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TAX CONFUSION AND FORM 1040 TURMOIL It was the night of April 14 and Daniel was pacing furiously around the house muttering to himself. Jessica sat nervously on the couch watching her husband and looking at their tax returns. What to do? What to file? Daniel and Jessica Markham realized their lives had become much, much more complicated than before. They met while in college, both studying computer science, and were married shortly after graduation. After landing great jobsDaniel with the local university in the Information Technology Department as a database administrator and Jessica in web design with a local fastgrowing startup companythey were shocked to find how much income tax was deducted from their new wonderful salaries. Between taxes and student loans, they did not feel like they were much better off than in their student days when they watched every penny. They had always heard that owning a home would provide some tax deductions and could maybe help them money-wise. Since they wanted out of their noisy apartment anyway, they took the plunge and bought a small house that needed a little remodeling and \"tender loving care.\" They thought purchasing a home would certainly yield some nice tax deductions and save them some money. Jessica's Business During her last year in college, Jessica became fascinated with bobblehead dolls and started collecting them. Over time, as friends and acquaintances admired her collection, inquiring as to where she found them, she decided to start a part-time business selling them. She contacted the manufacturer, Bobble Heads, Inc., and started her side business, Bobble Buddies, selling scented bobblehead dolls. She was convinced it would help their financial situation. By agreement, she was required to carry an inventory of standard dolls that included cartoon figures, comic-book heroes, celebrities and sports mascots. She purchased these figures directly from Bobble Heads, Inc. and all revenues from her party sales and online sales were hers to keep. But she could also order customized caricatures of friends or non-standard figures directly from the manufacturer. For these sales she received sales commissions as her share of the revenue. When the bobbleheads moved, they would emit a pleasing scent, chosen from a wide selection and refillable after a month or two. The aromas ranged from lilac and other flowering scents to more masculine scents and even hemp so as to appeal to both male and female customers. Not only would there be gross profits from the sales of the dolls and scents, but there would be additional sales commissions from the special order dolls. Jessica was confident about the prospects for this business despite its past losses of $4,174 in 2013 and $691 in 2014. Daniel took a much dimmer view of the future, pointing out the time commitment, the continuing drain on their cash, and the constant gifts to potential customers both retailers and acquaintances of hers who would refer their friends. She, however, argued that her losses seemed to be declining and profits must surely be around the corner despite an apparent repeated loss this past year. 2 Though busy with her demanding job, Jessica plunged ahead and continued the bobblehead business in her spare time from their home. She was using space in the garage to store her inventory but as they began to acquire yard maintenance equipment and other basic household tools, they started running out of space for the bobbleheads. The summer heat was also a potential threat to the stability of the scents that were being stored out there. Since they were not really using one of the two spare bedrooms in their home, Jessica decided to set it up as a storage area. She had bought several storage cabinets in March 2015 and installed them so that the inventory could be kept organized. Unfortunately, it meant that the small room couldn't be used for anything else and Daniel didn't like the idea of taking up one of their rooms just for the business. But since they were not planning on starting a family for a while, and their parents lived in nearby towns, they didn't really need the extra sleeping space. Filing the 2015 Return Another financial drain this year was that both Jessica and Daniel had to see medical specialists. Jessica suffered terribly from allergies and had received medications as well as many respiratory treatments from a clinic, and