Ben and Lisa Jackson have provided you with the posted documents and the following verified information. Ben and Lisa have 3 children and wish to file jointly. Ben?s DOB is 11-21-1971 and Lisa?s DOB is 3-4-1974. Their dependents are: Kenny 336-98-7522 DOB 5/25/1996, Wendy 336-59-8475 DOB 6/21/1999, and Lisa?s niece Brenda Kennedy 265-98-7415 DOB 2/6/2001 who has been living with the Jackson?s since the death of her parents in March of 2009. The Jacksons are the sole means of support for Brenda and Lisa was the sole beneficiary of $650,000 of life insurance benefits from Brenda?s parent?s estate intended to be used for Brenda?s support. The Jackson?s have not received any social security payments for Brenda as yet. Interest earned on the life insurance totaled $26,050 for the year from Prudential Insurance and a 1099 was presented. This money is saved for Brenda?s education and minimal amounts are used for annual support (less than 50% of her living expenses). Ben is a computer designer and consultant and he has opened a computer consulting business Blue Ribbon Consultants 165 West Commerce Park, Holt Mi 48842. Ben is a cash basis taxpayer. He started the business on 6-6-2013 and he has had the following expenses in 2013 for which he has the appropriate documentation: Advertising $1,150; Insurance for property and general liability $1,775; Accounting 2,566, Rent $2,200 per month starting June 6; Office Supplies $1,650; Utilities $2,200, Misc. Publications $265, Internet service $830. He also paid an employment service $17,111 for a part time secretary. He traveled to several conventions and spent $2,366 on Hotels and $1,196 on food and he has provided receipts. He also entertained potential clients for $295. He drove to the most of the conventions and paid air expenses of $1,100 for one convention and he rented a car for a total of $396. All travel was over night and domestic. Ben purchased a computer system for $4,900, office furniture for $3,150 and other office equipment for $2,323 when he opened for business. He chose not to apply section 179 of the IRC. He drives a 2008 Chevy sedan (he purchased it used with a cost of $22,560 in 2011 current value is unknown) 100% for business except for some of the miles driven in January, February and March 2013 and he would like the largest deduction for his vehicle. He drove a total of 11,586 business miles including in that total 1,592 miles in March, April and May 2013 when he was preparing to open his business. Total miles for that car for the year were 19,283. He had the following automobile related business expenses: parking $258, interest on financing the vehicle $1,100, license plates of $166, Gas oil and maintenance of $2,140. A mileage log was used to verify the mileage. Business revenue included $31,659 on his books plus the income from a School District reported on a Form 1099 MISC of $42,950 not on his books. The school district was a new client. He made estimated tax payments of $7,100 to the IRS and $3,500 to the State for the year. They paid $3,255 in additional Federal taxes due for 2012 on April 14, 2011 and $1,300 in additional State taxes due on the same date. They sold 300 shares of CMS stock for $13,720 on 6-7-2013 which cost $9,500 on 5-7-2000 and 100 shares of XCV for $976 on 7-7-2013 for which they paid $1,375 on 1-29-2009. They also sold 77 Shares of LTV for $11,980 which had a basis of $9,570 purchased on 1/29/2013 and sold on 11/22/2013. They received $1,230 of dividends of which $930 were qualified dividends. They also received $1,100 in interest from Series EE Savings Bonds that they cashed in March 3, 2013 which was used to help start the business. Lisa is a Nurse and she occasionally must work in some of the hospital?s specialty clinics. She drove her 2007 van ($27,000 original cost) a total of 32,155 miles of which 5,655 were for traveling to the clinics and 16,345 commuting to her job. The rest was personal use miles. She also incurred $543 in lunch expenses while at the clinics. Her employer does not reimburse Lisa for any expenses. Lisa is still paying on her student loans and she has paperwork indicating that she paid $2,675 in interest on the loans. Lisa also paid $326 for uniforms. Insurance on the van was $2,300 and the License plates cost $266. She