(I'm not asking for the answers to all these questions or for pictures of the exact tax returns but if someone could try and answer as many of these as possible and explain why certain answers are the way they are that would be very beneficial. Also instructions on what forms to put these on would be helpful.)

Please complete the required federal individual income tax return forms for Phil and Rita Connors for the 2018 tax year. If required information is missing, use reasonable assumptions to fill in the gaps. Ignore the requirement to attach the form(s) W-2 to the front page of the Form 1040. .

In addition to the Form 1040, supporting schedules and forms, please submit a manual (hand-written) worksheet showing your tax calculation. 2018 forms, along with very helpful publications and instructions, can be downloaded from www.irs.gov. All numbers should be rounded to the nearest whole dollar.

Each schedule and form will be graded for completeness, accuracy, calculation, and key learning objectives (where appropriate). It is strongly recommended that you use the instructions for each form and schedule to ensure that you are completing them accurately. Please order your project with the cover sheet on top, Form 1040, and numbered schedules 1, 3, 4, and 5, followed by Sch A, B, C, D, E, SE, and then supplemental forms 4562 (Sch C only), 8949, 4797, and 8863, stapled securely.

1) Phil and Rita Connors live in Punxsutawney, Pennsylvania. Rita is Vice President of Sales at a small insurance agency, but her true passion is 19th century French poetry. Phil owns his own executive coaching business with a specialty in time management. The Connors have three children:

a. Nancy, age 23, lives at home and is a law student at Punxsutawney State. She worked part time during the year, earning $1,500, which she spent for her own support. Phil and Rita provided $6,000 toward Nancys support (including $4,000 for Nancys fall tuition).

b. The Connors also provided over half the support of their 21-year old son, Larry, who is a full-time student at Woodchuck College. Larry worked part time at Woodchucks admissions office, earning $3,200. Larry lived at home for most of the year until he married Doris in October 2018. Larry and Doris have their own apartment nearby. Since Doris earned $31,000 since graduating and earning her CPA, she and Larry filed a joint return. The Connors are unsure whether Larry qualifies as a dependent for 2018.

c. Ned turned 12 in July, and lived in the Connors home for the entire year. He had no income. Phil and Rita would like to take advantage on their return of any educational deductions and/or credits for their children and would like to see that on a completed Form 8863. They arent concerned about retirement savings at this time.

2) The Connors plan to file a joint tax return and provided the following information:

Phils social security number is 534-77-5347

Ritas social security number is 321-55-3215

Nancys social security number is 879-44-8794

Larrys social security number is 123-22-1232

Neds social security number is 654-11-6541

The Connors mailing address is 149 Weatherman Way, Punxsutawney, Pennsylvania 15767

3) Rita reported the following the following information relating to her employment during the year:

Employer	Gross Wages	Federal Income Tax Withholding	State Income Tax Withholding
Gnobbler's Knob Insurance Agency	$40,000	$4,500	$1,700

The entire Connors family was covered by health insurance during 2018, provided by Ritas employer. Appropriate payroll taxes were withheld from Ritas compensation.

4) The Connors also received the following during the year:

Interest income from First Bank of Pennsylvania: $880

Interest income from Punxsutawney Town Curb Repair Bond: $1,000

Qualified dividend income from PepsiCo: $540

Qualified dividend income from Kellogg: $390

Qualified dividend income from Microsoft: $895

5) The Connors sold 100 shares of Microsoft (MSFT) stock on September 3, 2018, for $84 a share (minus a $50 commission). The Connors received the stock from Phils father on June 25, 1986, as a wedding present. Phils father originally purchased the stock for $20 per share on January 1, 1984. The stock was valued at $29 per share on the date of the gift. All transactions were reported to the Connors on a Form 1099-B. The basis information reported to the IRS was inaccurate since the Connors receipt of the stock predated laws that tracked basis and they did not purchase the stock.

Phil Connors is self-employed as an executive coach. His business, WorldPeace LLC, received the following revenue during the year reported on Forms 1099-MISC. Phil is the sole owner of WorldPeace, and uses the cash method of accounting. He did not need to issue any 1099s to vendors or service providers. His gross receipts were $111,000, and his employer identification number is 04-1230002. Phil employs one employee, his faithful assistant, Andy. Expenses for Andys wages, payroll taxes, and benefits are listed below. Phil does not receive a salary or benefits because he is the owner of the business.