as a result, her health was improving. Daniel, unfortunately, suffered a hernia in moving into their new home and required surgery as well as follow-up visits. Nevertheless, the good news in all of this, they realized, was that they must have many, many deductions for their new home and medical expenses. In fact, they were counting on a big refund so that they could use some of the money to open an IRA. Their parents kept telling them that it was never too soon to think about retirement. They really didn't know anything about IRAs other than that they had to open some kind of account with a financial institution and that there was a limit to how much they could contribute every year. But there could also be an extra tax deduction available for the money they contributed, so they were ready to consider opening an account in 2015. Jessica had also been putting money into her employer's 401(k) plan, though, so she didn't really know if they needed an IRA. She wanted to keep the money in their savings account in case they had any more expensive medical issues, but Daniel still thought they should look into IRAs further. In fact, they had planned to do so before they filed their tax returns for 2015, but figured they would wait to see what kind of refund they were getting before they met with a banker. When the deadline for filing their 2015 taxes loomed on the horizon, they did what most people would do confronted with all of these changes and new adventuresthey panicked! They gathered all their receipts, real estate closing documents, and W-2's and headed to the local store of the national chain, Taxes-Don't-Faze-Us. They were assigned to Angela Carson, who guided them to her desk and proceeded to ask for various documents based on what looked like a checklist that she was reading from her computer. First she asked for W-2s and went through a whole list of other possible types of income like interest, dividends, and investments. Jessica and Daniel made eye contact\"don't we wish,\" they silently communicated. Finally she got around to asking if they had any kind of business income. From the way she asked, it was obvious that she didn't expect the answer to be yes! 3 Jessica pulled out her records for Bobble Buddies. Angela reviewed the spreadsheets showing revenues and expenses and the 1099 from Bobble Buddies, Inc. for the commissions Jessica got for the special order bobbleheads. She handed Jessica a list of expense items and asked her to identify what other expenses from the list she might have and the amounts. As Jessica reviewed the list she saw Angela glancing at her and realized that the line of clients waiting was getting longer and longer. Well, Angela would just have to wait, because she wanted to be sure that she was getting all the deductions she should. Then things got a little confusing. Jessica told Angela about all the expenses, including the ones related to using the space in their home to store things. But when Angela finally seemed to realize that the storage space was actually in their home, she told them that would require another form, and since the company charged on a per form basis, it would cost extra. Were they sure they wanted to do that since it might not result in much of a deduction? Jessica hadn't kept all those careful records for nothing, so they replied that they wanted to complete the form. Jessica and Daniel had to estimate a few things, like the square footage of the room used for storage, but they did the best they could. Although they gave Angela their mortgage and real estate tax information, she didn't ask about any other expenses. Daniel asked if she needed any more information about their deductions, since they had medical expenses and charitable contributions during the year as well. After Jessica showed her the charitable contribution receipts and the medical expense log she had kept, Angela told them that it didn't look like they had enough deductions to itemize. She didn't want to see their house closing documents and said she just needed the mortgage interest and property tax numbers. Jessica and Daniel began to wonder if she really knew what she was doing, but they went ahead and finished the return with her and received a completed tax return showing a refund of taxesabout $2,700. But they had been expecting much more. After all, they claimed almost no exemptions on their W-4 forms, and their tax withholdings seemed high. All of their