bought a new watch for $110 on July 11, 2013 and she wonders if she can claim it as a deduction. The Jackson?s had the following personal items: Property tax of $3,655, Mortgage Interest of $11,966 and Private Mortgage insurance of $1,296 on a form 1098, gifts to their church of $6,622 cash, and paid $266 to have their taxes done in 2012. They did not itemize in 2012. They made a gift of $5,000 to Ben?s cousin Sid who lives in Portland Oregon. The health insurance premiums on their W2s were post tax and they had out of pocket medical, dental, and prescription expenses of $3,760. They traveled 550 miles for medical reasons. Lisa had withdrawn $10,000 from her IRA in 2013 to help pay for the business start-up expenses. Prepare their 2013 Federal tax return (80 pts.) and provide two ways they might save on their taxes in 2014 assuming everything stays the same as in 2013. (10 Points each suggestion as a letter to the Jacksons.) Please see attached files for important information to answer this question.
CORRECTED (if checked) PAYER'S name, street address, city or town, province or state, country, ZIP or foreign postal code, and telephone no. 1 Rents SCHOOL DISTRICT 321 EATON RAPIDS MI 48827 $ OMB No. 1545-0115 2013 2 Royalties Miscellaneous Income $ $ 5 Fishing boat proceeds 6 Medical and health care payments $ 38-1234566 4 Federal income tax withheld $ $ 7 Nonemployee compensation PAYER'S federal identification number RECIPIENT'S identification number Form 1099-MISC 3 Other income 8 Substitute payments in lieu of dividends or interest FILE COPY ONLY 215-53-1772 RECIPIENT'S name BEN JACKSON $ Street address (including apt. no.) 1244 EAGLE RD City or town, province or state, country, and ZIP or foreign postal code 42950 11 Foreign tax paid HOLT MI 48842 $ $ Form 1099-MISC QNA KEEP FOR YOUR RECORDS 12 Foreign country or U.S. possession $ 13 Excess golden parachute payments Account number (see instructions) 15a Section 409A deferrals $ 9 Payer made direct sales of 10 Crop insurance proceeds $5,000 or more of consumer products to a buyer $ (recipient) for resale 15b Section 409A income $ 16 State tax withheld $ $ 14 Gross proceeds paid to an attorney $ 17 State/Payer's state no. MI 18 State income $ $ CORRECTED (if checked) OMB PAYER'S name, street address, city, state, and ZIP code No. 1545-0119 Distributions From 1 Gross distribution Pensions, Annuities, 10000 MONEY CONCEPTS Retirement or $ 2013 123 ANYWHERE 2a Taxable amount Profit-Sharing Plans, IRAs, Insurance 10000 Form 1099-R EATON RAPIDS MI 48827 Contracts, etc. $ 2b Total Taxable amount not determined distribution gain PAYER'S federal identification number RECIPIENT'S identification number 3 Capital 2a) (included 4 Federal income tax withheld in box 255-48-9766 33-3333333 $ $ RECIPIENT'S name 5 Employee contributions 6 Net unrealized appreciation in /Designated Roth employer's securities contributions or insurance premiums LISA JACKSON $ $ Street This information is address (including apt. no.) 7 Distribution IRA/ 8 Other code(s) SEP/ SIMPLE being furnished to 1244 EAGLE RD 1 $ the Internal Revenue % Total employee Your percentage City, state, and ZIP code 9a total distribution of 9bcontributions Service. HOLT MI 48842 % $ 10 13 14 11 1st year of desig. Roth contrib. State/Payer's state no. State distribution Amount allocable to IRR within 5 years 12 State tax withheld MI 10000 $ $ ?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A $ $ $ 16 17 Account number (see instructions) Local distribution Name of locality 15 Local tax withheld $ $ ?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A $ $ Form 1099-R Department of the Treasury - Internal Revenue Service QNA ?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A CORRECTED (if checked) OMB PAYER'S name, street address, city, state, and ZIP code No. 1545-0119 Distributions From 1 Gross distribution Pensions, Annuities, Retirement or $ Profit-Sharing Plans, 2013 2a Taxable amount IRAs, Insurance Contracts, etc. Form 1099-R $ 2b Total Taxable amount not determined distribution PAYER'S Federal identification number RECIPIENT'S identification number gain 3 Capital 2a) (included 4 Federal income tax withheld in box $ $ RECIPIENT'S name 5 Employee contributions 6 Net unrealized appreciation in /Designated Roth employer's securities contributions or insurance premiums $ $ Street This information is address (including apt. no.) 7 Distribution IRA/ 8 Other code(s) SEP/ SIMPLE being furnished to $ the Internal Revenue % Total employee Your percentage City, state, and ZIP code 9a total distribution of 9bcontributions Service. % $ 13 14 10 State/Payer's state no. State distribution 11 1st year of desig. Roth contrib. Amount allocable to IRR within 5 years 12 State tax withheld $ $ ?