Income Tax Return Project

Tax Return - Kevin and Delilah Ferrerr

Kevin and Delilah are married and file a joint return. Kevin is 48 years of age and Delilah is 51. Kevin is a self-employed certified public accountant (CPA) and Delilah is employed by HSBC Bank as a vice president for Home-Loans. They have four children: Leslie, age 21, Angela, age 14, Sarah, age 12, and Jack, age 10. The family lives at 6814 W. Shreveport Street, New York City, New York. They purchased their home on October 1, 2018.

Until September 1, 2018, the family lived in Santa Fe, New Mexico, where Kevin was employed by Insurance Company and Delilah was a loan officer for Capital One Bank. They sold their home in New Mexico and moved to New York so that Delilah could assume her new job as a vice-president and Kevin could become self-employed. Delilah started her new job on January 1, 2019 and Kevin started his self-employed business on the same date.

In moving from Albuquerque, New Mexico to New York, the family incurred the following expenses, none of which were reimbursed:

Cost of moving household goods. $8,750

Meals 500

Lodging 650

Not included in any of the above expenses are the costs for driving two automobiles from Albuquerque to New York.

The family purchased their new home on October 1, 2018, for $625,000. Its a 30-year, 4% conventional mortgage loan from a local bank.

Delilah received her W-2 (Note: This form was completed by the employer and sent a copy to Delilah and another copy to the IRS. Hence, you do not need to complete W-2 form), reporting her salaries and withholds for 2019:

Gross Salary. $250,000

Federal Income Taxes withheld.. 35,250

F. I. C. A taxes withheld:

Social Security.. 8,549.8

Medicare.. 3,625

State of New York Income Tax withheld.. 22,750

New York City tax withheld .. 6,450

Delilah, Social Security No. 227-22-4549:

On January 1, 2019, Kevin rented office space at 514404 Shreveport Drive, New York City, NY. The terms of the one-year lease agreement called for a monthly rent of $3,000.

Kevin decided to operate his business in the name of Kevin Ferrerr, Certified Public Accountant, and he elected to use the cash method of accounting for his revenues and expenses. The following items relate to his business for 2019.

Gross receipts.. $375,000

Expenses:

Advertising . 3,250

Bank Service Charges.. 200

Dues and publications 1,450

Insurance.. 1,600

Interest.. 275

Professional Services 525

Office Rent.. 36,000

Office Supplies. 2,700

Kevin drove his personal automobile, a 2017 BMW, 8,000 miles for business purpose from January 1 through December 31, 2019. Kevins total auto mileage for the year was 24,000 miles.

The family received interest income during 2019 from the following:

US Treasury Bills $2,750

First National Bank, New York 3,240

Hamilton County municipal bonds 4,800

Kevin and Delilah received the following dividends during 2019.

Ford Motor Company. $10,300

Boeing Corporation. 3,500

Apple stock dividends (400 new shares of stock valued at $140 per share, received March 9, 2019)

Delilah and Kevin contributed $7,000 each to traditional IRA accounts.

The family reported the following stock transactions for 2019:

1. Sold 600 shares of Intel stock for $75 per share on December 28, 2019, but did not receive the sales proceeds until January 3, 2020. The family had paid $8 per share for the stock on May 21, 2010.

2. Sold 700 shares of Microsoft stock for $170 per share on July 31, 2019. The family purchased these shares on January 25, 2016 for $60 per share.

Delilah has summarized the following cash expenditure for 2019 from cancelled checks, mortgage company statements, and other documents:

Prescription medicines and drugs $3,982

Medical insurance premiums (paid by Delilah) 4,830

Doctors and hospitals bills (net of reimbursements) 4,535

Real estate taxes paid on . 16,530

Mortgage Interest paid for New York House.. 23,150

Credit card interest paid. 8,200

Cash charitable contribution to

First Baptist Church.. 5,200

Red Cross 3,500

Kevin made estimated federal income tax payment of $4,750 each quarter (four payments made during 2019).

Lastly, the family decided to adopt a child (her name is Nalla) from a foreign country during 2019. They were able to adopt and bring the child to the USA to live with them on November 25, 2019. The child is 5 years old. The total cost of adoption paid during 2019 is $35,000.

Specific Requirements:

1. Prepare the familys year 2019 individual income tax return (Form 1040). Include any required schedules (Schedule A, B, etc and Schedules 1, 2, 3.. etc). Even if itemized deductions are less than the standard deduction, attach a detailed Schedule A to show your work.

3. Use the fill in option for printed forms - no handwritten tax returns accepted.

4. If you put more than one income or expense item on any given tax return line, attach a schedule showing the detail of amounts included. Reference the form number and line number. For example (how to reference) Form 1040, line 1 Wages, Salaries, tips, etc. Just one sheet for all of these.

5. If information is not specifically provided, assume the answer is not available (NA).

7. You are not allowed to use tax preparation software not even as a reference.

Instructions to download Form 1040:

IRS Website: www.irs.gov Select: Forms and publications (left side of page)

Select: Current Forms and Pubs

HINT: Use the IRS website as your primary reference! You should download a copy of the instructions to Form 1040 that you will need to complete the individual income tax return. Warning: You may not want to print the Form 1040 instructions - - over 100 pages just for 1040 instructions.