friends had said that with buying a house, medical expenses, and running a business from their home, the Markhams would have sizeable deductions. They expected to get a huge refund. But sadly, they were not accountants. They asked Angela to just give them a printed copy of the tax return and to wait on filing for now. Once they got home, they started wondering aloud whether Angela really knew what she was doing. \"She seemed kind of nervous,\" said Daniel. Jessica replied that she seemed a bit rushed too. \"I can't understand why we didn't get to take more deductions, and why didn't she look at our closing statement? Didn't our real estate agent tell us to keep a copy with our tax records for when we prepared our tax return? What about the form 1098 from the bank? It looked official and should be included in a tax return, right?\" After talking it over with friends and thinking about it a great deal, they decided that maybe they should not use the tax return from Taxes-Don't-Faze-Us. Maybe they should try doing their taxes themselves. So, on the eve of April 15 the Markhams were in a quandary. They wanted a bigger refund that would somehow take into account all their house, medical, and other expenses, and it seemed so 4 strange that none were shown on the Taxes-Don't-Faze-Us return. Was the prepared tax return even correct? They didn't want to get in trouble with the IRS. Before they were married, Jessica had always done her own returns and never had any problems. Daniel, however, was hesitant to try it on their own, since everything seemed so complicated. It would be easy to make some big mistake and cause an audit. The clock was ticking away. They knew they had to make a decision before the next day..... Case Requirements 1. Review the supporting documents contained in Exhibit 1 and prepare a return for the Markhams to the best of your ability with the information provided. 2. Prepare a list of additional questions that you would want to ask the Markhams or any additional documentation you would like to review before actually filing the tax return that you prepare. 3. Review the return prepared by Taxes-Don't-Faze-Us in Exhibit 2 and compare it to the return you prepared. For each difference between your return and the one from Taxes-Don't-Faze-Us, identify the presentation that you believe is correct from among the two returns and explain why and/or identify any additional information that you would need to determine the correct presentation. 4. Complete the student feedback form and submit it with your final case response. EXHIBIT 1 MARKHAM TAX DOCUMENTS a Employee's social security number 22222 436-89-2210 OMB No. 1545-0008 b Employer identification number (EIN) 1 Wages, tips, other compensation 95-4556713 40,472.69 c Employer's name, address, and ZIP code 4,935.53 3 Social security wages 4 Social security tax withheld 43,200.37 Texas Star University PO Box 3895 Austin, TX 78704 2,678.42 5 Medicare wages and tips 6 Medicare tax withheld 43,200.37 626.41 7 Social security tips 8 Allocated tips 9 d Control number e Employee's first name and initial 2 Federal income tax withheld Last name 10 Dependent care benefits 12a Suff. 11 Nonqualified plans C o d e 13 Daniel Markham 4232 Smallpond Rd. Austin, TX 78754 Statutory employee Retirement plan X Third-party sick pay DD 5.594.08 12b C o d e 12c 14 Other C o d e 12d C o d e f Employee's address and ZIP code 15 State Employer's state ID number 16 State wages, tips, etc. 17 State income tax 18 Local wages, tips, etc. 19 Local income tax 20 Locality name TX Form Wage and Tax W-2 Statement Copy 1For State, City, or Local Tax Department 2015 Department of the TreasuryInternal Revenue Service Calculation of Taxable Income Gross Salary University Salary Supplement Total Salary per Earnings Statements Add--Other Taxable Income: 1. Other (Box 14) 2. Taxable Fringe Benefit Less--Esclusions from Taxable Income: 1. Optional Retirement Program 2. Teacher Retirement 3. Tax Sheltered Annuity (E, Box 12) Sec 403(b) 4. Deferred Compensation (G, Box 12) Sec 457(b) 5. Premium Redirect 6. TXSFLEX Medical/Dental Reimbursement 7. TXSFLEX Dependent Care (Box 10) 8. Sick pay (J, Box 12) 9. Exemption (Tax Treaty) 10. Pretax Parking Taxable Income per Form W-2 42,780.00 1,020.00 43,800.00 - 2,727.68 451.92 147.71 40,472.69 Notice to Employee Do you have to file? Refer to the Form 1040 Instructions to determine if you are required to file a tax return. Even if