Tax Return 1 John and Mary Sanders (Fictional Taxpayers real case)

The Sanders came to you to have their 2019 taxes prepared.

John and Mary Sanders, under age 65, have 2 children Brenda and William. Brenda was born on 1/22/2015 and her Social Security number is 375-32-6011. William was born on 8/19/2016 and his Social Security number is 345-46-5974. The Sanders incurred child care expenses of $2,923 for each of their children paid to the Big Elephant Day Care Employer Identification Number 04-1253667 address 175 Wildwood Manor in Lansing, MI 48910. John is a financial consultant and Brenda is a Registered Nurse.

Marys Father, Kevin Latimer SSN 365-89-7411DOB 6/5/1937, lives with them and his income consisted of $3,900 in Social Security payments. While Kevin pays for some personal items he saves over half is money, John and Mary provide all other costs of his support. Kevin earned $100 in interest that he gave to his grandchildren.

Johns brother Ronald Kemp, SSN 456-34-4876 DOB 2-11-1989, lives in Portland Oregon and John and Mary paid all his living expenses while he was looking for work in 2019. They spent $16,800 on Ronald for his apartment and for food in 2018.

The Sanders also provided all the support for Marys Niece Sandra Wilson, SSN 546-45-6783 DOB 4-3-1989 while she was on a 5 month church mission in Mexico. Sandra had lived with the Sanders for 2 years prior to deciding to go on the church mission her income for these years was under $2000 per year. She lived with the Sanders the remaining 7 months in 2019. Payments totaling $17,992 were sent directly to Sandra.

Kenneth Lay, SSN 456-95-9565 DOB 6-12-1990, is not related to the Sanders but lived with them for all of 2019 while he recovered from an accident. Ken was unable to work during that time. John and Mary also have a nephew John II who lists the Sanders home as his address while he is in and out of jail and drug rehabilitation.

John and Mary provided a form 1099INT showing that they had earned $7,250 in interest from Bank of America. Their children had each earned $200 from their savings accounts.

John and Mary paid out of pocket health insurance premiums totaling of the total health insurance premiums after tax. Johns employer paid the rest. The total premium was $21,800 and Mary and the children incurred $7,220 in out of pocket medical expenses consisting of $2,220 in prescription drugs and $5,000 in doctor and dentist bills. They also had to drive a total of 904 miles to receive medical service. John and Mary also incurred $1,125 in over the counter medicine expenses. They also paid the medical expenses for Sandra for a fall she incurred while hiking in the mountain while on her mission. The cost was $4,200.

Mary paid $700 per month in alimony payments to her disabled ex-husband. His name is Peter and his SSN is 657-43-9875. The divorce was finalized on 02/22/2008. John pays $400 per month in child support to his ex-wife, Susan SSN 987-23-3746 and she has full custody their son Benjamin. John receives $300 per month in child support for Brenda from another marriage.

John wants to open his own business and he incurred $11,000 of expenses in October 2019 to investigate the opening of a retail computer franchise. John is a financial consultant. He decided not to pursue this opportunity until 2020 or 2021.

John and Mary made $2,500 in charitable contributions all supported by receipts of which $2,100 was in cash and $400 was in clothing provided to the Salvation Army Lansing Michigan. They also incurred $12,248 in Mortgage interest, Property tax of $3,950 on their home found on form 1098 from the bank, license plate fees of $395 for all their vehicles. They also paid $620 to have their taxes prepared for 2018 and they had itemized their deductions in 2018. Union dues for Mary were $1280. John had miscellaneous unreimbursed employee expenses of $3120. They received $537 in State and Local Tax refunds for 2018 received in 2019 on form 1099G. They itemized in 2018. John and Mary also received a state tax refund in 2018 of $1100 which was for tax year 20116. They did not itemize in 2016. All documentation has been verified.

Note: There is no Alternative Tax.

You are to complete the 2019 Federal Tax Return and to write a letter giving at least 2 tax saving recommendations one of which must be related to the TCJA to help them reduce their 2018 tax liability assuming no changes to their financial situation. These recommendations make up 20 points for the return. The recommendations should be in a letter prepared for the clients that will lower their tax liability in future years.

