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SMALL BUSINESS CLIENTS AND RETURNS FILING Tax Preparation Project Description In order to complete the requirements of this project, you will prepare a tax return for the Smith family. They have a fairly complicated 2014 return, but your program has prepared you to accurately complete this tax return. The information you will need for the tax return is listed below. You will find all the forms and tax tables you need for this project at the IRS web site (www.irs.gov). Depending on when you complete your project, you may need to locate the forms under the heading of prior year (http://apps.irs.gov/app/ picklist/list/priorFormPublication.html). Note, in any case you will not be penalized if you need to use the forms and tables for a more recent tax year. Just make sure that the forms, instructions, and tables are consistent for one tax year. Project Details: The Smith Family David and Hope Smith are married and have two children, Katelyn and Cory. They all live at 134 Crystal Lake Road, New Hope, PA 18938. The Smith family had health care coverage provided by David's employer for the entire year of 2014. Their Social Security numbers and other pertinent information are listed below:Name Social Birthday Occupation Time, Income,Security, Lived, Parents David J. Smith 123-45-6789 04/05/1971 Engineer Hope K. Smith 234-56-7890 07/04/1973 Analyst Dependents Children Katelyn Smith (F) 423-45-6789 05/12/1997 Student 12 Months $0 Cory Smith (M) 334-56-7890 06/08/2000 Student 12 Months $0 Earnings David's earnings and tax withholdings for 2014 can be found on his W-2. Hope's earnings and tax withholdings for 2014 can also be found on her W-2. Hope was laid off in 2014 and received $27,755 in unemployment benefits and had $2,793 Federal income tax withheld. SMALL BUSINESS CLIENTS AND RETURNS FILING 31 Federal income tax withheld Hope also started a small consulting business in 2014. The business classification is \"Other Finance and Investment Activities.\" The 2014 gross income and expenses for the business are listed below: Gross Receipts $3,427 Expenses Office Expense 495 Lodging 434 Baggage 50 Parking 45 Hope also drove 225 business miles and 15,000 personal miles. Dividends and Interest Income David and Hope received $316 in certificate of deposit interest income from Prudential and $3,327 of dividend income from Fidelity Brokerage Services, of which $2,698 was qualifying dividend income. In addition, there was $53 of capital gain distributions and $60 in foreign taxes withheld. A copy of David and Hope's 2014 1099 INT and 1099 DIV can be found in the tax documents section below. Note : Neither David nor Hope has any interest or signatory authority over a foreign bank account. Be sure to check the correct boxes on the bottom of your Schedule B to ensure compliance. Retirement Distributions Hope directly rolled over $87,769.45 into a qualified IRA. A copy of her 1099-R can be found in the tax documents section. Schedule AItemized deductions The Smith family has the following itemized deductions: State and Local Income TaxesThis information can be found on their W-2s. In addition, David and Hope paid an additional $172 in state taxes in 2014 for their 2013 state tax liability. Real Estate Taxes paid in 2014$3,296 Home Mortgage Interest for 2014$4,116 (reported on Form 1098) Cash Contributions for 2014$825 Non-cash Contributions for 2014Thrift Store Value $2,625. The following information is what you will need to fill out the form for non-cash contributions. The contribution was 8-12-2014 32 SMALL BUSINESS CLIENTS AND RETURNS FILING Date acquiredvarious How acquiredpurchased Donor's costadjusted basisN/A Schedule DCapital Gains and Losses The Smith family had a short term capital loss carryover of $2,169 from 2013. Hint : Remember to also look at the Capital Gains Dividend on Schedule 1099 DIV for 2014. Schedule ERental Property The Smiths purchased an investment rental property in 2014. Details relating to the property transaction can be found in the tax documents section. The depreciation schedule needed to calculate depreciation can be found in the tax documents section. Note : Remember to complete 8582 Passive Activity Loss Limitations. Tax Calculation Hint: When calculating the tax liability on line 44 of the 1040, be sure to take into consideration the qualified dividends. When you complete this project your tax refund should be $3,486. Best of luck and be proud of what you have achieved. Tax Documents David & Hope Smith Rental Property 542 Route 247 New Hope, PA 18938 2014 The Smiths purchased a rental property on 5-15-14. The property was placed into service on 7-1-14. All of the property's expenses are listed below. You will need to break the expenses down into capitalized costs which need to be added to the basis of the house and depreciated and regular expenses. All expenses are already pro-rated to only include the portion attributable to 2014. Basis: Purchase Price Purchase date (5-15-14) 110,000.00 Less Land (25,000.00) Basis (before the addition of capitalized expenses) 85,000.00 Rent 950.00 6 5,700.00 SMALL BUSINESS CLIENTS AND RETURNS FILING 33 Expenses: Annual 2014 Association Dues 600.00 Legal-Acquisition Cost 500.00 RE Taxes 1,055.52 Title Insurance 908.75 School Taxes 1,630.68 Recording Fee 65.00 Transfer Tax 550.00 Sewer 300.00 Repairs 981.84 Insurance 550.00 Mold Inspection 250.00 Misc. 111.95 Depreciation 1,450.00 GRADED PROJECT Introduction This hands-on assignment is an opportunity