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A $ $ $ 16 17 Account number (see instructions) Local distribution Name of locality 15 Local tax withheld $ $ ?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A $ $ Form QNA 1099-R Department of the Treasury - Internal Revenue Service a Employee's social security number For Official Use Only 215-53-1772 OMB No. 1545-0008 2 Federal income tax withheld b Employer identification number (EIN) 1 Wages, tips, other compensation 32155 3152 38-5655699 4 Social security tax withheld c Employer's name, address, and ZIP code 3 Social security wages 22132 1372 BK COMPUTER CONSULTING 6 Medicare tax withheld 1145 WINTER RD 5 Medicare wages and tips 22132 321 8 Allocated tips HOLT MI 48842 7 Social security tips 10 d Control number 9 Dependent care benefits 11 12a Last name Suff. See instructions for box 12 e Employee's first name and initial Nonqualified plans c o d JACKSON [ BEN e Retirement Third-party 12b 13 Statutory employee plan sick-pay c o d X [ e 12c 14 Other c o d [ 1244 EAGLE RD e 12d c o d [ HOLT MI 48842 e f Employee's address and ZIP code 15 16 17 18 19 20 Employer's state ID number State wages, tips, etc. State income tax Local wages, tips, etc. Local income tax Locality name State 32155 1698 MI 385655699 ?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A ?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A ?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A Department of the Treasury--Internal Revenue Service Form W-2 Wage and Tax Statement 2013 ?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A QNA a Employee's social security number For Official Use Only 255-48-9766 OMB No. 1545-0008 2 Federal income tax withheld 1 Wages, tips, other compensation b Employer identification number (EIN) 102577 12553 36-5656565 4 Social security tax withheld 3 Social security wages c Employer's name, address, and ZIP code LOCAL HOSPITAL 109577 6794 6 Medicare tax withheld 5 Medicare wages and tips 1235 LOCAL AVE 109577 1589 8 Allocated tips 7 Social security tips LANSING MI 48911 10 9 Dependent care benefits d Control number 11 12a Last name Suff. See instructions for box 12 Nonqualified plans e Employee's first name and initial c o d D [ LISA JACKSON 8000 e Retirement Third-party 12b 13 Statutory employee plan sick-pay c o d [ X e 12c 14 Other c o d [ HEALTH 1244 EAGLE RD 21635 e 12d c o d [ HOLT MI 48842 e f Employee's address and ZIP code 15 16 17 18 19 20 Employer's state ID number State wages, tips, etc. State income tax Local wages, tips, etc. Local income tax Locality name State MI 84655 102577 3659 102577 1236 LANSING ?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A ?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A ?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A?A Department of the Treasury--Internal Revenue Service Form W-2 Wage and Tax Statement 2013 QNA TAX RETURN PROJECT 2 Ben and Lisa Jackson have provided you with the posted documents and the following verified information. Ben and Lisa have 3 children and wish to file jointly. Ben's DOB is 11-21-1971 and Lisa's DOB is 3-4-1974. Their dependents are: Kenny 336-98-7522 DOB 5/25/1996, Wendy 336-59-8475 DOB 6/21/1999, and Lisa's niece Brenda Kennedy 265-98-7415 DOB 2/6/2001 who has been living with the Jackson's since the death of her parents in March of 2009. The Jacksons are the sole means of support for Brenda and Lisa was the sole beneficiary of $650,000 of life insurance benefits from Brenda's parent's estate intended to be used for Brenda's support. The Jackson's have not received any social security payments for Brenda as yet. Interest earned on the life insurance totaled $26,050 for the year from Prudential Insurance and a 1099 was presented. This money is saved for Brenda's education and minimal amounts are used for annual support (less than 50% of her living expenses). Ben is a computer designer and consultant and he has opened a computer consulting business Blue Ribbon Consultants 165 West Commerce Park, Holt Mi 48842. Ben is a cash basis taxpayer. He started the business on 6-6-2013 and he has had the following expenses in 2013 for which he has the appropriate documentation: Advertising $1,150; Insurance for property and general liability $1,775; Accounting 2,566, Rent $2,200 per month starting June 6; Office Supplies $1,650; Utilities $2,200, Misc. Publications $265, Internet service $830. He also paid an employment service $17,111 for a part time secretary. He traveled to several conventions and spent $2,366 on Hotels and $1,196 on food and he has provided receipts. He also entertained potential clients for $295. He drove to the most of the conventions and paid air expenses of $1,100 for one convention and he rented a car for a total of $396. All travel was over night and domestic. Ben purchased a computer system for $4,900, office furniture for $3,150 and other office equipment for $2,323 when he opened for business. He chose not to apply section 179 of the IRC. He drives a 2008 Chevy sedan (he purchased it used with a cost of $22,560 in 2011 current value is unknown) 100% for business except for some of the miles driven in January, February and March 2013 and he would like the largest deduction for his vehicle. He drove a total of 11,586 business miles including in that total 1,592 miles in March, April and May 2013 when he was preparing to open his business. Total miles for that car for the year were 19,283. He had the following automobile related business expenses: parking $258, interest on financing the vehicle $1,100, license plates of $166, Gas oil and maintenance of $2,140. A mileage log was used to verify the mileage. Business revenue included $31,659 on his books plus the income from a School District reported on a Form 1099 MISC of $42,950 not on his books. The school district was a new client. He made estimated tax payments of $7,100 to the IRS and $3,500 to the State for the year. They paid $3,255 in additional Federal taxes due for 2012 on April 14, 2011 and $1,300 in additional State taxes due on the same date. They sold 300 shares of CMS stock for $13,720 on 6-7-2013 which cost $9,500 on 5-7-2000 and 100 shares of XCV for $976 on 7-7-2013 for which they paid $1,375 on 1-29-2009. They also sold 77 Shares of LTV for $11,980 which had a basis of $9,570 purchased on 1/29/2013 and sold on 11/22/2013. They received $1,230 of dividends of which $930 were qualified dividends. They also received $1,100 in interest from Series EE Savings Bonds that they cashed in March 3, 2013 which was used to help start the business. Lisa is a Nurse and she occasionally must work in some of the hospital's specialty clinics. She drove her 2007 van ($27,000 original cost) a total of 32,155 miles of which 5,655 were for traveling to the clinics and 16,345 commuting to her job. The rest was personal use miles. She also incurred $543 in lunch expenses while at the clinics. Her employer does not reimburse Lisa for any expenses. Lisa is still paying on her student loans and she has paperwork indicating that she paid $2,675 in interest on the loans. Lisa also paid $326 for uniforms. Insurance on the van was $2,300 and the License plates cost $266. She bought a new watch for $110 on July 11, 2013 and she wonders if she can claim it as a deduction. The Jackson's had the following personal items: Property tax of $3,655, Mortgage Interest of $11,966 and Private Mortgage insurance of $1,296 on a form 1098, gifts to their church of $6,622 cash, and paid $266 to have their taxes done in 2012. They did not itemize in 2012. They made a gift of $5,000 to Ben's cousin Sid who lives in Portland Oregon. The health insurance premiums on their W2s were post tax and they had out of pocket medical, dental, and prescription expenses of $3,760. They traveled 550 miles for medical reasons. Lisa had withdrawn $10,000 from her IRA in 2013 to help pay for the business start-up expenses. Prepare their 2013 Federal tax return (80 pts.) and provide two ways they might save on their taxes in 2014 assuming everything stays the same as in 2013. (10 Points each suggestion as a letter to the Jacksons.)