you do not have to file a tax return, you may be eligible for a refund if box 2 shows an amount or if you are eligible for any credit. Earned income credit (EIC). You may be able to take the EIC for 2015 if your adjusted gross income (AGI) is less than a certain amount. The amount of the credit is based on income and family size. Workers without children could qualify for a smaller credit. You and any qualifying children must have valid social security numbers (SSNs). You cannot take the EIC if your investment income is more than the specified amount for 2015 or if income is earned for services provided while you were an inmate at a penal institution. For 2015 income limits and more information, visit www.irs.gov/eitc. Also see Pub. 596, Earned Income Credit. Any EIC that is more than your tax liability is refunded to you, but only if you file a tax return. Clergy and religious workers. If you are not subject to social security and Medicare taxes, see Pub. 517, Social Security and Other Information for Members of the Clergy and Religious Workers. Corrections. If your name, SSN, or address is incorrect, correct Copies B, C, and 2 and ask your employer to correct your employment record. Be sure to ask the employer to file Form W-2c, Corrected Wage and Tax Statement, with the Social Security Administration (SSA) to correct any name, SSN, or money amount error reported to the SSA on Form W-2. Be sure to get your copies of Form W-2c from your employer for all corrections made so you may file them with your tax return. If your name and SSN are correct but are not the same as shown on your social security card, you should ask for a new card that displays your correct name at any SSA office or by calling 1-800-772-1213. You also may visit the SSA at www.socialsecurity.gov. Cost of employer-sponsored health coverage (if such cost is provided by the employer). The reporting in box 12, using code DD, of the cost of employer-sponsored health coverage is for your information only. The amount reported with code DD is not taxable. Credit for excess taxes. If you had more than one employer in 2015 and more than $7,347 in social security and/or Tier 1 railroad retirement (RRTA) taxes were withheld, you may be able to claim a credit for the excess against your federal income tax. If you had more than one railroad employer and more than $4,321.80 in Tier 2 RRTA tax was withheld, you also may be able to claim a credit. See your Form 1040 or Form 1040A instructions and Pub. 505, Tax Withholding and Estimated Tax. (Also see Instructions for Employee on the back of Copy C.) Instructions for Employee (Also see Notice to Employee, on the back of Copy B.) Box 1. Enter this amount on the wages line of your tax return. Box 2. Enter this amount on the federal income tax withheld line of your tax return. Box 5. You may be required to report this amount on Form 8959, Additional Medicare Tax. See the Form 1040 instructions to determine if you are required to complete Form 8959. Box 6. This amount includes the 1.45% Medicare Tax withheld on all Medicare wages and tips shown in Box 5, as well as the 0.9% Additional Medicare Tax on any of those Medicare wages and tips above $200,000. Box 8. This amount is not included in boxes 1, 3, 5, or 7. For information on how to report tips on your tax return, see your Form 1040 instructions. You must file Form 4137, Social Security and Medicare Tax on Unreported Tip Income, with your income tax return to report at least the allocated tip amount unless you can prove that you received a smaller amount. If you have records that show the actual amount of tips you received, report that amount even if it is more or less than the allocated tips. On Form 4137 you will calculate the social security and Medicare tax owed on the allocated tips shown on your Form(s) W-2 that you must report as income and on other tips you did not report to your employer. By filing Form 4137, your social security tips will be credited to your social security record (used to figure your benefits). Box 10. This amount includes the total dependent care benefits that your employer paid to you or incurred on your behalf (including amounts from a section 125 (cafeteria) plan). Any amount over $5,000 is also included in box 1. Complete Form 2441, Child and Dependent Care Expenses, to compute any taxable and nontaxable amounts. Box 11. This amount is (a) reported in box 1 if it is a distribution made to you from a