Instructions

Develop a 2019 individual tax return (with all required forms and supporting schedules) for Don and Megan Draper that is both professional in appearance and technically correct. The use of an E-file website, other tax software, or a professional tax preparer to complete this project is prohibited. You can access fill-in forms (in pdf format) on the IRS website (www.irs.gov) by clicking on List All Current Forms & Instructions on the right side of the homepage in the Forms and Instructions section. Next, perform a search for the specific forms and schedules you need. A search of Form 1040 will result in a list that includes Form 1040 and all associated schedules and instructions for each. Make certain you use 2019 forms and schedules.

The tax return you submit for a grade must be completed online (without the use of software or fillable forms that complete any portion of the form automatically), printed to pdf, and submitted by the deadline. Handwritten tax forms and/or late submittals are unacceptable. Assemble your completed project according to the Attachment Sequence Number that appears just under 2019 on the upper right corner of each form/schedule. Complete and attach the cover sheet I have provided to your completed tax project. Be prepared to turn in an electronic print of your cover sheet/project via D2L Drop Box at the beginning of class on the due date assigned for your class. Projects not submitted at the beginning of class will be considered late.

The objective of this project is to enhance your understanding of the Internal Revenue Code rules as they relate to the individual taxpayer through practical application. After you have tried to the best of your ability to resolve any questions you have on your own, you are welcome to contact accounting lab staff or me with very specific questions. The learning experience can be enhanced if students are allowed to resolve a few relatively minor issues among themselves. However, the objective can only be achieved if each student substantially completes his/her own project. Examples of student collaboration that are not acceptable include, but are not limited to:

• Comparing completed forms/schedules,
• Comparing check figures (for example AGI, taxable income, tax liability, etc.),
• Working together as a group of two or more students to prepare a single tax return and making copies for each student to submit, or
• Coordinating with one or more students to determine what should be entered on numerous lines of the tax forms/schedules so that it appears that a single return was prepared and copied.

Interview Information

Don and Megan are calendar year, cash basis taxpayers who are married filing jointly with two dependent children, Sally and Bobby. The social security numbers and dates of birth for members of this family are as follows:

	Social Security Number	Date of Birth
Don	111-11-1111	7/21/1982
Megan	222-22-2222	11/16/1986
Sally	333-33-3333	3/25/2009
Bobby	444-44-4444	02/26/2014

.

The Draper family resides at 3190 Laurel Farms Road, Murfreesboro, TN 37130.

An in-depth interview with Don and Megan, coupled with a review of all their documentation, reveals the following information for the current year:

• Megan worked throughout the year for Shepard and Associates as a paralegal. Megans W-2 indicates gross wages of $42,340 and income tax withholding of $8,743. (You may omit the requirement to attach a copy of the W-2 to the tax return.)

• Dons extensive travel caused him to reconsider his career. He left the employment of Pegasus International as of 1/4/2019 and started his own business doing all types of computer-related work locally. He operates this business as a sole proprietorship (under the business name Quality IT Solutions) from the basement of his home. Don collected revenues of $188,350 and paid the following expenses related to this business:

Employee wage expense	$34,600
Payroll tax expense	7,500
Repairs and maintenance	8,761
Supplies expense	5,838

All these expenses pass the 12-month rule test for tax recognition in 2019. Additionally, Don fully documented business-related mileage of 1,254 miles that he put on his personal vehicle driving to various job sites. This is a service business, so Don had no cost of goods sold. He also elected to forego any deduction for the business use of his home (i.e. the home office deduction), and he opted to use the standard mileage rate to account for his business transportation expenses rather than his actual costs. (You may omit the requirement to complete Part IV of Schedule C.)

• Don knew his decision to pursue self-employment had tax consequences, so he came to you earlier in the year to ask for your help. You advised him to make estimated tax payments on Form 1040-ES totaling $31,000 to prepay an estimate of his self-employment and income tax liability. Don followed your advice and made timely estimated tax payments by completing and filing Form 1040-ES throughout 2019.

• Don and Megan received a Form 1099-INT from Bank of America indicating they earned a total of $592 in interest income on their joint savings account.

• The Drapers sold 3000 shares of Quantum Corp stock for $5 per share on January 12, 2019. They originally paid $3.25 per share when they purchased the stock on September 20, 2002. This information was reported to the Drapers on Form 1099-B. Additionally, all information including basis was reported to the IRS. Therefore, Form 8949 is not required.

• Don occasionally travels to Florida for work. When there, he always goes to the dog track. Don is a habitual loser at the track, but on his last trip, he laid odds on Ping Pong Bounce, a winning greyhound, and collected $2,100 at the track. Don keeps good records from his betting adventures and can support previous losses at the track of $750.

• The Drapers also received a Form 1098 from Regions Bank indicating they paid a total of $14,165 in home mortgage interest. The loan qualified as acquisition debt, and the average outstanding principal balance of $311,000. They also paid $6,175 in real property taxes on this home and $2,700 interest on personal debt (i.e. a car loan and credit cards).

• The Drapers gave $8,900 to the American Red Cross for disaster relief. The Red Cross is an organization officially recognized by the IRS as a nonprofit, tax exempt entity.

• Don and Megan had no liability for Tennessee income tax, but they paid sales tax on all applicable, personal purchases. (Search for the sales tax deduction calculator on the IRS website, and use it to simplify the calculation of their deductible sales tax. Assume the Drapers had no additional large purchases that were subject to sales tax in 2019.)

• The Draper family had a total of $15,149 in out-of-pocket medical expenses and $2,050 in tax return preparation fees to Dons CPA.

• The Drapers paid $2,900 in tuition and fees and $481 for books for Megan to attend classes at a qualified educational institution. Megan is working toward a Masters degree on a part-time basis.

• Don and Megan paid $2,700 for Sallys care after school and when school was not in session and $6,100 for Bobbys day care. The provider of this care is as follows: Happy Child Daycare (Fed ID # 12-3333333) 565 Greenleaf Lane, Murfreesboro, TN 37130.

Additional Notes:

• Don and Megan have adequate documentation to support each of the aforementioned expenses (except as otherwise noted), and they have no carryforwards from previous years that will impact their return for the current year.
• Round all amounts presented on the tax return to the nearest dollar and leave the cents column blank. Any lines on the tax return that you dont need to use should be left blank do not enter zeros.
• These taxpayers have no AMT liability, so you may omit Form 6251.
• Everyone in the household had health insurance for the entire year. The coverage came through Megans employer.
• Don and Megan did not own any foreign bank accounts or investments.
• If any underpayment of taxes exists, assume that Don and Megan paid in the appropriate percentage based on prior year taxes and are therefore not subject to any underpayment penalties.