for you to demonstrate your mastery of tax preparation by completing a family's tax return using form 1040. In this project you will use the data provided to complete a typical tax return for a family of four. This family has many common earnings and personal details that affect how income, deductions, credits, and so on are determined. Like the other assignments in your program, this assignment is open book. Not only is it open book in terms of your study materials, you are also encouraged to use the Internet and any other research tool available to you to develop your response. Once you have completed all the parts of the project, you will need to compile a set of all required forms and schedules and submit them to the school for evaluation. Label your assignment or create your file name with your student number XXX_TPN_lesson_12. You should submit your finished assignment using the Drop Box in the Student Portal. More detailed instructions are provided at the end of the project description. There are four basic grading elements for this project. Each part is worth a specific amount of points as described below. Your total grade will be equal to the sum of your totals for each part. Grading of this project will be as follows: Determination and Recording of Adjusted Gross Income: 40 points Determination and Recording of tax and credits: 20 points Submission of Required Schedules and Forms: 20 points Overall accuracy of return (refund, payment, etc.): 20 points Total Possible Score: 100 points Now that you understand the basic goals of your project, let's get started. SMALL BUSINESS CLIENTS AND RETURNS FILING 29 Tax Preparation Project Description In order to complete the requirements of this project, you will prepare a tax return for the Smith family. They have a fairly complicated 2014 return, but your program has prepared you to accurately complete this tax return. The information you will need for the tax return is listed below. You will find all the forms and tax tables you need for this project at the IRS web site (www.irs.gov). Depending on when you complete your project, you may need to locate the forms under the heading of prior year (http://apps.irs.gov/app/ picklist/list/priorFormPublication.html). Note, in any case you will not be penalized if you need to use the forms and tables for a more recent tax year. Just make sure that the forms, instructions, and tables are consistent for one tax year. Project Details: The Smith Family David and Hope Smith are married and have two children, Katelyn and Cory. They all live at 134 Crystal Lake Road, New Hope, PA 18938. The Smith family had health care coverage provided by David's employer for the entire year of 2014. Their Social Security numbers and other pertinent information are listed below: Name Social Security Birthday Occupation Time Lived Parents David J. Smith 123-45-6789 04/05/1971 Engineer Hope K. Smith 234-56-7890 Income 07/04/1973 Analyst Dependents Children Katelyn Smith (F) 423-45-6789 05/12/1997 Student 12 Months $0 Cory Smith (M) 06/08/2000 Student 12 Months $0 334-56-7890 Earnings Hope's earnings and tax withholdings for 2014 can also be found on her W-2. 30 David's earnings and tax withholdings for 2014 can be found on his W-2. Hope was laid off in 2014 and received $27,755 in unemployment benefits and had $2,793 Federal income tax withheld. SMALL BUSINESS CLIENTS AND RETURNS FILING Federal income tax withheld Hope also started a small consulting business in 2014. The business classification is \"Other Finance and Investment Activities.\" The 2014 gross income and expenses for the business are listed below: Gross Receipts $3,427 Expenses Office Expense Lodging Baggage Parking 495 434 50 45 Hope also drove 225 business miles and 15,000 personal miles. Dividends and Interest Income David and Hope received $316 in certificate of deposit interest income from Prudential and $3,327 of dividend income from Fidelity Brokerage Services, of which $2,698 was qualifying dividend income. In addition, there was $53 of capital gain distributions and $60 in foreign taxes withheld. A copy of David and Hope's 2014 1099 INT and 1099 DIV can be found in the tax documents section below. Note: Neither David nor Hope has any interest or signatory authority over a foreign bank account. Be sure to check the correct boxes on the bottom of your Schedule B to ensure compliance. Retirement Distributions Hope directly rolled over $87,769.45 into a qualified IRA. A copy of her 1099-R can be found in the tax documents section. Schedule AItemized deductions The Smith family has the following itemized deductions: State and Local Income TaxesThis information can be found on their W-2s. In addition, David and Hope paid an additional $172 in state taxes in 2014 for their 2013 state tax liability. Real Estate Taxes paid in 2014$3,296 Home Mortgage Interest for 2014$4,116 (reported on Form 1098) Cash Contributions for 2014$825 Non-cash Contributions for 2014Thrift Store Value $2,625. The following information is what you will need to fill out the form for non-cash contributions. The contribution was 8-12-2014 SMALL BUSINESS CLIENTS AND RETURNS FILING 31 Date acquiredvarious How acquiredpurchased Donor's costadjusted basisN/A Schedule DCapital Gains and Losses The Smith family had a short term capital loss carryover of $2,169 from 2013. Hint: Remember to also look at the Capital Gains Dividend on Schedule 1099 DIV for 2014. Schedule ERental Property The Smiths purchased an investment rental property in 2014. Details