nonqualified deferred compensation or nongovernmental section 457(b) plan or (b) included in box 3 and/or 5 if it is a prior year deferral under a nonqualified or section 457(b) plan that became taxable for social security and Medicare taxes this year because there is no longer a substantial risk of forfeiture of your right to the deferred amount. This box should not be used if you had a deferral and a distribution in the same calendar year. If you made a deferral and received a distribution in the same calendar year, and you are or will be age 62 by the end of the calendar year, your employer should file Form SSA-131, Employer Report of Special Wage Payments, with the Social Security Administration and give you a copy. Box 12. The following list explains the codes shown in box 12. You may need this information to complete your tax return. Elective deferrals (codes D, E, F, and S) and designated Roth contributions (codes AA, BB, and EE) under all plans are generally limited to a total of $18,000 ($12,500 if you only have SIMPLE plans; $21,000 for section 403(b) plans if you qualify for the 15-year rule explained in Pub. 571). Deferrals under code G are limited to $18,000. Deferrals under code H are limited to $7,000. However, if you were at least age 50 in 2015, your employer may have allowed an additional deferral of up to $6,000 ($3,000 for section 401(k)(11) and 408(p) SIMPLE plans). This additional deferral amount is not subject to the overall limit on elective deferrals. For code G, the limit on elective deferrals may be higher for the last 3 years before you reach retirement age. Contact your plan administrator for more information. Amounts in excess of the overall elective deferral limit must be included in income. See the \"Wages, Salaries, Tips, etc.\" line instructions for Form 1040. Note. If a year follows code D through H, S, Y, AA, BB, or EE, you made a make-up pension contribution for a prior year(s) when you were in military service. To figure whether you made excess deferrals, consider these amounts for the year shown, not the current year. If no year is shown, the contributions are for the current year. AUncollected social security or RRTA tax on tips. Include this tax on Form 1040. See \"Other Taxes\" in the Form 1040 instructions. BUncollected Medicare tax on tips. Include this tax on Form 1040. See \"Other Taxes\" in the Form 1040 instructions. CTaxable cost of group-term life insurance over $50,000 (included in boxes 1, 3 (up to social security wage base), and 5) DElective deferrals to a section 401(k) cash or deferred arrangement. Also includes deferrals under a SIMPLE retirement account that is part of a section 401(k) arrangement. EElective deferrals under a section 403(b) salary reduction agreement (continued on back of Copy 2) Instructions for Employee (continued from back of Copy C) FElective deferrals under a section 408(k)(6) salary reduction SEP GElective deferrals and employer contributions (including nonelective deferrals) to a section 457(b) deferred compensation plan HElective deferrals to a section 501(c)(18)(D) tax-exempt organization plan. See \"Adjusted Gross Income\" in the Form 1040 instructions for how to deduct. JNontaxable sick pay (information only, not included in boxes 1, 3, or 5) K20% excise tax on excess golden parachute payments. See \"Other Taxes\" in the Form 1040 instructions. LSubstantiated employee business expense reimbursements (nontaxable) MUncollected social security or RRTA tax on taxable cost of groupterm life insurance over $50,000 (former employees only). See \"Other Taxes\" in the Form 1040 instructions. NUncollected Medicare tax on taxable cost of group-term life insurance over $50,000 (former employees only). See \"Other Taxes\" in the Form 1040 instructions. PExcludable moving expense reimbursements paid directly to employee (not included in boxes 1, 3, or 5) QNontaxable combat pay. See the instructions for Form 1040 or Form 1040A for details on reporting this amount. REmployer contributions to your Archer MSA. Report on Form 8853, Archer MSAs and Long-Term Care Insurance Contracts. SEmployee salary reduction contributions under a section 408(p) SIMPLE plan (not included in box 1) TAdoption benefits (not included in box 1). Complete Form 8839, Qualified Adoption Expenses, to compute any taxable and nontaxable amounts. VIncome from exercise of nonstatutory stock option(s) (included in boxes 1, 3 (up to social security wage