I am needing help finding the errors in my tax return assignment. I completed most, the tax return myself, but my ending numbers are off. Also, I need help calculating Depreciation expense and tax liability for the return, I need to show calculations in Excel.
I'm stuck on these questions for the Memo.
How much do they owe or should they expect refunded?What is reported on each form - why are those items on that form and what does that form tell us?How was his tax liability calculated?Be specific - tell me how much was taxed as ordinary income (and at what rates), and how much was taxed at preferential rates (and what were the rates)?This memo will also give you an opportunity to "earn" points back from the second requirement.Do you have any concerns about the return or the results you would like me to review before sharing with the Dunphy's?If you do have an area of the return you don't believe is being captured correctly by the software, where is it, and what do you think it should say.How is it wrong?How would it impact the final tax liability?
The ending numbers on the return are suppose to be
total income - 437,526 (AGI)
line 18 - 77,775
refund - 493 (Federal Return)
Scenario:
1.Phillip and Claire are married and file a joint return. Phillip is self-employed as a real-estate agent, and Claire is an executive. Phillip and Claire have three dependent children. All three children live at home with Phillip and Claire for the entire year.
The Dunphys provide you with the following additional information:
The Dunphys do not want to contribute to the presidential election campaign.
The Dunphys live at 3701 Brighton Ave, Hollywood Park, Texas 78232.
Phillip's birthday is 11/5/1973 and his Social Security number is 321-XX-XXXX (use your last 4 digits of you're a-number for the last 4 digits of his SSN).
Claire's birthday is 5/12/1976 and her Social Security number is 567-XX-1258.
Haley's birthday is 11/6/2007 and her Social Security number is 621-XX-7592.
Alex's birthday is 2/1/2009 and her Social Security number is 621-XX-8751.
Luke's birthday is 12/12/2013 and his Social Security number is 621-XX-9926.
The Dunphys do not have any foreign bank accounts or trusts.
2.Claire is the CEO for Closets Closets Closets (CCC), where she earned $125,000 in salary. CCC withheld federal income tax of $26,000, Social Security tax of $7,640, and Medicare tax of $1,800.
3.Phillip and Claire received $500 of interest from State Savings Bank on a joint account. They also received a qualified dividend of $895 on jointly owned stock in Xila Corporation.
4.Phillip's full-time real estate business is named "Phillip Dunphy Realty." His business is located at 645 Grove Street, Hollywood Park, Texas 78232, and his employer identification number is 93-3488888. Phillip's gross receipts during the year were $800,000. Phillip uses the cash method of accounting for his business. Phillip's business expenses are as follows:
Advertising
$6,250
Professional dues
950
Professional journals
175
Employee wages
48,500
Insurance on office contents
1,650
Accounting services
2,400
Miscellaneous office expense
750
Utilities and telephone
3,600
Payroll taxes
3,675
Depreciation
To be calculated
On March 20, Phillip moved his business out of the old offices at 1103 Allium Lane into a newly constructed and equipped office on Grove Street. Phillip sold the old office building and all its furnishings. Phillip's expenditures for the new office building are as follows:
Date Acquired
Asset
Cost
3/20
Land
$300,000
3/20
Office building
2,500,000
3/20
Furniture
200,000
4/1
Computer system
350,000
Phillip computes his cost recovery allowance using MACRS. He would like to use the 179 immediate expensing, but he has elected to not claim any bonus depreciation. Phillip has never claimed 179 or bonus depreciation before. The assets Phillip sold on March 20 are as follows:
Date Acquired
Asset
Sales Price
Original Cost
Accumulated Depreciation as of the Beginning of the Year
5/1/14
Office building
$ 940,000
$ 900,000
$ 129,825
5/1/14
Land
150,000
100,000
0
7/1/14
Furniture
50,000
239,000
206,998
8/13/16
Furniture
10,000
324,000
222,782
4/12/17
Office equipment
100,000
120,000
67,524
5/13/19
Computers
30,000
50,000
10,000
Phillip has never sold any assets relating to his business before this transaction.