relating to the property transaction can be found in the tax documents section. The depreciation schedule needed to calculate depreciation can be found in the tax documents section. Note: Remember to complete 8582 Passive Activity Loss Limitations. Tax Calculation Hint: When calculating the tax liability on line 44 of the 1040, be sure to take into consideration the qualified dividends. When you complete this project your tax refund should be $3,486. Best of luck and be proud of what you have achieved. Tax Documents David & Hope Smith Rental Property 542 Route 247 New Hope, PA 18938 2014 The Smiths purchased a rental property on 5-15-14. The property was placed into service on 7-1-14. All of the property's expenses are listed below. You will need to break the expenses down into capitalized costs which need to be added to the basis of the house and depreciated and regular expenses. All expenses are already pro-rated to only include the portion attributable to 2014. Basis: Purchase Price Purchase date (5-15-14) Less Land Basis (before the addition of capitalized expenses) Rent 32 950.00 6 110,000.00 (25,000.00) 85,000.00 5,700.00 SMALL BUSINESS CLIENTS AND RETURNS FILING Expenses: Annual 2014 Association Dues Legal-Acquisition Cost RE Taxes Title Insurance School Taxes Recording Fee Transfer Tax Sewer Repairs Insurance Mold Inspection Misc. Depreciation 600.00 500.00 1,055.52 908.75 1,630.68 65.00 550.00 300.00 981.84 550.00 250.00 111.95 1,450.00 SMALL BUSINESS CLIENTS AND RETURNS FILING 33 34 SMALL BUSINESS CLIENTS AND RETURNS FILING SMALL BUSINESS CLIENTS AND RETURNS FILING 35 36 SMALL BUSINESS CLIENTS AND RETURNS FILING SMALL BUSINESS CLIENTS AND RETURNS FILING 37 Submitting Your Work When you have completed all of the components of the project and checked your work for accuracy, you are ready to submit the project to the school for evaluation. Keep in mind that the results of this assignment will count as one lesson grade in your program average. Remember that you must submit all required forms, schedules, and tax documents as if this were an actual tax return. Since you do not have the original taxpayer documents, such as W-2s or 1099s, you do do not need to submit them for this assignment. The ideal way to submit your project is to use the PDF forms and schedules available at the IRS website. Use whatever the current tax-year forms that are available when you begin your project. Assemble all of the required forms and schedules and create a single compressed (zip) file for upload using the instructions below. If you have access to tax preparation software that will allow you to create and save an electronic copy, you can submit that file as well. One other alternative would be to complete hand-written forms and scan them to create an electronic copy. If you have no means of creating an electronic copy of the project and need to mail a hard copy, contact the school for specific instructions. When you are ready to submit your project, login to the student portal at http://community.ashworthcollege.edu. Click on Student Portal at the top righthand side of the screen (Figure 1). Figure 1 38 SMALL BUSINESS CLIENTS AND RETURNS FILING The Home or Dashboard page of the Student Portal displays. To access your courses, click Courses in the upper right-hand banner (Figure 2). Figure 2 Click on Courses to access your My Workspace page (Figure 3). Click on More Sites and navigate to the final segment of your program (Figure 4). Figure 3 Figure 4 SMALL BUSINESS CLIENTS AND RETURNS FILING 39 Click on Assignments on the left-hand navigation menu (Figure 5). Figure 5 Click on the link for your graded project under Assignment title in the center of your screen (Figure 6). Figure 6 40 SMALL BUSINESS CLIENTS AND RETURNS FILING Click on the Choose File button at the bottom of the page to locate and attach your finished project. When you've attached your file, check the Honor Pledge box to confirm that you're submitting your own work for the assignment. Then click Submit (Figure 7). Figure 7 You'll see a confirmation message that tells you your project has been successfully submitted to the school (Figure 8). Figure 8 SMALL BUSINESS CLIENTS AND RETURNS FILING 41 Grading Rubric - Achievement Exam: 1040 Tax Return Adjusted Gross Income Tax and Credits Forms and Schedules Accuracy of Return: refunds and payments Points/Actual Points/Actual Points/Actual Points/Actual 5/ 5/ 5/ 5/ N/A N/A N/A 5/ Student accurately listed all sources of income. 15/ N/A N/A N/A Student accurately listed allowable adjustments and determined AGI. 20/ N/A N/A N/A Student accurately determined deductions and calculated exemptions and taxable income. N/A 5/ N/A N/A Student accurately determined required tax, allowable credits, and other taxes. Student determined accurate total tax. N/A 5/ N/A N/A Student accurately accounted for withholdings and payment credits. N/A 5/ N/A N/A Student correctly identified all required schedules and forms. N/A N/A 5/ N/A Student accurately completed all required schedules and forms. N/A N/A 10/ N/A Student determined correct refund or payment due. N/A N/A N/A 5/ Grading Considerations Student made a reasonable attempt to complete the project component. Student accurately added all required personal data, filing status information, and exemptions. 5/ Student included all required tax documentation. Total Points Possible 40 20 20 20 Total Points Earned (Each Part) Sum of Points from Parts 1-4 = (Project Grade) 42 Total Grade = SMALL BUSINESS CLIENTS AND RETURNS FILING