base), and 5). See Pub. 525 and instructions for Schedule D (Form 1040) for reporting requirements. WEmployer contributions (including amounts the employee elected to contribute using a section 125 (cafeteria) plan) to your health savings account. Report on Form 8889, Health Savings Accounts (HSAs). YDeferrals under a section 409A nonqualified deferred compensation plan ZIncome under a nonqualified deferred compensation plan that fails to satisfy section 409A. This amount is also included in box 1. It is subject to an additional 20% tax plus interest. See \"Other Taxes\" in the Form 1040 instructions. AADesignated Roth contributions under a section 401(k) plan BBDesignated Roth contributions under a section 403(b) plan DDCost of employer-sponsored health coverage. The amount reported with Code DD is not taxable. EEDesignated Roth contributions under a governmental section 457(b) plan. This amount does not apply to contributions under a taxexempt organization section 457(b) plan. Box 13. If the \"Retirement plan\" box is checked, special limits may apply to the amount of traditional IRA contributions you may deduct. See Pub. 590, Individual Retirement Arrangements (IRAs). Box 14. Employers may use this box to report information such as state disability insurance taxes withheld, union dues, uniform payments, health insurance premiums deducted, nontaxable income, educational assistance payments, or a member of the clergy's parsonage allowance and utilities. Railroad employers use this box to report railroad retirement (RRTA) compensation, Tier 1 tax, Tier 2 tax, Medicare tax and Additional Medicare Tax. Include tips reported by the employee to the employer in railroad retirement (RRTA) compensation. Note. Keep Copy C of Form W-2 for at least 3 years after the due date for filing your income tax return. However, to help protect your social security benefits, keep Copy C until you begin receiving social security benefits, just in case there is a question about your work record and/or earnings in a particular year. a Employee's social security number 22222 584-32-1110 OMB No. 1545-0008 b Employer identification number (EIN) 1 Wages, tips, other compensation 95-3678920 46,329.00 c Employer's name, address, and ZIP code 4,955.00 3 Social security wages 4 Social security tax withheld 49,308.00 Jump Start Tech 14304 Research Blvd. Austin, TX 78750 3,057.10 5 Medicare wages and tips 6 Medicare tax withheld 49,308.00 715.00 7 Social security tips 8 Allocated tips 9 d Control number e Employee's first name and initial 2 Federal income tax withheld Last name 10 Dependent care benefits Suff. 11 Nonqualified plans 12a C o d e 13 Jessica Markham 4232 Smallpond Rd. Austin, TX 78754 Statutory employee Retirement plan X Third-party sick pay C o d e 12c 14 Other 47.52 C 12b C o d e D 2,979.00 DD 5,874.70 12d C o d e f Employee's address and ZIP code 15 State Employer's state ID number 16 State wages, tips, etc. 17 State income tax 18 Local wages, tips, etc. 19 Local income tax 20 Locality name TX Form and Tax W-2 Wage Statement Copy 1For State, City, or Local Tax Department 2015 Department of the TreasuryInternal Revenue Service VOID CORRECTED PAYER'S name, street address, city or town, state or province, country, ZIP or foreign postal code, and telephone no. 1 Rents OMB No. 1545-0115 $ Bobble Heads Inc. 123 Scented Lane Portland, OR 97201 2015 2 Royalties $ PAYER'S federal identification number RECIPIENT'S identification number 58-4116732 584-32-1110 RECIPIENT'S name Jessica Markham Street address (including apt. no.) 4232 Smallpond Rd. City or town, state or province, country, and ZIP or foreign postal code Miscellaneous Income Form 1099-MISC 3 Other income 4 Federal income tax withheld $ $ 5 Fishing boat proceeds 6 Medical and health care payments $ $ 7 Nonemployee compensation 8 Substitute payments in lieu of dividends or interest $ 1,433.70 $ Copy 1 For State Tax Department 9 Payer made direct sales of 10 Crop insurance proceeds $5,000 or more of consumer products to a buyer $ (recipient) for resale a 11 12 13 Excess golden parachute payments 14 Gross proceeds paid to an attorney Austin, TX 78754 Account number (see instructions) FATCA filing requirement $ 15a Section 409A deferrals $ Form 1099-MISC 15b Section 409A income $ 16 State tax withheld $ $ www.irs.gov/form1099misc $ 17 State/Payer's state no. TX 18 State income $ $ Department of the Treasury - Internal Revenue Service CORRECTED (if