5.The Dunphys sold 60 shares of Fizbo Corporation common stock on September 3 for $65 a share (minus a $50 total commission). The Dunphys purchased the stock on November 8, 2019, for $90 a share. They also sold a painting for $13,000 on March 1. Claire purchased the painting for $20,050 on September 1, 2013, as an investment.
6.The Dunphy's have a condo address 120 Breezy Way Court, Port Aransas, TX78373.This year they incurred the following expenses in connection with their condo:
Insurance
$1,000
Advertising expense
600
Mortgage interest
3,500
Property taxes
900
Repairs and maintenance
650
Utilities
950
Depreciation
To be calculated
They bought the condo in 2019 for $150,000.During the year, they rented the condo for 150 days, receiving $15,000 of gross income.They personally used the condo for 35 days.Assume they use the IRS method of allocating expenses to rental use of the condo.
7.The Dunphys made timely estimated federal income tax payments of $15,000 each quarter during 2020. They would like to receive a refund for any overpayments.
8.Phillip and Claire have qualifying insurance for purposes of the Affordable Care Act (ACA) through Claire's employer.
I ATTACHED THE 1040 I DID SO FAR, I did the whole return, but couldn't upload the whole thing
r I am your supervisor. Write me a professional memo fully explaining this tax return. How much do they owe or should they expect refunded? 1lr'lihat is reported on each form - why are those items on that form and what does that form tell us? How was his tax liability calculated? Be specific tell me how mu ch was taxed as ordinary income {a nd at what rates}, and how much was taxed at preferential rates {and what were the rates}? This me mo will also give you an opportunity to \"earn\" points back from the second requirement. Do you have any concerns about the return or the results you would like me to reyiew before sharing with the Dun phy's? If you do have an area of the return you don't believe is being captured correctly by 'd'ie software,where is It, and what do you think it should say. How Is it wrong? How would it impact the nal tax liability? If you correctly identify and address an error within the program, you will reduce your penalty for getting a wrong number in requirement 1. :- Include an excel spreadsheet where you calculate the tax liability and depreciation expense. Facts: 1L Phillip and Claire are married and file a joint return. Phillip is selfemployed as a real-estate agent, and Claire is an executive. Phillip and Claire have three dependent children. All three children live at home with Phillip and Claire for the entire year. The Dunphyg provide you with the following additional information: :- The Dun ph do not want to contribute to the presidential election campaign. In The Dun phyg live at 3?1 Brighton Aye, Hollywood Park, Texas T3232. :- Phillip's birthday is 11f5f19?3 and his Social Security number is SZIH-Jtit {use your last 4 digits of you're anumber for the last 4 digits of his SSH}. o Claire's birthday is 5;"123r 19TH and her Social Security number is SETIK-HSB. u- Haley's birthday is lift-inll}? and her Social Security number is E21iiI-T592. lndiyidual Tax Return Problem 4 r Alex's birthday is Zflg and her Social Security number is 62 1-xx-at51. o Luke's birthday is 12(12f213 and his Social Security number is ZlIiiSBZE. :- The Dunph do not have any foreign bank accounts or trusts. 2. Claire is the CEO for Closets Closets Closets (CCC), where she earned $ 125,000 in salary. CCC withheld federal income tax of $26,000, Social Security tax of $7, 640, and Medicare tax of $1,800. 3. Phillip and Claire received $500 of interest from State Savings Bank on a joint account. They also received a qualified dividend of $895 on jointly owned stock in Xila Corporation. Phillip's full-time real estate business is named "Phillip Dunphy Realty." His business is located at 645 Grove Street, Hollywood Park, Texas 78232, and his employer identification number is 93- 3488888. Phillip's gross receipts during the year were $800,000. Phillip uses the cash method of accounting for his business. Phillip's business expenses are as follows: Advertising 6,250 Professional dues 950 Professional journals 175 Employee wages 48,500 Insurance on office contents 1,650 