In June, Phil and Rita decided to refurbish his office on their own. They finished the renovation and put assets in service on July 1. Phils expenditures included $8,000 for new office furniture, $6,000 for new equipment (both 7-year recovery periods), and $2,000 for a new computer (5 year property). Phil elected to compute his cost recovery allowance using MACRS, did not take a 179 immediate expensing or bonus depreciation, or even de minimus exception for the computer. Other than these new assets, any previously purchased business assets were fully depreciated before 2018.

His business expenses are as follows:

Advertising $ 1,200

Professional dues 490

Professional journals 360

Contributions to employee benefit plans 2,000

Malpractice insurance 3,200

Fine for overbilling State of Ohio for 5,000

Welfare-to-Work program Insurance on office contents 720

Interest on money borrowed to refurbish office 600

Accounting services 2,100 Miscellaneous office expense 388

Office rent 12,000

Supplies 7,672

Utilities 3,360

Wages paid 30,000

Payroll taxes paid 2,400

Depreciation To be calculated*

*Use Form 4562 to report the appropriate depreciation on the new assets for the Sch C business

6. Phil and Rita have given you a file containing the following receipts for expenditures during the year:

Prescription medicine and drugs (net of insurance reimbursement) $ 376

Doctor and hospital bills (net of insurance reimbursement) 2,468

Penalty for underpayment of last years state income tax 150

Real estate taxes on personal residence 4,762

Interest on home mortgage (paid to Home State Savings & Loan) 8,250

Interest on credit cards (consumer purchases) 595

Cash contribution to St. Matthews church 3,080

Payroll deductions for Ritas contributions to the United Way* 150

Contribution for ice sculpture for Gobblers Knob festival** 500

* Rita received a note from the United Way, thanking her for supporting their qualified charity that supports local not-for-profits, food banks, homeless shelters, daycare centers, and financial literacy workshops, among many others. The note serves as a receipt.

**The festival is a town celebration that is informally paid for by local residents and businesses.

7) The Connors filed their 2017 federal, state, and local returns on April 12, 2018. They paid the following additional 2017 taxes with their returns: federal income taxes of $630, and state income taxes of $325.

8) The Connors made timely estimated federal income tax payments of $1,500 each quarter during 2018. They also made estimated state income tax payments of $460 each quarter. The Connors made all fourthquarter payments on December 31, 2018. They would like to receive a refund for any overpayments.

9) In February, Phil was injured when his car hit a train while he was driving angry. The injury prevented Phil from working for about a month. During this time, Phil received $15,000 in disability payments attributable to a disability insurance policy that he paid the premiums on.

10) Ritas mother, Johanna, died on March 2, 2013, leaving Rita her entire estate. Included in the estate was Johannas residence, nearby at 325 Top Hat Lane, Dubois, PA 15801. Johanna had purchased the house in 1979 for $30,000, and lived there ever since. Johanna never used the house for business or rental, and did not make any improvements on the property worth adding to the basis. The fair market value of the residence on July 2, 2013, was $155,000.

The property was distributed to Rita on January 1, 2014. The Connors have held the property as rental property and have managed it themselves. From 2014 until June 30, 2018, they rented the house to the same tenant. The tenant was transferred to a branch office in California and moved out at the end of June.

Since they did not want to bother finding a new tenant, Phil and Rita sold the house on June 30, 2018. They received $140,000 for the house and land ($15,000 for the land and $125,000 for the house), less a 6 percent commission charged by the broker. They had depreciated the house using the MACRS rules and conventions applicable to residential real estate. To compute depreciation on the house, the Connors had allocated $15,000 of the propertys basis to the land on which the house is located based on a formal appraisal provided by the executor of the estate. The Connors collected rent of $1,000 a month during the six months the house was occupied during the year. You may assume that the rental activity is considered an investment activity (not a trade or business). They incurred the following related expenses during this period:

Property insurance $500

Property taxes 800

Maintenance 465

Depreciation To be calculated*

*Enter the rental buildings depreciation directly on Sch E rather than complete a Form 4562. You may need that same depreciation figure in calculating gain (loss) when reporting the sale of the rental house on Form 4797. The sale on 4797 and the land must be reflected on Form 8949 Part II (sale of long-term capital assets), and then on Sch D.

11) The Connors would like to contribute to the Presidential Election Campaign. The Connors want any overpayment of taxes applied to their future tax liability. If the Connors has an underpayment, you do not need to compute any penalty.

12) The Connors did not own, control or manage any foreign bank accounts nor were they a grantor or beneficiary of a foreign trust during the tax year.

13) The Connors previous accountant analyzed their information and determined that AMT does not apply to them, thus you need not complete or review Form 6251.