checked) OMB No. 1545-1576 RECIPIENT'S/LENDER'S name, street address, city or town, state or province, country, ZIP or foreign postal code, and telephone number Student Loan Interest Statement 2015 Nelnet Loan Services PO Box 82561 Lincoln, NE 68501 Form 1098-E Copy B RECIPIENT'S federal identification no. BORROWER'S social security number 1 Student loan interest received by lender 59-9999999 584-32-1110 $ 4.94 For Borrower BORROWER'S name Jessica Markham Street address (including apt. no.) 4232 Smallpond Rd. City or town, state or province, country, and ZIP or foreign postal code Austin, TX 78754 Account number (see instructions) Form 1098-E 2 If checked, box 1 does not include loan origination fees and/or capitalized interest for loans made before September 1, 2004 . . . . . . . . . (keep for your records) www.irs.gov/form1098e x This is important tax information and is being furnished to the Internal Revenue Service. If you are required to file a return, a negligence penalty or other sanction may be imposed on you if the IRS determines that an underpayment of tax results because you overstated a deduction for student loan interest. Department of the Treasury - Internal Revenue Service Real Estate Broker Fees Fees net of commission (line 700) as follows: .. to 4566.45 to Simmons Thomas Realty Commission paid at settlement $4566.45 Items Payable in Connection with Loan Our origination charge Your credit or charge (points) for specific interest rate chosen Your adjusted origination charges Appraisal fee to IMortgage.com, Inc. Credit report to IMortgage.com, Inc. Tax Service Flood certification to IMortgage.com, Inc. Attorney Fee to Karen Larsen, P.L.L.C. Paid From Borrower's Funds at Settlement $ 2,608.87 (from GFE #1) (from GFE #2) (from GFE #A) (from GFE #3) (from GFE #3) (from GFE #3) (from GFE #3) Paid From Seller's Funds at Settlement 4,566.45 2,608.87 425.00 72.94 25.00 $150 Items Required by Lender to be Paid in Advance Interest from 01/10/15 to 02/01/15 to IMortgage.com, I @ $ 15.24200/day (22 days @ 3.75000%) Mortgage insurance premium for month to HUD (from GFE #3) Homeowner's Insurance for 1.0 year to Allenbrook Insurance (from GFE #11) for to (from GFE #10) Reserves Deposited with Lender Initial deposit for your escrow account to IMortgage.com, Inc. (from GFE #9) Homeowner's insurance 2.000 months @ $ 57.03 per month $ 114.06 Mortgage Insurance 0.000 months @ $ 139.59 per month $ Property Taxes 1.000 months @ $ 286.00 per month $ 286.00 months @ $ per month $ months @ $ per month $ months @ $ per month $ Aggregate Adjustment ($ 57.03) Title Charges Title services and lender's title insurance to Crockett Title Company (from GFE #4) See Additional 1101 335.32 1,468.87 709.37 343.03 410.05 33.00 Items Settlement or closing fee to Crockett Title Company $ 120.00 Owner's title insurance (from GFE #5) Lender's title insurance $ 232.05 Lender's title policy limit $148,355.00 Owner's title policy limit $152.215.00 Agent's portion of the total insurance premium to Crockett Title Company $ 1,408.15 Underwriter's portion of the total title insurance premium Government Recording and Transfer Charges Government recording charges to Crockett Title Company Deed $ 24.00 Mortgage $ 64.00; Releases $ Transfer Taxes City/County tax/stamps Deed $ ; Mortgage $ Sale tax/stamps Deed $ ; Mortgage $ Additional Settlement Charges Required services that you can shop for Transfer Fee to Gibson Association Management Riverwood Entry Fee to Riverwood Homeowners Association 2015 Assessments to Regis Homes, Inc. Home Warranty to RHIA 2014 Taxes to Travis County Survey to Regis Homes, Inc. $ 216.50 Total Settlement Charges (enter on lines 103, Section J and 502, Section K) 120.00 Escrow Fee (from GFE #7) 1,180.10 88.00 (from GFE #8) (from GFE #6) 216.50 120.00 73.67 429.92 114.15 398.31 fbo South Texas Engineer 8,506.64 5,231.91 CORRECTED (if checked) RECIPIENT'S/LENDER'S name, street address, city or town, state or province, country, ZIP or foreign postal code, and telephone number 2015 Deep Wells Bank PO Box 111999 Des Moines, IA 50300 RECIPIENT'S federal identification no. 94-1234567 * Caution: The amount shown OMB No. 1545-0901 may not be fully deductible by you. Limits based on the loan amount and the cost and value of the secured property may apply. Also, you may only deduct interest to the extent it was incurred by you, actually paid by you, and not reimbursed by another person. Form 1098 PAYER'S social