Visit the IRS website at www.irs.gov/efile OMB No. 1545-0008 2 Federal income tax withheld a Employee's social security number 365-32-5911 b Employer identification number (EIN) 39-6852214 c Employer's name, address, and ZIP code HOSPITAL 325 GREEWOOD LANSING MI 48910 1 Wages, tips, other compensation 76155 3 Social security wages 86155 5 Medicare wages and tips 86155 7 Social security tips 8960 4 Social security tax withheld 5342 6 Medicare tax withheld 1249 8 Allocated tips d Control number 9 10 Dependent care benefits Suff. 11 Nonqualified plans 12a See instructions for box 12 e Employee's first name and initial Last name MARY SANDERS 123 MAIN ST CARSON CITY MI 48811 D 12b 10000 13 Statutory employee Retirement plan Third-party sick pay DD 18950 14 Other 12c 12d f Employee's address and ZIP code 15 State Employer's state ID number 17 State income tax MI | 396852214 16 State wages, tips, etc. 76155 18 Local wages, tips, etc. 76155 19 Local income tax 625 20 Locality name LANSING 1600 Visit the IRS website at www.irs.gov/efile OMB No. 1545-0008 a Employee's social security number 325-36-5874 b Employer identification number (EIN) 38-5145773 c Employer's name, address, and ZIP code FINANCE INC 155 MAPLE LANSING MI 48911 1 Wages, tips, other compensation 66522 3 Social security wages 76522 5 Medicare wages and tips 76522 7 Social security tips 2 Federal income tax withheld 5760 4 Social security tax withheld 4744 6 Medicare tax withheld 1110 8 Allocated tips d Control number 9 10 Dependent care benefits Suff. 11 Nonqualified plans 12a See instructions for box 12 e Employee's first name and initial Last name JOHN SANDERS 123 MAIN ST CARSON CITY MI 48811 :D 12b 10000 13 Statutory employee Retirement plan Third-party sick pay 14 Other 12c 12d f Employee's address and ZIP code 15 State Employer's state ID number MI 38-5145773 17 State income tax 19 Local income tax 16 State wages, tips, etc. 66522 18 Local wages, tips, etc. 66522 20 Locality name LANSING 925 475 Visit the IRS website at www.irs.gov/efile OMB No. 1545-0008 2 Federal income tax withheld a Employee's social security number 365-32-5911 b Employer identification number (EIN) 39-6852214 c Employer's name, address, and ZIP code HOSPITAL 325 GREEWOOD LANSING MI 48910 1 Wages, tips, other compensation 76155 3 Social security wages 86155 5 Medicare wages and tips 86155 7 Social security tips 8960 4 Social security tax withheld 5342 6 Medicare tax withheld 1249 8 Allocated tips d Control number 9 10 Dependent care benefits Suff. 11 Nonqualified plans 12a See instructions for box 12 e Employee's first name and initial Last name MARY SANDERS 123 MAIN ST CARSON CITY MI 48811 D 12b 10000 13 Statutory employee Retirement plan Third-party sick pay DD 18950 14 Other 12c 12d f Employee's address and ZIP code 15 State Employer's state ID number 17 State income tax MI | 396852214 16 State wages, tips, etc. 76155 18 Local wages, tips, etc. 76155 19 Local income tax 625 20 Locality name LANSING 1600 Visit the IRS website at www.irs.gov/efile OMB No. 1545-0008 a Employee's social security number 325-36-5874 b Employer identification number (EIN) 38-5145773 c Employer's name, address, and ZIP code FINANCE INC 155 MAPLE LANSING MI 48911 1 Wages, tips, other compensation 66522 3 Social security wages 76522 5 Medicare wages and tips 76522 7 Social security tips 2 Federal income tax withheld 5760 4 Social security tax withheld 4744 6 Medicare tax withheld 1110 8 Allocated tips d Control number 9 10 Dependent care benefits Suff. 11 Nonqualified plans 12a See instructions for box 12 e Employee's first name and initial Last name JOHN SANDERS 123 MAIN ST CARSON CITY MI 48811 :D 12b 10000 13 Statutory employee Retirement plan Third-party sick pay 14 Other 12c 12d f Employee's address and ZIP code 15 State Employer's state ID number MI 38-5145773 17 State income tax 19 Local income tax 16 State wages, tips, etc. 66522 18 Local wages, tips, etc. 66522 20 Locality name LANSING 925 475