Accounting services 2,400 Miscellaneous office expense 750 Utilities and telephone 3,600 Payroll taxes 3,675 Depreciation To be calculated On March 20, Phillip moved his business out of the old offices at 1103 Allium Lane into a newly constructed and equipped office on Grove Street. Phillip sold the old office building and all its furnishings. Phillip's expenditures for the new office building are as follows: Date Acquired Asset Cost 3/20 Land $ 300,000 3/20 Office building 2,500,000 3/20 Furniture 200,000 4/1 Computer system 350,000Individual Tax Return Problem 4 Phillip computes his cost recovery allowance using MACRS. He would like to use the $179 immediate expensing, but he has elected to not claim any bonus depreciation. Phillip has never claimed $179 or bonus depreciation before. The assets Phillip sold on March 20 are as follows: Date Sales Accumulated Depreciation as Acquired Asset Price Original Cost of the Beginning of the Year 5/1/14 Office building $ 940,000 $ 900,000 $ 129,825 5/1/14 Land 150,000 100,000 0 7/1/14 Furniture 50,000 239,000 206,998 8/13/16 Furniture 10,000 324,000 222,782 4/12/17 Office equipment 100,000 120,000 67,524 5/13/19 Computers 30,000 50,000 10,000 Phillip has never sold any assets relating to his business before this transaction. 5. The Dunphys sold 60 shares of Fizbo Corporation common stock on September 3 for $65 a share (minus a $50 total commission). The Dunphys purchased the stock on November 8, 2019, for $90 a share. They also sold a painting for $13,000 on March 1. Claire purchased the painting for $20,050 on September 1, 2013, as an investment. 6. The Dunphy's have a condo at 120 Breezy Way Court, Port Aransas, TX 78373. This year they incurred the following expenses in connection with their condo: Insurance $ 1,000 Advertising expense 500 Mortgage interest 3,500 Property taxes 900 Repairs and maintenance 650 Utilities 950 Depreciation To be calculated They bought the condo in 2019 for $150,000. During the year, they rented the condo for 150 days, receiving $15,000 of gross income. They personally used the condo for 35 days. Assume they use the IRS method of allocating expenses to rental use of the condo. 7. The Dunphys made timely estimated federal income tax payments of $15,000 each quarter during 2020. They would like to receive a refund for any overpayments. 8. Phillip and Claire have qualifying insurance for purposes of the Affordable Care Act (ACA) through Claire's employer.$1040 Department of the Treasury-Internal Revenue Service (66) U.S. Individual Income Tax Return 2020 OMB No. 1545-0074 IRS Use Only-Do not write or staple in this space. Filing Status ( Single [X Married filing jointly Married filing separately (MFS) Head of household (HOH) ( Qualifying widow(er) (QW) Check only If you checked the MFS box, enter the name of your spouse. If you checked the HOH or QW 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 Phillip Dunphy Age: 47 321 00 $113 If joint return, spouse's first name and middle initial Last name Spouse's social security number Clair Dunphy Age: 44 567 07 125 Home address (number and street). If you have a P.O. box, see instructions. Apt. no Presidential Election Campaign 3701 Brighton Ave 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 Hollywood Park TX 78232 to go to this fund. Checking a box below will not change Foreign country name Foreign province/state/county Foreign postal code your tax or refund. You Spouse At any time during 2020, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency? ( Yes No Standard Someone can claim: ) You as a dependent ) Your spouse as a dependent Deduction | Spouse itemizes on a separate return or you were a dual-status alier Age/Blindness You: | Were born before January 2, 1956 ] Are blind Spouse: Was born before January 2, 1956 ) Is blind Dependents (see instructions) 2) Social security (3) Relationship (4) if qualifies for (see instructions): If more (1) First name Last name number to you Child tax credit Credit for other dependents than four Luke Dunphy 621 Sor Age: 7 dependents, Alex Dunphy 1 07 8751 Son Age: 11 see instructions = and check Haley Dunphy 621 07 7592 Daughter Age: 13 here 1 Wages, salaries, tips, etc. Attach Form(s) W-2 1 125,000 00 Attach Tax-exempt interest 0 00 Sch. B if 2a b Taxable interest 2b 500 00 895 00 895 00 required. 