15; Schedule 2 (Form 1040), line 5; Schedule 2 (Form 1040), line 6; and Schedule 2 (Form 1040), line 13 . . 22 23 Add lines 21 and 22 . . 23 24 1040 and 1040-SR filers: Enter the total of the amounts from Form 1040 or 1040-SR, line 27. and Schedule 3 (Form 1040), line 11. 1040-NR filers: Enter the amount from Schedule 3 (Form 1040), line 11. 25 Subtract line 24 from line 23. If zero or less, enter -0- . 25 26 Enter the larger of line 20 or line 25 . . 26 Next, enter the smaller of line 17 or line 26 on line 27 Part II-C Additional Child Tax Credit 27 This is your additional child tax credit. Enter this amount on Form 1040, 1040-SR, or 1040-NR, line 28 . 27 Schedule 8812 (Form 1040) 2022