security number 436-89-2210 $ PAYER'S/BORROWER'S name 3 Refund of overpaid interest $ City or town, state or province, country, and ZIP or foreign postal code Account number (see instructions) 07050044999 Form 1098 (keep for your records) 4 Real estate taxes 5 4,351.20 Mortgage insurance premiums 1,395.90 www.irs.gov/form1098 Copy B For Payer/Borrower $ Street address (including apt. no.) Austin, TX 78754 4,604.42 2 Points paid on purchase of principal residence Daniel and Jessica Markham 4232 Smallpond Rd. 1 Mortgage interest received from payer(s)/borrower(s)* Mortgage Interest Statement The information in boxes 1, 2, and 3 is important tax information and is being furnished to the Internal Revenue Service. If you are required to file a return, a negligence penalty or other sanction may be imposed on you if the IRS determines that an underpayment of tax results because you overstated a deduction for this mortgage interest or for these points or because you did not report this refund of interest on your return. Department of the Treasury - Internal Revenue Service Bobblehead Business Expenses TOTAL VALUE OF INVENTORY - 12/31/14 TOTAL VALUE OF INVENTORY - 12/31/15 $ $ 60.00 1,288.00 $ $ $ 1,433.70 4,416.93 $1,918 7,768.63 Total Sales Total inventory--Party sales Total inventory- Website orders Total Inventory - OTHER $ $ $ $ 5,676.55 939.42 1,476.61 8,092.58 Total Cost of goods sold Total FREE products Total DISPLAY products Total Website sales costs Total party supplies $ $ $ $ 1,737.70 giveaways at parties 589.00 sample products for parties 591.70 829.23 Total 1099 Commission Total Inventory Sales Total Party Sales Total business miles in Hyundai Cost of Hyundai (purchase 1/1/15) Sales tax on Hyundai Total miles driven Other expenses: Storage cabinets purchased 3/15/15 Displays purchased 7/1/15 Postage and Shipping Merchandising fees Tax return preparation (Sch. C) Rent Utilities total for home Home insurance premium ATT&T Uverse (internet provider) Home square footage Office square footage $ $ $ $ $ $ $ $ $ $ $ 5498 27,725.00 1,668.00 16257 1,058.00 568.00 459.00 153.00 53.00 180.00 for temporary storage of inventory 2,852.00 709.00 480.00 1909 156 Additional information -- medical expenses: Doctor and dentist copays Prescription medications Hospital copay for Daniel's surgery Lab fees Glasses and optometrist co-pays Weight loss program Mileage to doctor and hospital visits 1,781.43 712.25 850.00 25.00 373.40 489.35 1604 total miles Charitable Contributions for 2015: Big Brothers/Big Sisters March of Dimes ALS Foundation Susan G Komen Race for the Cure Household items Goodwill Charitable miles driven $ 135.00 100 30 60 $991 98 Feedback on Tax Turmoil and Form 1040 Confusion Case Please indicate the extent to which you agree or disagree with the following statements about the case. 1. The case was interesting and enjoyable. Strongly Agree Agree Neutral Disagree Strongly Disagree 2. The case included sufficient information for me to answer the questions posed in the case. Strongly Agree Agree Neutral Disagree Strongly Disagree Neutral Disagree Strongly Disagree 3. The case was easy to read and follow. Strongly Agree Agree 4. I was able to relate to the couple described in the case. Strongly Agree Agree Neutral Disagree Strongly Disagree 5. The case helped improve my ability to review and understand client-provided information. Strongly Agree Agree Neutral Disagree Strongly Disagree 6. The case was a good opportunity to demonstrate my ability to apply the tax law learned during the semester. Strongly Agree Agree Netural Disagree Strongly Disagree 7. The case helped me improve my ability to identify the correct presentation of items in a tax return. Strongly Agree Agree Netural Disagree Strongly Disagree 8. The case increased my awareness of where additional information is needed in order to prepare an accurate return. Strongly Agree Agree Netural Disagree Strongly Disagree 9. The case increased my awareness of the complexity of the tax return preparation process. Strongly Agree Agree Netural Disagree Strongly Disagree 10. What was the most important thing that you learned from working on this case? 11. Approximately how much time did you spend completing the case assignment? Preparing the tax return: ______________ hours Comparing the two returns and identifying differences: __________________ hours 12. Please provide any additional feedback that will help to improve the case. Thanks