3a Qualified dividends 3a b Ordinary dividends 3b IRA distributions 4a 0 00 b Taxable amount . 4b 0 00 a Pensions and annuities 5a 0 00 b Taxable amount . 5b 0 00 Standard 6a Social security benefits . 6a 0 00 b Taxable amount . 6b 0 00 Deduction for- Capital gain or (loss). Attach Schedule D if required. If not required, check here 7 217,642 00 . Single or Married filing Other income from Schedule 1, line 9 . 8 70,544 00 separately. Add lines 1, 2b, 3b, 4b, 5b, 6b, 7, and 8. This is your total income 9 414,581 00 $12,400 Married filing 10 Adjustments to income: jointly or Qualifying a From Schedule 1, line 22 . 10a 4,466 00 widow(er). $24,800 b Charitable contributions if you take the standard deduction. See instructions 10b 0 00 Head of Add lines 10a and 10b. These are your total adjustments to income 10c 4,466 00 household $18,650 11 Subtract line 10c from line 9. This is your adjusted gross income 11 410, 115 00 If you checked 12 Standard deduction or itemized deductions (from Schedule A) 12 24,800 00 any box under Standard Qualified business income deduction. Attach Form 8995 or Form 8995-A 13 11,748 00 Deduction, 14 36,548 00 see instructions. Add lines 12 and 13 . 15 Taxable income. Subtract line 14 from line 11. If zero or less, enter -0- 15 373,567 00 For Disclosure, Privacy Act, and Paperwork Reduction Act Notice, see separate instructions. Form 1040 (2020)Collapse Menu >> Form 1040 (2020) Page 2 16 Tax (see instructions). Check if any from Form(s): 1 8814 2 4972 3 16 691534 0amount from Schedule 2, line 3 17 0 00 REFUND SUMMARY 18 Add lines 16 and 17 . 18 69,634 00 19 Child tax credit or credit for other dependents 19 5,450 00 AGI $410,115 20 Amount from Schedule 3, line 7 20 0 00 21 Add lines 19 and 20 . 21 5,450 00 22 Subtract line 21 from line 18. If zero or less, enter -0- |22 64, 184 00 Federal $6,801 23 Other taxes, including self-employment tax, from Schedule 2, line 10 23 15,015 00 24 Add lines 22 and 23. This is your total tax 24 79, 199 00 25 Federal income tax withheld from: Form(s) W-2 25a b Form(s) 1099 . 25b C Other forms (see instructions) 25c d Add lines 25a through 25c 25d 26,000 00 If you have a 26 2020 estimated tax payments and amount applied from 2019 return . 26 60,000 00 qualifying child, Earned income credit (EIC) . . 27 0 00 attach Sch. EIC. If you have Additional child tax credit. Attach Schedule 8812 28 0 00 nontaxable American opportunity credit from Form 8863, line 8 . 29 0 00 combat pay see instructions Recovery rebate credit. See instructions . 30 0 00 Amount from Schedule 3, line 13 . 31 0 00 32 Add lines 27 through 31. These are your total other payments and refundable credits . 32 0 00 183 Add lines 25d, 26, and 32. These are your total payments 33 86,000 00 Refund 34 If line 33 is more than line 24, subtract line 24 from line 33. This is the amount you overpaid 34 6,801 00 35a Amount of line 34 you want refunded to you. If Form 8888 is attached, check here 0 35a 6,801 00 Direct deposit? b Routing number c Type: Checking Savings See instructions. d Account number 36 Amount of line 34 you want applied to your 2021 estimated tax . 36 0 00 Amount 37 Subtract line 33 from line 24. This is the amount you owe now 37 0 00 You Owe Note: Schedule H and Schedule SE filers, line 37 may not represent all of the taxes you owe for For details on how to pay, see 2020. See Schedule 3, line 12e, and its instructions for details. instructions. 38 Estimated tax penalty (see instructions) 38 0 00 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) Sign Under penalties of perjury, I declare that I have examined this return and accompanying schedules and statements, and to the best of my knowledge and 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? (see inst.) See instructions. spouse's signature. If a joint return, both must sign. Date Spouse's occupation if the IRS sent your spouse an Keep a copy for Identity Protection PIN, enter it here your records. (see inst.) Phone no. Email address Preparer's name Preparer's signature Date PTIN Check if: Paid Self-employed Preparer Phone no. Use Only Firm's name Firm's address Firm's EIN Go to www.irs.gov/Form1040 for instructions and the latest information. Form 1040 (2020)
